income tax

Standard Operating Procedure for Income Reassessment of Sugar Co-operatives

Overview of Standard Operating Procedure for Income Reassessment of Co-operative Sugar Societies

The Central Board of Direct Taxes (CBDT) has released a Standard Operating Procedure (SOP) through Circular No. 14 of 2023, dated July 27, 2023. This SOP addresses the recomputation of total income for co-operative societies involved in sugar manufacturing, aiming to reduce uncertainty and foster growth within the sugar sector. This initiative specifically tackles tax disputes linked to Final Cane Price (FCP) payments exceeding the Statutory Minimum Price (SMP).

Background and Legal Amendments

The tax disputes primarily arose from co-operatives claiming FCP payments as business expenditures. However, these claims were often disallowed during assessments, classified instead as profit distributions. To resolve these ongoing litigations, amendments to the Income-tax Act were introduced, allowing deductions for such payments, under specific conditions.

Key Points of the Amendment

  • Amendment of Section 155: The latest changes to Section 155 of the Income-tax Act facilitate the recomputation of total income for previous years, specifically prior to April 1, 2014. Eligible co-operative sugar societies must submit a formal application for this recomputation.

  • New Provisions under Finance Act 2023: As of April 1, 2023, the newly inserted sub-section (19) allows co-operative sugar factories to claim deductions for FCP payments, subject to compliance with government pricing.

Standard Operating Procedure Details

This SOP provides detailed steps for co-operative societies to file for income recomputation under sub-section (19) of Section 155.

Application Filing Criteria

  1. Eligibility: Applicants must be co-operative societies, as defined under sub-section (19) of Section 2 of the Income-tax Act, specifically engaged in sugar manufacturing.
  2. Assessment Years Covered: Applications can be submitted for the assessment year 2015-16 or any earlier fiscal year.

Document Submission Requirements

To facilitate the recomputation process, the Jurisdictional Assessing Officer may request the following documents:

  • Tax computation details and audit reports as per Section 44AB.
  • Audited financial statements (Profit and Loss Account, Balance Sheet).
  • Relevant Assessment and Appellate Orders regarding disallowances related to FCP payments.
  • Notice of Demand issued under Section 156.
  • Proof of tax payments made, if applicable.
  • Government orders or legal instruments pertaining to sugarcane pricing.
  • Evidence of the co-operative society's registration under applicable legislation.
  • Any additional documents deemed necessary by the Jurisdictional Assessing Officer.

Reassessment Procedure

  • Computation Timeline: The jurisdictional officer is mandated to complete the recomputation process within six months from the month the application is received.
  • Limitations: The rectification process under this provision is valid until March 31, 2027.

Conclusion

The SOP issued by the CBDT aims to provide clarity and assistance to co-operative sugar societies navigating the complexities of tax assessments related to sugarcane purchases. By streamlining the application process and ensuring compliance with recent legislative changes, the government seeks to bolster the cooperative movement within the sugar sector and mitigate ongoing disputes.