LexTHE COMMISSIONER OF INCOME-TAX versus THE MYSORE SUGAR CO., LTD.
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198' Arnarchand Lalitkuma~ •• Shrtt tfmbica Ju't M1ll4 l.1td. DatJ. 1961 MoyJ. 976 SOPH.EME OOOR'l' REPORTS [1963) mentioned, the contract would be deemed to be cancelled which mE>ant that the contract was to be treated as mm est for all purposes. If the con- tract was deemed to be oaooolled, it must mean that the right and obligations of the parties came to an end simultaneously. It was not really neceB- sary to insert the words "with out any difference on both sides" in the bought notes and such addition in the sold notes did not make any difference to the rightB of the parties. For the reasons given above we hold that there is no merit in any of the appeals. The appeals are accordingly diam issed with costs ; one hearing fee. Appeals dismissed. THE OOMMISSIONER OF INCOME-TAX v. THE MYSORE SUGAR CO., LTD. (S. K. DA.s, A. K. SA.RKA.R, M. lIJDA.YA.TULLAH and RA.OHUBA.R DAYAL, JJ.) Income Ta:i-Dduction-E:ipenditur• l>y way of inyeat""n and e:ipendihtre in the courBe of b1Uinua-.Di.timtion-Tut1 applkAbk-IndW.n [nco,,,..Ta:t A.ct, 1922 (II of 1922), "· 1 (I), (2) (:ti), 2 (zv). · The assessee Company used to purchase sugarcane from the sugarcane growers to prepare sugar in ill factory, in which a very large percentage. of shares was owned by the Government of Mysore. As a part of its business operation it entered into written agreemen!J with the sugarcane growers and advanced them seedlings, fertilizen, and also cash .. The cane growers entered into these agreements known as "oppige" by which they agreed to sell sugarcane exclusively to the assessee company at current market rates and to have the .. • • 2 S.O.R. SUPREME COURT REPORTS 971 advances adjusted toward• the price. /\n account of each "0ppigedar" was opened by the cony>any. .These agreements wet e entered into for each crop. 'I. In the year 1948-49 due to drought, the assessce com- pany could not work its mills >!nd the "oppigedar" could not grow or deliver the sugarcane and thus the advances made in the year •emainded unrecovered. The Mysore Government realising the hardship appointed a committee to investigate the ma(ter and make a report. The Committee recommended that the assessec company should ex·gratia forgo some of its dues, arid in the year of account 'ending June 30, 1952, the ~ company waived its rights in. respect of Rs. 2,87 ,422/-. Ti)e Company claimed 1this as a deduction under s. 10 (2) (xi) and s. )0 (2) (xv) but the Income·Tax Officer declined to jr make the deduction and the appeal before .the Appellate . Assistant Commissioner also failed. The Tribunal was also of the opinion that these advances were made to ensure to steady supply of quality surgarcane and the Joss, if any,' must be taken to repr<scnt a capit11l loss and not a trading loss but the tribunal referred the question ·thereby arising for the decision of the High Court. The High Court relying upon a decision ·of this Court· in Badridas Daga v. Commissioner of Income-tax held, that ~he expenditure was not in the nature " of a capital expenditure, but was a _revenue expenditure and '< that this amount was deductible in computing the profits of the business for the year in question under s. 10 (1) of the Income· tax Act. · The central point for decision in the present case, was whether the money which was given up, represe.nted a loss of capital or must be treated as a revenue expenditure. Helrl, thats. 10 (2) does not deal exhaustively with the deductions which must be made to arrive at the true profits ~ and gains. It mentions certain dedutions. in els. (i) to (xiv) ., and if an expenditure comes within any of the emunerated classes. of allowance the case has to be considered under the appropriate class. Clause (xv) is a general clause. which allows an expenditure . to be deducted, if I.aid out or expended wholly anQ. exclusively for the purpose of such bu.sinCSs, which . is not . in the nature of capital expenditure or personal expenses of the assessee. But. the general scheme of the .section is that profits or gains must be calculated after dedu· ~ cting outgoings reasnnably attributable as business expcn\]iture ;' but not so as to deduct any part of a capital expenditure. To find out whether an expenditure is on the capital account or on. revenue, one must consider the expenditure in 196! Oommfssioner uj Income-Ku v • • Vysore Sugar Co ' Ltd. 1!.6! CommiaJionn of Income-t
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