Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business loss/deductions - Allowable as - Assessees were federal societies of primary milk societies and their business was to purchase milk from their members and other producers at rate to be fixed by their board of directors at beginning of year on basis of price fixed by State Government and to sell milk to various parties - Difference in purchase price and sale price after adjustment of normal expenses was profit of assessees-societies which was liable to tax and was distributed to members-primary milk co-operative societies - Rates of purchasing milk were provisional to final milk rate difference which was determined in month of March every year and paid to members-societies in following year - Assessing Officer refused to allow deduction of final rate difference paid by assessees on ground that it was made on basis of accrued profits of year and, hence, amounted to distribution of profits - Whether when facts revealed that payments were made only to members who were suppliers; that payments were made to suppliers not on basis of shares held by them, but on amounts of milk supplied and on basis of fat content of milk; that resolutions to pay additional price were passed before end of financial year, i.e., before profits could be said to have accrued, amount paid as final rate difference could be said to be distribution of profit among members of societies - Held, no FACTS The assessees were federal societies of primary milk societies and their business was to purchase milk from their members and other producers at the rate to be fixed by their board of directors on the basis of fat content of milk and to sell the milk to various parties. The difference in purchase price and sale price after the adjustment of normal expenses was the profit of the assessees-societies which was liable to tax and was distributed among the members-primary milk co-operative societies. The assessees fixed the rate of purchasing of milk at the beginning of the year on the basis of the price declared by the State Government and price which other buyers paid to the vendors. Those rates were revised from time-to-time and were provisional…

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