Law:

Section:

Section 37(1) of the income-tax act, 1961-Business expenditure-Assessee-company was liable to pay a portion of extra consideration received on sale of sugar to sugarcane growers-During relevant accounting year amount payable to cane growers was tentatively fixed at Rs. 90 per ton as amount of consideration released on sale of sugar was not fully known at that time-After end of accounting year, assesses, on basis of actual amount realised on sale of sugar, found that price payable to cane growers was Rs. 94 per ton-Whether assessee was entitled in relevant accounting year to deduction of amount added after end of said accounting year-Held, yes Facts The assessee-company was carrying on business in the manufacture and sale of sugar. In the relevant accounting year ended on 30-9-1972, the assessee purchased sugarcane and following a scheme of the Government directing the manufacturers to part with a portion of the extra consideration received on sale of sugar to the cane growers, the assessee passed a resolution on 26-9-1972 tentatively fixing the amount payable to sugarcane growers at Rs. 90 per ton. The exact amount payable to sugarcane growers could not be determined at that time as the amount of consideration realised on sale of sugar was not fully known. However, after the end of the relevant accounting year the assessee made up its accounts and found the actual amount realised on sale of sugar. On 12-2-1973 before the accounts for the relevant previous year were made up another resolution was passed, whereby the cane growers were to be paid a certain sum at the rate of Rs. 94 per ton which was the actual amount payable in accordance with the formula devised by the Government. The assessee claimed deduction of this amount out of its income from business for the assessment year under consideration. The claim was rejected on the ground that the amount became payable pursuant to the resolution on 12-2-1973, which was after the closing of the relevant accounting year. The Tribunal, however, accepted the assessee' s claim holding that the principle to pay the cane growers a portion of the sale price was determined by the resolution dated 26-9-1972 and…

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