Strengthening of the Cooperative Sugar Mills

The Government of India has taken the following steps for strengthening of Cooperative Sugar Mills (CSMs):- The payment of FCP by the co-operative sugar factories over and above the SMP for purchase of sugarcane had resulted into tax litigation. The co-operative sugar factories were claiming this excess payment as business expenditure whereas the same has been disallowed in the assessment on the ground that the excess price paid for purchase of sugar cane over and above SMP is in the nature of appropriation/distribution of profit and hence not allowable as deduction. In order to provide certainty in this matter and to encourage co-operative movement in sugar sector, a new clause (xvii) was inserted to amend sub-section (1) of section 36 of the Income-tax Actto provide that the amount paid for purchase of sugarcane by the co-operative societies engaged in the manufacture of sugar at a price which is equal to or less than the price fixed by or fixed with the approval of the Government, including price fixation by State Governments through State-level Acts/Orders or other legal instruments that regulate the purchase price for sugarcane, including State Advised Price, which may be higher than the Statutory Minimum Price/Fair and Remunerative Price fixed by the Central Government shall be allowed as deduction for computing business income of the sugar co-operative factories w.e.f. 01.4.2016. 17. Therefore, to conclude the matter logically and to extend the benefit of the abovementioned relief to all the applicable years, section 155 of the Act has been amended to insert a new sub- section (19) vide Finance Act, 2023, w.e.f. 01 April 2023. It provides that in the case of a sugar mill cooperative, where any deduction in respect of any expenditure incurred for the purchase of sugarcane has been claimed by an assessee and such deduction has been disallowed wholly or partly in any previous year commencing on or before the 1ª day of April, 2014, the Assessing Officer shall, on the basis of an application made by such assessee in this regard, recompute the total income of such assessee for such previous year. The Assessing Officer shall allow such deduction to the extent such expenditure is incurred at a price which is equal to or less than price fixed or approved by the Government for that previous year. CBDT has also issued Standard Operating Procedure in this regard on 27.07.2023. For ease of CSMs availing loan for setting up of ethanol plants under the scheme, NCDC has revised its funding pattern from 70:30 to 90:10 wherein the society has to raise only 10% of the project cost and 90% of the project cost will be provided by NCDC subject to technical and financial viability of the project. Further,for benefit of the Cooperative Sugar Mills, NCDC has reduced its floating rate of interest for term loan to 8.50% under the scheme. This was stated by the Minister of Cooperation, Shri Amit Shah in a written reply to a question in the Rajya Sabha. ***** RK/VV/ASH/RR/PR/PS The Government of India has taken the following steps for strengthening of Cooperative Sugar Mills (CSMs):- The payment of FCP by the co-operative sugar factories over and above the SMP for purchase of sugarcane had resulted into tax litigation. The co-operative sugar factories were claiming this excess payment as business expenditure whereas the same has been disallowed in the assessment on the ground that the excess price paid for purchase of sugar cane over and above SMP is in the nature of appropriation/distribution of profit and hence not allowable as deduction. In order to provide certainty in this matter and to encourage co-operative movement in sugar sector, a new clause (xvii) was inserted to amend sub-section (1) of section 36 of the Income-tax Actto provide that the amount paid for purchase of sugarcane by the co-operative societies engaged in the manufacture of sugar at a price which is equal to or less than the price fixed by or fixed with the approval of the Government, including price fixation by State Governments through State-level Acts/Orders or other legal instruments that regulate the purchase price for sugarcane, including State Advised Price, which may be higher than the Statutory Minimum Price/Fair and Remunerative Price fixed by the Central Government shall be allowed as deduction for computing business income of the sugar co-operative factories w.e.f. 01.4.2016. 17. Therefore, to conclude the matter logically and to extend the benefit of the abovementioned relief to all the applicable years, section 155 of the Act has been amended to insert a new sub- section (19) vide Finance Act, 2023, w.e.f. 01 April 2023. It provides that in the case of a sugar mill cooperative, where any deduction in respect of any expenditure incurred for the purchase of sugarcane has been claimed by an assessee and such deduction has been disallowed wholly or partly in any previous year commencing on or before the 1ª day of April, 2014, the Assessing Officer shall, on the basis of an application made by such assessee in this regard, recompute the total income of such assessee for such previous year. The Assessing Officer shall allow such deduction to the extent such expenditure is incurred at a price which is equal to or less than price fixed or approved by the Government for that previous year. CBDT has also issued Standard Operating Procedure in this regard on 27.07.2023. For ease of CSMs availing loan for setting up of ethanol plants under the scheme, NCDC has revised its funding pattern from 70:30 to 90:10 wherein the society has to raise only 10% of the project cost and 90% of the project cost will be provided by NCDC subject to technical and financial viability of the project. Further,for benefit of the Cooperative Sugar Mills, NCDC has reduced its floating rate of interest for term loan to 8.50% under the scheme. This was stated by the Minister of Cooperation, Shri Amit Shah in a written reply to a question in the Rajya Sabha. ***** RK/VV/ASH/RR/PR/PS