SOP for Recomputation of Income of Suger Cooperatives u/s 155(19)

The CBDT has prescribed the Standard Operating Procedure (SOP) for making application for recomputation of total income under I-T section 155(19) and resolution of pending tax disputes in the case of sugar manufacturer co-operative societies.

Co-operative sugar factories in certain states often pay sugarcane growers an additional amount called the Final Cane Price (FCP), which goes beyond the Statutory Minimum Price (SMP) fixed by the Central Government. However, this practice has led to tax disputes as the excess payment was considered by co-operative sugar factories as a business expenditure, but tax authorities disallowed it, stating that it amounted to profit distribution.

SOP for Recomputation of Income of Suger Cooperatives u/s 155(19)

To resolve this issue and promote co-operative movement in the sugar sector, the Income Tax Act was amended in 2015, allowing the deduction of sugarcane purchase expenses if the price paid was equal to or below the government-fixed price. Despite this amendment, disputes for years before 2016-17 still persisted.

CBDT Income Tax Circular 14/2023 dated 27/07/2023: SOP for Recomputation of Income of Suger Cooperatives u/s 155(19)


1. Sugar factories operating in the co-operative sectors in certain States of India pay to sugarcane growers a final amount, often referred to as Final Cane Price (FCP) which is over and above the Statutory Minimum Price (SMP) fixed by the Central Government under the Sugarcane Control Order, 1996.

2. The payment of FCP by the co-operative sugar factories over and above the SMP for purchase of sugarcane had resulted into tax litigation. The co-operative sugar factories were claiming this excess payment as business expenditure whereas the same has been disallowed in the assessment on the ground that the excess price paid for purchase of sugar cane over and above SMP is in the nature of appropriation/distribution of profit and hence not allowable as deduction.

Amendments in Income Tax

3. In order to provide certainty in this matter and to encourage co-operative movement in sugar sector, a new clause (xvii) was inserted to amend I-T section 36(1) to provide that the amount paid for purchase of sugarcane by the co-operative societies engaged in the manufacture of sugar at a price which is equal to or less than the price fixed by or fixed with the approval of the Government shall be allowed as deduction for computing business income of the sugar co-operative factories. The said amendment came into force through the Finance Act 2015 w.e.f. April 01, 2016 and was applicable from AY 2016-17 and onwards. Pending demands and litigation still persisted in respect of AYs prior to 2016-17.

4. Therefore, to conclude the matter logically and to extend the benefit of the abovementioned relief to all the applicable years, I-T section 155 has been amended to insert a new sub-section (19) vide Finance Act, 2023, w.e.f. April 01, 2023. It provides that in the case of a sugar mill cooperative, 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 in any previous year commencing on or before the 1st day of April, 2014, the Assessing Officer shall, on the basis of an application made by such assessee in this regard, recompute the total income of such assessee for such previous year. The Assessing Officer shall allow such deduction to the extent such expenditure is incurred at a price which is equal to or less than the price fixed or approved by the Government for that previous year. Also, it provides that the provisions of I-T section 154 shall, so far as may be, apply thereto, and the period of four years specified in I-T section 154(7) shall be reckoned from the end of previous year commencing on the 1st day of April, 2022.

SOP for Resolution of Tax Disputes with Sugar Cooperatives

5. In order to standardize the manner of filing application to the Jurisdictional Assessing Officer (JAO) under section 155(19) and its disposal by the JAO under the said section, following SOP has been outlined.

(a) The applicant must be a “co-operative society”, as defined in I-T section 2(19), engaged in the business of manufacturing of sugar. Such co-operative society seeking relief under I-T section 155(19) should file an application to the JAO.

(b) The application can be filed for AY 2015-16 or any earlier assessment year (AYs).

(c) The JAO may seek the following documents for the purpose of recomputation under section 155(19):

i) Computation of tax, audit report u/s 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 excess price paid for 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 Government based on which excess price was paid for 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 JAO for the purposes of recomputation of total income under section 155(19).

(d) The JAO shall recompute the total income of such co-operative society under the provisions of section 155(19) read with section 154 of the Income Tax Act. Further, the rectification under these sections can only be made till 31st MArch 2027.

(e) The JAO Officer shall pass an order u/s 155(19) read with section 154 within a period of six months from the end of the month in which the application is received.


The recent amendments in the Income Tax Act have provided much-needed relief to co-operative sugar factories operating in India by allowing deductions for sugarcane purchases made at or below the government-approved price. The new section 155(19) empowers the Assessing Officer to recompute the total income for previous years with disputed deductions, resolving long-standing tax litigation. By following the outlined Standard Operating Procedure (SOP), co-operative sugar factories can effectively seek the benefits of these amendments to resolve their tax disputes amicably.

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