I-T dept stays tax recovery from Maharashtra sugar mills

Shortage of cane for crushing made the stay necessary, says mills' body chairman

Maharashtra’s cooperative sugar factories have received a major relief as the Income-Tax department has stayed till September 30 tax recovery worth Rs 1,000 crore from mills. More than 60 sugar factories are expected to benefit from the move.

The department issued tax demand notices to these mills after due assessment of their accounts since 2006-07. So far, mills have paid Rs 23.37 crore.

“The additional commissioner of Income Tax, Pune, on April 1 stayed the tax demand. It has been kept in abeyance till September 30 or an order of the Supreme Court in the case pertaining to Tasgaon cooperative sugar factory, whichever is earlier,”Vijaysinh Mohite-Patil, chairman, Federation of Cooperative Sugar Factories, told Business Standard.  

Mohite-Patil said the stay would be applicable to sugar factories in Maharashtra.

The federation, representing over 170 cooperatives, has conveyed the stay order to its members across the state. Mohite-Patil said the payments for cane made by factories was the price of the cane and not the distribution of profit. Therefore, he noted it did not attract income tax.

The stay was necessitated in the wake of the ongoing severe drought conditions in the state, said Mohite-Patil. “Normally, the sugar crushing season in Maharashtra goes up to the end of April. However, this year, sugar factories have closed or are closing early, because of lack of sugarcane available for crushing due to failure of rains and lack of availability of water even to operate the sugar factory. As against nine million tonnes (mt) of sugar production during the last crushing season, production is estimated to reduce to 7.5 mt in the current season.”

Due to drought, the next season’s sugar production may drop to 4.5 mt, with nearly 30 per cent sugar factories likely to remain closed. “This will have severe and lasting effect on the rural economy of Maharashtra. The financial ability of sugar factories is severely affected and will continue to be affected for a couple of years,” Mohite-Patil said.