Clarification regarding Section 36(1)(xvii) of the Income-tax Act, 1961 inserted vide Finance Act, 2015

Last updated: 17 November 2021

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This circular clarifies Section 36(1)(xvii) of the Income-tax Act, 1961, which relates to deductions for expenditure incurred by sugar manufacturing co-operative societies. It specifies that the 'price fixed or approved by the Government' includes prices set by State Governments, such as State Advised Prices, even if they exceed the Central Government's minimum prices. This clarification applies from the assessment year 2016-17 onwards.

Circular No.18/2021-Income Tax F.N0.173/146/2021/ITA-I Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, Dated 25thOctober, 2021 Subject: Clarification regarding Section 36(1)(xvii) of the Income-tax Act, 1961 inserted vide Finance Act, 2015 -reg. The Finance Act, 2015inserted the following clause (xvii) in sub-section (1) of section 36 of the Income-tax Act, 1961 (the Act) to provide for deduction on account of the amount of e

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FAQ :

Section 36(1)(xvii) allows a deduction for expenditure incurred by a co-operative society engaged in sugar manufacturing, specifically for the purchase of sugarcane at a price equal to or less than the government-fixed price.

This clause became effective from 1st April 2016, applying to the assessment year 2016-17 and subsequent assessment years.

The circular clarifies that this phrase includes prices set by State Governments through their own Acts or Orders, such as the State Advised Price, which may be higher than the Statutory Minimum Price or Fair and Remunerative Price set by the Central Government.

This clarification specifically applies to co-operative societies engaged in the business of manufacturing sugar.

The clarification was issued due to questions raised about the tax treatment of additional payments for sugarcane prices by co-operative sugar mills, and whether these should be considered income distribution to farmer members.

Notification No : Circular No. 18/2021-Income Tax
Source : https://incometaxindia.gov.in/communications/circular/circular-no-18-2021.pdf

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