INDIA BUSINESS WORLD - APRIL 1^st - APRIL 15^th - 2008

SUGAR SAP PART OF PURCHASE PRICE, TO BE TAXABLE: SUPREME COURT

The Supreme Court has ruled the state advised price (SAP) paid by them formed a part of the purchase price paid to the sugarcane growers and was, therefore, to be included in their turnover for the purpose of computation of tax. A bench comprising Justice Arijit Pasayat, Justice P Sathasivam and Justice Aftab Alam allowed an appeal by Karnataka. It had challenged an order of the Karnataka High Court, which had held in the absence of pact between sugarcane buyers and growers, the payment of excess amount fixed by the state/central government was not to be reckoned for the purpose of purchase tax under the Karnataka Sales Tax Act, 1957. The state government had said that purchase tax was payable on the purchase price. On the other hand, the mill owner, in this case, Sri Chamundeswari Sugar, had said that because it was agreed by the grower and the purchaser that a certain amount would be paid, the amount paid as SAP becomes irrelevant.