TMI Blog2012 (9) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be taxed and in view of the said judgment, thus the assessee is right in valuing the closing stock at levy price. The stock valuation of incentive sugar has a direct impact on the manufacturer's revenue or business profits. If to accept the case of the Department that the excess amount realized by the manufacturer(s) over the levy price was a revenue receipt taxable under the Act then the very purpose of the Incentive Scheme formulated by Sampat Committee would have been defeated. One cannot have a stock valuation which converts a capital receipt into revenue income - in favour of assessee. - CIVIL APPEAL NOS. 7014 TO 7018 OF 2012, SLA (CIVIL) NO. 9263 OF 2009, S.L.P. (C) NOS. 18567 OF 2009 & 19988 TO 19990 OF 2012 - - - Dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted. By virtue of the provisions of the Essential Commodities Act, 1955 and the Sugar Control Order read with the Notification issued thereunder, a sugar manufacturer (assessee in this case) was required to sell 40% of his sugar production at the notified levy price to the Public Distribution System. At the relevant time, on an average, the levy price came to be less than the manufacturers' cost of production. Consequently, it was found by the manufacturers that under the above price control regime, the establishment of new sugar manufacturing units was not viable. It was found that even the existing sugar manufacturing units had become unviable and uneconomical. Therefore, an Incentive Scheme was framed, as suggested by the Sampat Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated as a revenue receipt. However, that contention of the Department in Ponni Sugars Chemicals Ltd. (supra) was negatived although in the context of another Scheme this Court after examining the Scheme in the case of Sahney Steel Press Works Ltd. v. CIT [1997] 228 ITR 253/94 Taxman 368 (SC) held that the excess amount realized was a revenue receipt. The judgment in Sahney Steel Press Works Ltd. (supra) was considered in Ponni Sugars Chemicals Ltd. (supra). Applying the "purpose test" this Court held in Ponni Sugars Chemicals Ltd. (supra) that there is no straitjacket principle for coming to the conclusion as to whether the excess amount was a revenue receipt or a capital receipt. The Court held that it would depend on the Scheme. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appropriate allowances permitted etc. to arrive at taxable profits. In the present case, it is the case of the assessee, that following the judgment of this Court in Ponni Sugars Chemicals Ltd. (supra) the closing stock of incentive sugar should be allowed to be valued at levy price, which on facts, is found to be less than the cost of manufacture of sugar (cost price). We find merit in this contention. In Ponni Sugars Chemicals Ltd. (supra), this Court, on examination of the Scheme, held that, the excess realization was a capital receipt, not liable to be taxed and in view of the said judgment, we hold, that the assessee is right in valuing the closing stock at levy price. As stated, in certain cases, adjustments may have to be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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