EXPENDITIOR DEDUCTIBAL U/H PGBP
This query is : Resolved
29 December 2007
SIR,
IF A PERSON HAVING BUSINESS OF SUGAR MANUFACTURING AND ALSO HAVING HIS OWN SUGAR CANE FARM HE USES PRODUCED SUGAR CANE FOR PRODUCTION FOR THE PURPOSE OF INCOME U/H PGBP WHAT AMOUNT OF MANUFACTURING EXPENSE SHALL BE ALLOWED? ACTUAL COST OF SUGAR CANE OR MARKET PRICE OF SUGAR CANE???
IF A PERSON HAVING BUSINESS OF SUGAR MANUFACTURING AND ALSO HAVING HIS OWN SUGAR CANE FARM HE USES PRODUCED SUGAR CANE FOR PRODUCTION FOR THE PURPOSE OF INCOME U/H PGBP WHAT AMOUNT OF MANUFACTURING EXPENSE SHALL BE ALLOWED? ACTUAL COST OF SUGAR CANE OR MARKET PRICE OF SUGAR CANE???
29 December 2007
ACTUAL COST OF SUGAR CANE OR MARKET PRICE OF SUGAR CANE
lower of both Cost
lower of both Cost
29 December 2007
UNDER WHICH SEC. OF INCOME TAX ACT
01 January 2008
As per the rule(7)When the Agriculture produce is used as raw material in manufacturing operation the average market price of the agriculture produce during the previous year shall be debited to the manufacturing A/C of the business.No other deduction towards agriculture operation shall be allowed.
The average market price=
1-Where determinable=Average price at which raw Material has been sold during the Relevant Previous Year.
2-Where not determinable=Exp. of Cultivation+Land Revenue or the Rent paid+ Reasonable Profit as determined by A.O.
So in your question The average Market price will Qualify.
The average market price=
1-Where determinable=Average price at which raw Material has been sold during the Relevant Previous Year.
2-Where not determinable=Exp. of Cultivation+Land Revenue or the Rent paid+ Reasonable Profit as determined by A.O.
So in your question The average Market price will Qualify.
01 January 2008
In this case the income derived by the assesse is partly agricultural and partly business incoem. Hence Rule of the Income Tax Rules will apply. The said rule reads as under:
"Income which is partially agricultural and partially from business.
7. (1) In the case of income which is partially agricultural income as defined in section 2 and partially income chargeable to income-tax under the head Profits and gains of business, in determining that part which is chargeable to income-tax the market value of any agricultural produce which has been raised by the assessee or received by him as rent-in-kind and which has been utilised as a raw material in such business or the sale receipts of which are included in the accounts of the business shall be deducted, and no further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver of rent-in-kind.
(2) For the purposes of sub-rule (1) market value shall be deemed to be :
(a) where agricultural produce is ordinarily sold in the market in its raw state, or after application to it of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render it fit to be taken to market, the value calculated according to the average price at which it has been so sold during the relevant previous year;
(b) where agricultural produce is not ordinarily sold in the market in its raw state or after application to it of any process aforesaid, the aggregate of
(i) the expenses of cultivation;
(ii) the land revenue or rent paid for the area in which it was grown; and
(iii) such amount as the 86[Assessing Officer] finds, having regard to all the circumstances in each case, to represent a reasonable profit."
For any further clarification do contact me.
"Income which is partially agricultural and partially from business.
7. (1) In the case of income which is partially agricultural income as defined in section 2 and partially income chargeable to income-tax under the head Profits and gains of business, in determining that part which is chargeable to income-tax the market value of any agricultural produce which has been raised by the assessee or received by him as rent-in-kind and which has been utilised as a raw material in such business or the sale receipts of which are included in the accounts of the business shall be deducted, and no further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver of rent-in-kind.
(2) For the purposes of sub-rule (1) market value shall be deemed to be :
(a) where agricultural produce is ordinarily sold in the market in its raw state, or after application to it of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render it fit to be taken to market, the value calculated according to the average price at which it has been so sold during the relevant previous year;
(b) where agricultural produce is not ordinarily sold in the market in its raw state or after application to it of any process aforesaid, the aggregate of
(i) the expenses of cultivation;
(ii) the land revenue or rent paid for the area in which it was grown; and
(iii) such amount as the 86[Assessing Officer] finds, having regard to all the circumstances in each case, to represent a reasonable profit."
For any further clarification do contact me.
01 January 2008
THANK YOU
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