Law:

Section:

Section 861 of the Income-tax Act, 1961 - Appeal to Supreme Court - Assessee-company engaged in business of manufacturing sugar entered into an agreement with G, an agricultural company - Under said agreement G was to grow sugarcane and was bound to sell it entirely to assesses and assessee advanced loans of substantial amount to G - G fell in financial stringency and to help it out assessee paid extra price for sugarcane supplied to it and also decided to forgo certain amount of interest payable by G on said loan advanced to it - High Court allowed deduction of amount of extra price paid as well as amount of interest forgone by assessee - Whether instant case was a fit one for grant of requisite certificate under section 261 for appeal to Supreme Court - Held, no Facts The assessee-company engaged in the business of manufacturing sugar, entered into an agreement with 'G' an agricultural company. Under the terms of the agreement, loans were to be advanced by the assessee to 'G'. G had to utilize the whole of its land and farms which were in close proximity of the sugar factory of the assessee for growing sugarcane and was bound to sell its entire production of sugarcane to the assessee. There was also a term in the agreement to charge the premium for cane for better variety than what was normally supplied by similar growers or cane, which was capable of giving higher percentage of recovery of sugar. G fell in financial stringency and in order to help it out, the assessee advanced loans of substantial amounts to it and also paid extra price for the sugarcane supplied by it. The assessee also agreed to forgo certain amount of interest payable by 'G' on the aforesaid loan advanced to it. For the relevant assessment years, the assessee claimed that the amount of extra price so paid and the interest forgone be deducted from its income. The Tribunal rejected the assessee's claim. On reference applying the principles laid down in the case of Addl. CIT v. Kuber Singh Bhagwandas [1979] 118 ITR 379 (MP) (FB), the High Court allowed the deductions claimed by the assessee. On application under section 261, the assessee did not dispute the principles enunciated in Kuber…

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