CBDT Notifies SOP for Making Application for Recomputation of Income of Co-operative Society u/s 155

Circular No 14 of 2023, dated 27-07-2023

Sugar factories operating in the co-operative sectors in certain States pay sugarcane growers a final amount often referred to as Final Cane Price (FCP). This amount exceeds the Statutory Minimum Price (SMP) fixed by the Central Government under the Sugarcane Control Order, 1996. FCP is decided based on the factory’s working results after considering all the revenues and expenditures incurred by the factory. The payment of FCP by the sugar co-operative societies over and above the SMP for the purchase of sugarcane often resulted in tax litigation.

Consequently, the Finance Act 2015 inserted a clause (xvii) in Section 36(1) with effect from the assessment year 2016-17. This provision provides a deduction for expenditure incurred by a sugar co-operative society for purchasing sugarcane at a price equal to or less than the price fixed or approved by the Government.

The said amendment came into force w.e.f. 01.04.2016 and was applicable from AY 2016-17 onwards. Pending demands and litigation still persisted regarding AYs before 2016-17. Therefore, to conclude the matter logically and to extend the relief to all the applicable years, the Finance Act 2023 inserted sub-section (19) in Section 155 with effect from 01-04-2023.

Section 155(19) provides that in the case of a sugar co-operative society, where any deduction in respect of any expenditure incurred for the purchase of sugarcane has been claimed by an assessee and such deduction has been disallowed wholly or partly, the Assessing Officer shall, based on an application made by such assessee, recompute the total income of such assessee for such previous year.

The following Standard Operating Procedure has been outlined to standardize the manner of filing an application and its disposal by the Jurisdictional Assessing Officer (AO) under section 155(19):

a) The applicant must be a “co-operative society”, as defined in section 2(19) of the Income-tax Act, engaged in manufacturing sugar.

b) The application by such a co-operative society can be filed for AY 2015-16 or any earlier assessment year (AY).

c) AO may seek the following documents for recomputation under section 155(19):

(i) Computation of Tax, Audit Report under section 44AB, Audited Profit & Loss Account and Balance Sheet.

(ii) Assessment Order/Appellate Order(s) of various appellate fora, as applicable, with respect to the disallowance made on account of the excess price paid for the purchase of sugarcane above the Statutory Minimum Price (SMP).

(iii) Notice of Demand issued under section 156.

(iv) Challan of taxes paid, if any.

(v) Copy of Order(s)/Other legal instrument(s) regarding price fixation by the Government based on which excess price was paid for the purchase of sugarcane over and above Statutory Minimum Price (SMP).

(vi) Documentary evidence regarding registration of co-operative society under State/Central Act.

(vii) Any other document as considered necessary by the AO for the purposes of recomputation of total income.

d) AO shall recompute the total income of such co-operative society under the provisions of sub-section (19) of section 155 read with section 154

e) AO shall pass an order under section 155(19) read with section 154 within six months from the end of the month in which he receives the application.

It must be noted that the rectification under section 155(19) read with section 154, can be made till 31.03.2027.

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