Maharashtras 125-odd cooperative sugar mills got a much-needed respite, as the state government has assured them of avoiding coercive measures like attachment of properties in the income tax departments bid to recover dues totalling Rs 2,500 crore pending since 1990-91. For now, the Central Board for Direct Taxes (CBDT) has rejected a blanket stay on the income tax demand made on these mills; it would instead consider the matter on case-to-case basis.

The sugar mills have contested the I-T departments argument that the sugarcane price they paid in excess of the respective statutory minimum price (SMP) was profit distributed to farmers and that such excess should not be allowed as their purchase cost.

The states Federation of Cooperative Sugar Factories said the representative body of 200-plus mills wanted the payment made to sugarcane growers be treated as business expenditure on the lines of expenses the mills incurred on harvesting and transportation.
Pointed out an official of the federation: We spend on harvesting and transportation only to ensure adequate and consistent supply of the freshly-cut sugarcane (which is an essential input for the non-stop running of mills).

Since these expenses are incurred for commercial expediency, they are prima facie wholly and exclusively for the purpose of business, he added. The logic also applies to the payment of cane price, he told Business Standard. The functionary informed that the non-remunerative nature of the SMP forces the state government to intervene and ensure that sugar factories pay farmers a price that ensures continuous and adequate supply from small and marginal farmers who are obliged to supply the cane to the local sugar factory. The issue may come up for a discussion tomorrow during a joint meeting between the ruling Congress and the NCP.

The official said it would not be possible for the mills to pay income tax arrears when they are struggling to cope up with the situation in the wake of a recent settlement over payment in excess of fair and remunerative price as the first advance to the sugarcane growers.

Therefore, we, on behalf of those 125 mills, had appealed to the CBDT to grant a stay on recovery of tax. The Board, on its part, has asked individual mills to file separate applications requesting for stay of demand with the assessing officers, he said.

Further, it has agreed to set up a special bench to consider various appeals in this regard.