2022 (3) TMI 126 - AT - Income Tax

Disallowance of deduction u/s 80P in respect of storage income derived from CAP storage - HELD THAT - There is no specific definition of godown and warehouse prescribed in Income-tax Act 1961. We also observe that section 80P does not state in specific terms that there must be a structure of permanent nature. What section 80P requires is only godown or warehouse . As noted earlier the Ld. A/R has made a considerable submission on the definition of warehouse prescribed in the laws governing the development and regulation of warehousing namely Section 2(s) of The Warehousing (Development and Regulation) Act 2007 and Section 2(d) of The Madhya Pradesh Agricultural Warehouse Act 1947. We have carefully considered these definitions and observe that even a protected place or protected enclosure used for the purpose of storage of commodities is also a warehouse CAP storage is a protected place for storage of commodities approved by the statutory Orders. In view of these factual submissions and legal position we feel that the CAP storage must be held to be a warehouse for the purpose of section 80P and we hold so. At this stage we also note that the section 80P is a beneficial provision and the purpose is to incentivize the warehousing activity of co-operative societies. Therefore the interpretation of section 80P must be liberal so as to advance the avowed objective. Taking into account all these aspects we are persuaded to conclude that the income from letting of CAP storage derived by the assessee is eligible for deduction u/s 80P and there is no justification in denying the same to the assessee. Therefore we delete the disallowance made by lower authorities. This ground is therefore allowed. Disallowance of claim of deduction u/s 80P on account of depreciation (protective) - HELD THAT - We observe that the depreciation disallowance of Rs. 1, 63, 23, 529/- has been fully deleted by the Ld. CIT(A) and this deletion has already attained finality as there is no appeal or cross-objection from Revenue contesting this. Regarding the disallowance out of deduction u/s 80P we have already deleted the same in preceding paras. Thus both of the disputes namely the disallowance of depreciation u/s 32 and disallowance of deduction u/s 80P made by Ld. AO stand fully settled in favour of the assessee at this stage. Being so we feel that the issue of protective disallowance of deduction u/s 80P on account of consequential effect of depreciation-disallowance does not survive further. Appeal of assessee is partly allowed.

Summary

Issues Involved:
1. Disallowance of deduction under section 80P for income derived from CAP storage.
2. Protective disallowance of deduction under section 80P on account of depreciation.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80P for Income Derived from CAP Storage:

The primary issue was whether the income derived from CAP (Cover and Plinth) storage qualifies for deduction under section 80P of the Income-tax Act, 1961. The assessee claimed a deduction of Rs. 5,02,23,957/- for income derived from CAP storage, which was disallowed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].

The AO argued that section 80P(2)(e) allows deductions for income derived from letting godowns or warehouses, and since CAP storage does not involve a permanent structure, it does not qualify as a godown or warehouse. The CIT(A) upheld this view, relying on the decisions in CIT Vs. Ahmedabad Maskati Cloth Dealers Co-operative Warehouses Society Ltd. and Surat Vankar Sahakari Sangh Ltd. Vs. CIT.

The assessee contended that the terms "godown" and "warehouse" are not defined in the Income-tax Act, 1961, and referred to definitions in other laws, such as The Warehousing (Development and Regulation) Act, 2007, and The Madhya Pradesh Agricultural Warehouse Act, 1947. These laws define a warehouse as any premises used for storing goods, including protected places or enclosures, which would include CAP storage.

The assessee further argued that CAP storage is a legally approved storage method, constructed and operated under controlled conditions as per statutory directives. The Tribunal agreed with the assessee's interpretation, noting that section 80P does not specify that a permanent structure is required. They concluded that CAP storage qualifies as a warehouse for the purposes of section 80P and allowed the deduction.

2. Protective Disallowance of Deduction under Section 80P on Account of Depreciation:

The second issue involved the protective disallowance of Rs. 1,18,52,613/- out of the deduction under section 80P, which was related to the depreciation disallowance. Initially, the AO had disallowed the full depreciation claim of Rs. 1,60,23,529/- and made a protective disallowance of Rs. 1,63,23,529/- from the allowed portion of the deduction under section 80P.

The CIT(A) deleted the full depreciation disallowance but upheld the protective disallowance to the extent of Rs. 1,18,52,613/- related to godown or building depreciation. The Tribunal observed that since the depreciation disallowance had been fully deleted and the disallowance under section 80P had been allowed, the issue of protective disallowance did not survive. Therefore, this ground became infructuous and did not require further adjudication.

Conclusion:

The Tribunal allowed the appeal partly, deleting the disallowance of deduction under section 80P for income derived from CAP storage and rendering the issue of protective disallowance on account of depreciation infructuous. The order was pronounced on 17.02.2022.