1973 (4) TMI 37

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..... rcane Control Order, 1955, which was amended from time to time. Under that Order the Government fixed the minimum price of sugarcane payable by the sugar mills to the sugarcane growers on the understanding that the cane growers would be duly compensated by the proportionate share in the excess price of sugar realised by the mills. For this purpose the Government issued a notification on September 23, 1958, clause 3(i) whereof made the sugar mills liable for the additional price payable to cane growers in certain circumstances set out therein and also prescribed the formula for working out the shares of cane growers in the excess sale price realised by the mills. In order to meet this liability, the company in its accounts relevant to the as .....

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..... respect of so much of its chargeable profits of the previous year as exceeds the standard deduction. The term " standard deduction has been defined in clause (9) of section 2 as under : " An amount equal to six per cent. of the capital of the company as computed in accordance with the provisions of the Second Schedule, or an amount of fifty thousand rupees, whichever is greater ..........." The Second Schedule contains rules for computing the capital of a company for purposes of super profits tax. Rule 1 of the Schedule provides that the capital of the company shall be the sum of amounts as on the first day of the previous year relevant to the assessment year of its paid up share capital and of its reserves except those which are allow .....

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..... urpose ". In the instant case, the Tribunal has found, and rightly, that there was no existing liability on the assessee for the payment of extra sugar price to the cane growers under the notification. There is also no finding that the notification applied to the case of the assessee nor did the assessee in fact pay anything to the cane growers. In the subsequent year the amount in question was taken out of the balance-sheet and was put back into the profits. This clearly shows that in the subsequent year the assessee company realised that it had no liability whatsoever to meet in respect of the increased sugar price. The amount in question did appear on the first day of the relevant previous year as a liability in its balance-sheet under t .....

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