CIRCULAR NO. 6/2007

DATED 11-10-2007

Allowability of harvesting and transportation expenses in the cases of Co-operative sugar mills

Instances have come to the notice of the Board wherein Assessing Officers have disallowed the claim of harvesting and transportation expenses incurred by the Co-operative sugar mills for procuring sugarcane from farmers, who are members of such Co-operative Sugar Mills and who are bound under an agreement to supply the sugarcane exclusively to the concerned sugar Mill.

2. The issue of allowability of such expenses in the case of Co-operative Sugar Mills has been examined by the Board. These expenses are incurred by the Sugar Mills for ensuring an adequate and sustained supply of freshly cut sugarcane that is an essential input for the continuous running of such Mills. These expenses are, therefore; incurred for a commercial expediency and are prima facie wholly and exclusively for the purpose of business. Such expenses are, therefore, allowable in the computation of the income of the Co-operative Sugar Mills.

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