Income Tax - harvesting and transportation expenses in the cases of Co-operative sugar mills
The CBDT has come to know that some Assessing Officers are not allowing the claim of harvesting and transportation expenses incurred by the Co-operative sugar mills for procuring sugarcane from farmers, who are members of such Co-operative Sugar Mills and who are bound under an agreement to supply the sugarcane exclusively to the concerned sugar Mill.
What is a concerned sugar mill? A sugar mill that is worried?
Anyway, Board now clarifies that
1. These expenses are incurred by the Sugar Mills for ensuring an adequate and sustained supply of freshly cut sugarcane that is an essential input for the continuous running of such Mills.
2. These expenses are, therefore, incurred for a commercial expediency and are prima facie wholly and exclusively for the purpose of business.
3. Such expenses are, therefore, allowable in the computation of the income of the Co-operative Sugar Mills.
Strange! The AOs never knew these elementary things! Thank God and Board - at least now, it is clarified by the concerned Board.
We should congratulate the Board for taking the super fast action. We in TIOL are especially happy that the Board indeed reacts. It was only on 5th October that we sent the Board a copy of the judgement of the Bombay High Court in THE COMMISSIONER OF INCOME TAX, AURANGABAD Vs SAMARTH SAHAKARI SAKHAR KARKHANA LTD -
The High Court had ruled that that the advances paid to the harvesting transport contractors was in the nature of business interest of the respondent and not a diversion of borrowed funds for non business purposes.
Suo moto, acting on the High Court decision, the CBDT has issued the above circular. These positive actions of the government are really our reward. All the midnight oil burnt, all the hassles and all the hard work pale into insignificance with one such order, useful to the assessee or the government.
CBDT CIRCULAR NO. 6/2007, Dated: October 11, 2007