HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
The Commissioner of Income-tax v. The Mysore Sugar Co. Ltd.
Civil Appeal No. 435 of 1961
[1963] 2 SCR 976 ·
Indian Income-tax Act, 1922: sections 10(1), 10(2)(xi), 10(2)(xv) and 66A
Sources & disclosures includedDownload original judgment / order
Four-judge bench; unanimous judgment delivered by M. Hidayatullah, J. · S. K. Das, J. · A. K. Sarkar, J. · M. Hidayatullah, J. · Raghubar Dayal, J.
01 · Facts of the case
Mysore Sugar purchased sugarcane for its factory. Under annual 'Oppige' arrangements for each crop, growers agreed to sell cane exclusively to the company at current market rates; the company supplied seedlings and fertiliser and advanced cash, with the advances and interim interest to be adjusted against the cane price. A drought in 1948-49 prevented operation of the mills and the growers could not grow or deliver cane. After a Mysore Government committee recommended ex gratia relief, the company waived Rs.2,87,422 in the account year ending 30 June 1952. The Income-tax Officer, Appellate Assistant Commissioner and Tribunal refused deduction and treated the loss as capital; the Mysore High Court held it to be deductible revenue expenditure.
Source: Primary judgment: procurement arrangements, drought, waiver and prior proceedings
02 · Discussion by the Hon’ble Court
The Court explained that section 10(2) did not exhaust every deduction needed to determine true business profits. The controlling distinction was whether money was laid out to acquire an enduring business asset or was an outgoing in carrying on the business: loss in the former circumstance is capital, while loss in the latter is revenue. Applied here, the advances related to one crop and represented advance payment of the price needed to secure the company's raw-material supply. They were not an investment in the growers' agriculture. The resulting loss was therefore on the revenue side, just as if the company had paid for a ready crop that was never delivered.
Source: Primary judgment: section 10 framework and capital-versus-revenue test; Primary judgment: application to one-crop advances
03 · Judicial decision
The Supreme Court held that the advances were current expenditure made in the company's cane-purchasing business, not capital investment. It affirmed the High Court, dismissed the Revenue's appeal and awarded costs against the Revenue.
04 · Outcome / in whose favour
In favour of the assessee. The High Court's revenue-loss conclusion stood and the Revenue's appeal was finally dismissed. The holding is confined to the historical 1922 Act and advances shown on the facts to be advance crop price in the ordinary procurement business.
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: for a supplier or grower advance that becomes unrecoverable, document whether it was tied to a specific procurement cycle, adjustable against purchase price and made to secure stock used in the ordinary business. Separately test whether the arrangement created an enduring asset, financing investment or independent lending relationship. Mysore Sugar supports revenue character where the money was functionally advance purchase price for one crop; it should not be applied mechanically to every waived advance. Confirm the governing statutory year and current provision before relying on this historical authority.
Source & verification
Download original judgment / order · Open cited source rendition
Full eleven-page SCR asset read and visually inspected; adjacent-case material on PDF pp.1 and 11 was separated from the Mysore Sugar headnote and judgment.
- Catalogue asset 1963_2_976_986: SHA-256 16220ebb1889659e04cacdbf4a4a24d7a1332a5670a68a2a7110eedfb34e71f9 and eleven-page count both matched the downloaded source.
- The source verifies Civil Appeal No. 435 of 1961, decision date 3 May 1962, the four-member bench and Hidayatullah J. as author.
- The report identifies the account year ending 30 June 1952 but does not print an assessment year; none is inferred.
- No exact source-hash, asset-ID, citation, docket or same-judgment publication match was found.
Statutory scope
The decision applies the Indian Income-tax Act, 1922 to an account year ending 30 June 1952. The report does not state the assessment year. No automatic equivalence with later deduction provisions under the Income-tax Act, 1961 or Income-tax Act, 2025 is asserted.
Later treatment
Source checked 2026-10-11. Later judicial treatment and present statutory applicability have not been comprehensively checked; no current-law or citator clearance is represented.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
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