Maharashtra's cash trapped cooperative sugar factories have received a relief for a moment as the Supreme Court has ruled that various petition on the recovery of income tax be referred to a larger bench. The breather comes at a time when the income tax department had started the recovery of income tax from some of the cooperative sugar factories. The tax demands issued by the Pune office for the 2008-09 and 2009-10 were for Rs 2,000 crore which are in addition to tax demand during 1991-92 and 2007-08 worth Rs 2,500 crore.
A division bench comprising justices DK Jain and Madan B Lokur on December 7 during hearing on petition of Tasgaon taluka cooperative sugar factory ruled "We feel that observations in Maharashtra Rajya Sahkari Sakkr Karkhana Sangh Ltd and others vs State of Maharashtra and others, 1995 supl (3) SCC 475, may have some bearing on the merits of the main issue, raised by the Revenue. Hence, it will be appropriate if these appeals are heard by a larger bench." The bench thereby ruled that there was no need to refer back the matter again to the Commissioner Income Tax (appeals) in Maharashtra.
The Tasgaon taluka cooperative sugar factory had argued that the expenses incurred by factories on the payment to cane growers are for ensuring adequate and consistent supply of the freshly cut sugarcane which is essential for continuous running of sugar factories. These expenses are incurred for commercial expediency and fully and exclusively for the purpose of business. It is not distribution of profit paid to cane growers.
The apex court's order comes at a time when a large number of cooperative sugar factories had received demand orders from the income tax department for the payment of tax. This had led the state chief minister Prithviraj Chavan asking CBDT not to resort to coercive actions against cooperative sugar factories.
Ankushrao Tope, director, National Federation of Cooperative Sugar Factories and Federation of Cooperative Sugar Factories of Maharashtra told Business Standard "A review petition will be filed in the Supreme Court either collectively by 150 odd cooperative sugar factories or by the Federation requesting the court to take a combined hearing on income tax related matters. A representation will also be made to CBDT requesting it to direct the income tax offices in Maharashtra stop the coercive action of tax recovery from cooperatives." Tope admitted that the last week's order has been a major relief for the cooperatives.
According to Tope, the income tax department is holding a view that the payment made by factories above fair and remunerative price (FRP) is profit. However, factories and state government are opposed to the stand taken by the income tax department.
