C.I.T. BOMBAY versus TASGAON TALUKA S.S.K. LTD.

Citation: [2019] 4 S.C.R. 145 · Decided: 05-03-2019 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Disposed off

Judgment (excerpt)

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C.I.T. BOMBAY
v.
TASGAON TALUKA S.S.K. LTD.
(Civil Appeal No. 8890 of 2012)
MARCH 05, 2019
[A. K. SIKRI, S. ABDUL NAZEER AND M. R. SHAH, JJ.]
Sugar Cane (Control) Order, 1966: Clause 3 and 5A –
Determination of price – The additional price is determined under
Clause 5A at the end of the season and as per Second Schedule to
the Control Order, 1966 – Therefore, at the time when the additional
purchase price is determined/fixed under Clause 5A, the accounts
are settled and the particulars are provided by the concerned
cooperative society what will be the expenditure; what can be the
profit etc. – So far as the Statutory Minimum Price (SMP) determined
under Clause 3 of the Control Order, 1966 by the Central
Government is concerned, it is at the beginning of the season –
Therefore, the difference of amount between the SMP determined
under Clause 3 and the SAP/additional purchase price determined
under Clause 5A has an element of profit and/or one of the
components would be the profit.
Income Tax Act, 1961: s.37(1) – Disallowance for excessive
and unreasonable cane purchase price paid to the members/non-
members of the sugarcane – Whether the sugarcane purchase price
paid to the cane growers by the assessee-society more than the
Statutory Minimum Price (SMP) and as determined under Clause
5A of the Control Order, 1966, can be said to be the sharing of
profit/appropriation of profit – Held: The difference of amount
between the SMP determined under Clause 3 and SAP/additional
purchase price determined under Clause 5A has an element of profit
and/or one of the components would be profit – However, at the
same time, the entire/whole amount of difference between the SMP
and the SAP per se cannot be said to be an appropriation of profit
– Only that part/component of profit, while determining the final
price worked out/SAP/additional purchase price would be and/or
can be said to be an appropriation of profit and for that an exercise
is to be done by the assessing officer by calling upon the assessee
[2019] 4 S.C.R. 145
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SUPREME COURT REPORTS
[2019] 4 S.C.R.
to produce the statement of accounts, balance sheet and the material
supplied to the State Government for the purpose of deciding/fixing
the final price/additional purchase price/SAP under Clause 5A of
the Control Order, 1966 – As regards the non-members, the same
can be dealt with and/or considered applying s.40A(2) of the Act
i.e. assessing officer on the material on record has to determine
whether the amount paid is excessive or unreasonable or not – Sugar
Cane (Control) Order, 1966 – Clause 3 and 5A, Schedule – Essential
Commodities Act, 1955.
Sugar Cane (Control) Order, 1966: Clause 3 – Fixation of
SMP – Determining factors – While fixing/determining the SMP
under Clause 3 of the Control Order, 1966, the Central Government
is required to consider the  various aspects such as the cost of
production of sugarcane; the return to the grower from alternative
crops and the general trend of prices of agricultural commodities;
the availability of sugar to the consumer at a fair price; the price at
which sugar produced from sugarcane is sold by producers of sugar;
and the recovery of sugar from sugarcane.
Disposing of the appeals, the Court
HELD:  1.1 As per Clause 3 of the Control Order, 1966,
the Central Government may, after consultation with such
authorities, bodies or associations as it may deem fit, by
notification in the official Gazette, from time to time, fix the
minimum price of sugarcane to be paid by producers of sugar or
their agents for the sugarcane purchased by them.  While fixing/
determining the SMP under Clause 3 of the Control Order, 1966,
the Central Government is required to consider the  various
aspects such as the cost of production of sugarcane; the return
to the grower from alternative crops and the general trend of
prices of agricultural commodities; the availability of sugar to
the consumer at a fair price; the price at which sugar produced
from sugarcane is sold by producers of sugar; and the recovery
of sugar from sugarcane. [Para 9.2][158-D-G]
1.2 As per Explanation, different prices may be fixed for
different areas or different qualities or varieties of sugarcane.
As per sub-clause 2 of Clause 3, no person shall sell or agree to
sell sugarcane to a producer of sugar or his agent, and no such
producer or agent shall purchase or agree to purchase sugarcane,
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at a price lower than that fixed 

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