AROORAN SUGARS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following two common questions of law have been referred to us for our consideration in respect of the assessment years 1974-75, 1975-76 and 1978-79 ;

(2.) THE assessee, is a manufacturer of sugar in its factory. THE assessee also grows sugarcane in its own lands and the sugarcane so grown is utilised in the manufacture of sugar, THE case of the assessee before the Income-tax Officer was that the income taxable under the Income-tax Act, 1961 (in short "the Act"), should be computed by applying Rule 7(2)(b) of the Income-tax Rules, 1962 (in short "the rules"). Both the Income-tax Officer and the Commissioner of Income-tax (Appeals) rejected the claim of the assessee. THE Income-tax Appellate Tribunal, on an appeal preferred by the assessee, also rejected the claim of the assessee on the basis of a judgment of this court rendered in the assessee's own case in CIT v. Thiru Arooran Sugars Ltd., 1983 144 ITR 4, for an earlier assessment year. THE finding of the Appellate Tribunal was that while computing the income chargeable to income-tax under the head "Profits and gains of business", the deduction has to be made in accordance with Rule 7(2)(a) of the Rules. It is also not in dispute that the Supreme Court in Thiru Arooran Sugars Ltd. v. CIT, 1997 227 ITR 432 affirming the judgment of this court in CIT v. Thiru Arooran Sugars Ltd. [1983] 144 ITR 4, held that Rule 7(2)(a) of the Rules would squarely apply to the facts of the case and the market value of the sugar-cane produced and consumed by the assessee had to be computed accordingly. Following the said decision of the apex court, we answer the first question of law referred to us by holding that the Tribunal was correct in holding that while computing the income chargeable to income-tax under the head "Profits and gains of business", the deduction should be made in accordance with the provisions of Rule 7(2)(a) of the rules. Accordingly, we answer the first question of law referred to us in the affirmative and against the assessee.