New I-T demand on Maha sugar coop cane payment

Vilasrao Deshmukh to discuss issue with CBDT head; protest at bracketing with private mills.

Cooperative sugar mills in Maharashtra, striving to cope with volatility in the global market, may have to pay income tax arrears of a whopping Rs 3,500 crore pending since 1992-93. The mills have started receiving notices from the Income Tax (I-T) Department in this regard.

The department has taken a view that what sugar mills pay to farmers as final cane payment over and above the statutory minimum price (SMP) is an excess profit and thus it attracts income tax. However, cooperative mills have argued that they do not operate mills on a profit basis and whatever remains after the payment of processing and management charges is given back to shareholders.

This is after the Supreme Court in January had referred the matter back to the commissioner, income tax (appeals), to reexamine the issue in the context of SMP and the state advisory price (SAP). The I-T department had filed cases against 126 cooperative sugar mills from Maharashtra in the apex court. The commissioner, I-T (appeals), is expected to begin hearings in this matter. Sources at the department preferred not to comment on the issue.

The issue would come up for discussion with the chairman of the Central Board of Direct Taxes (CBDT), S S N Moorthy, at a meeting scheduled tomorrow. It would take place in the presence of Union minister of heavy industries and public enterprises Vilasrao Deshmukh, also ex-chief minister of Maharashtra.

Harshvardhan Patil, state minister for cooperatives, told Business Standard: “There are over 170 sugar cooperative mills in the state. They pay advance to cane growers during the crushing season, which generally ends on March 31 or gets extended up to June in exceptional cases. The advance payment is before the completion of the fiscal (year). However, the final cane payment is paid in the new fiscal (year), only after it is approved by a committee chaired by the state chief minister.”

Patil said the I-T department has told the millers to fix the final payment before conclusion of the crushing season and also the financial year. The department has made it clear that what mills pay as final payment to the cane growers is an excess profit and thus it attracts payment of income tax.

Chandrashekhar Ghule, chairman of the Federation of Cooperative Sugar Factories in Maharashtra, shared the minister’s views and said cooperative mills cannot be treated on par with the private enterprises. “Cooperatives are not a profit making industry. Whatever remains after payment of necessary charges is given back to the shareholders.” He said the cooperative sugar sector would collapse if it was made to pay income tax. He said the mills had no liquidity, since all the money had been passed on to cane growers.