CBDT issue clarification on treatment of additional payment for sugarcane price by Cooperative sugar mills
CBDT Circular 18/2021 dated 25 October 2021
Clarification regarding Section (36) (1) (xvii) of the Income-tax Act 1961 inserted vide Finance Act. 2015
The Finance Act, 2015 inserted the following clause (xvii) in sub-section (1) of section 36 of the Income-tax Act, 1961 (the Act) to provide for deduction on account of the amount of expenditure incurred by a co-operative society engaged in the business of manufacture of sugar –
(xvii) the amount of expenditure incurred by a co-operative society engaged in the business of manufacture of sugar for purchase of sugarcane at a price which is equal to or less than the price fixed or approved by the Government;
This clause took effect from 01 .04 .2016 and accordingly applied to assessment year 2016-17 and subsequent assessment years.
The issue of treatment of additional payment for sugarcane price by Cooperative sugar mills as an income distribution to farmer members and the resultant tax liabilities has been brought to the notice of the Central Board of Direct Taxes (the Board).
The matter has been examined by the Board and in this regard , it is clarified that the phrase 'price fixed or approved by the Government' in clause (xvii) in sub-section (1) of section 36 of the Act includes 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