The income tax departent has made a claim of around Rs 20,000 crore towards income tax from the ailing sugar industry in Maharashtra. This claim is made for the period 1992-93 to 2007-08. The Supreme Court registrar on October 15 has admitted the income tax department?s special leave petition challenging the previous orders passed by the special bench of the Income Tax Tribunal in 2004 and the Bombay high court in 2007. The apex court is expected to take up the matter for hearing after Diwali vacation.

As reported by FE, Maharashtra?s sugar industry, which contributes nearly 30% to the all India sugar production, has incurred a cash loss of Rs 2,000 crore in 2007-08. The industry is in the midst of appointment of senior lawyers to plead its case in the apex court. Industry sources told FE that the special bench of the Income Tax Tribunal and the Bombay high court in their separate orders have dismissed the I-T department?s submission that cane payment made by sugar cooperative factories after the payment of statutoty minimum price (SMP ) should be considered as a taxable income.

Sources said that the special bench of the I-T department and the Bombay high court had also ruled that the cane payment made by sugar industry cannot be appropriation of profit. Besides, the high court observed that the price fixation theory was deviced in the best interest of the public. However, sugar factories and their Federation of Cooperative Sugar Factories in Maharashtra have been consistent in their argument that cane price payment is done as per the government directives.

While the Income Tax department pleaded that the cane price payment made after the payment of SMP should attract action under section 48 (2) (B) of the Income Tax Act which is applied for Association of Persons (AoP). However, the sugar industry submitted that AoP cannot be applied to the industry as the sugar unit is set up with the contribution of hundreds and thousands of farmers. The formation of sugar cooperative is aimed at giving maximum returns to the members and to the poor farmers. In such sugar units 80% sugarcane suppliers are holding 1 to 2 acres of sugarcane.

Further, the industry argued that the payment made is a factual payment and this is not something siffoning of profit.