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Payment for sugarcane in excess of its SMP can’t be treated as appropriation of profit: SC

March 6, 2019[2019] 103 taxmann.com 57 (SC)
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IT : Assessee - societies seem to have paid sugarcane purchase price to members/non-members even in excess/above price determined under Clauses 3 & 5A of Control Order, 1966. However, entire/whole amount of difference between Statutory Minimum Price(SMP) and State Advice Price (SAP) per se cannot be said to be an appropriation of profit. In order to find out whether any amount of sugarcane purchase price paid by assessee-society to its members/non-members above SMP determined under clause 3 of the Control Order, 1966, may be paid as per price determined by State Government under clause 5A of the Control Order, 1966, can be said to be sharing of profit and therefore is to be included in return of income, Assessing Officer will have to take into account manner in which business works, modalities and manner in which SAP/additional purchase price/final price are decided and to determine what amount would form part of profit and after undertaking such an exercise whatever is profit component is to be considered as sharing of profit/distribution of profit and rest of amount is to be considered as deductible as expenditure

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