TMI Blog1997 (2) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee claimed total exemption on the above-mentioned income under section 10(29) of the Income-tax Act. The Assessing Officer, however, accepted that the assessee was the authority constituted as per section 10(29) and that only income from letting of godowns or the warehouses for storage, processing or facilitating the marketing of commodities was exempt, but the income from own buying and selling of wheat was not exempt under section 10(29). He further held that the interest income was also not exempt under that section. He, therefore, computed the taxable income of the assessee at Rs. 8,77,03,400. The Assessing Officer relied on the decisions of the Hon'ble Supreme Court in the case of Union of India v.U.P.StateWarehousing Corpn. [1991] 187 ITR 54 and of the Hon'ble Rajasthan High Court in the case of CIT v. Rajasthan State Warehousing Corpn. [1994] 210 ITR 906/75 Taxman 66. 4. On first appeal, the learned counsel for the assessee made the following submissions before the learned CIT(A), namely : (a) The assessee did not carry out any activity of purchase and sale of wheat at its own. The assessee purchased the wheat as an agent of the Government and the entire wheat was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest charges and other incidentals. FCI agreed to pay Rs. 44.10 per qtl. of wheat in addition to the purchase price of wheat. This included payment of storage charges only to the extent of Rs. 3.10 per qtl. ; (c) The assessee was earning income from two different activities, one from letting of godown and warehouses, which income was obviously exempt under section 10(29) and the other from trading of wheat which was not incidental to warehousing activity. The said activity in fact consisted of full-fledged marketing which also included a small fraction of storage charges earned by using the warehouses owned by the assessee. 4.2 The learned CIT(A) thereafter examined the provisions of section 10(29) and came to the conclusion that the expression " any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities " cannot possibly refer to the functions of buying and selling of wheat on one's own behalf because when a person buys or sells, he indulges in marketing and he could not be said to facilitate marketing of commodities. He further held that the expression ' marketing of commodities ' as used in the said cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the said decision of the Hon'ble Rajasthan High Court was the latest reported decision and it had discussed at length almost all the earlier judgments given by different High Courts. He further observed that the Assessing Officer had applied the said judgment and had held that income from trading of wheat was not exempt under section 10(29) of the I.T. Act. The learned CIT(A) then proceeded to examine the decisions of the various High Courts reported in CIT v. Haryana Warehousing Corpn. [1978] 112 ITR 374 (Punj. Har.), M.P. Warehousing Corpn. v. CIT [1982] 133 ITR 158 (MP),M.P.StateWarehousing Corpn. v. CIT [1984] 145 ITR 420 (MP), CIT v.KarnatakaStateWarehousing Corpn. Ltd. [1990] 185 ITR 25 (Kar.) and Rajasthan State Warehousing Corpn.'s case. The learned CIT(A) reproduced the summary of the decision of the Hon'ble Rajasthan High Court at pages 10-11 of his order and held that the income earned by the assessee from marketing of wheat on his own account was not exempt under section 10(29) of the I.T. Act. He also referred to the provisions of section 39 of the Warehousing Corporation Act, 1962, which provide that " for the purposes of the Income-tax Act, 1961, the Warehousin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and that the only sale of wheat was to FCI at prescribed rates. He also referred to the provisions of section 24(d) of the Warehousing Corporation Act, 1962, where under the State Warehousing Corporation was to act as an agent of the Central Warehousing Corpn. or of the Government for the purposes of purchase, sale, storage and distribution of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities. He, therefore, submitted that the assessee was acting as an agent of the Government for procurement of wheat which was ultimately to be supplied to the FCI. He further submitted that the said activities by the Haryana Warehousing Corporation facilitated the marketing of commodities as mentioned in section 10(29) of the I.T. Act. The learned counsel again relied on the following decisions, namely :--- 1.U.P.StateWarehousing Corpn.'s case 94 ITR 129 (All.). He particularly stressed that it has been held in the said decision that " marketing " has been used in wider sense to include various activities which generally go to form the trade of marketing ; 2.U.P.StateWarehousing Corpn.'s case 187 ITR 54 (SC), wherein it was observed that since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices in the mandated area and its functioning. Warehousing or storage is an essential step in the whole process of marketing. It enhances the utility of the commodities in question by making them more valuable. Therefore, it has a direct impact on the trading activities by enhancing their real value. The same is true of the other activities of processing of the commodities and facilitating the distribution by transport to and from the warehouses. 5.1 In view of the foregoing decisions, the learned counsel stressed that the decision of the Hon'ble Allahabad High Court reported inU.P.StateWarehousing Corpn.'s case squarely covers the case of the assessee. In this connection he also stressed that the learned CIT(A) has not considered the 2nd limb of the provisions of section 10(29) of the Income-tax Act and which have been considered by the Hon'ble Allahabad High Court in the aforesaid decision whereby it has answered both the questions in the affirmative in favour of the assessee, thereby holding that the assessee's income from misc. receipts and commission on procurement of wheat for FCI was exempt from tax within the meaning of section 10(29), notwithstanding the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94 ITR 129 and submitted that the contentions for the revenue before the Hon'ble High Court were that (1) the U.P. State Warehousing Corpn's case was not an authority within the meaning of section 10(29), and (2) buying and selling on its behalf constituted a vital and central element of marketing but the petitioner did not buy or sell commodities for itself. He further submitted that the Hon'ble High Court had held that the U.P. State Warehousing Corporation having been established under the 1962 Act to function for running warehouses, for storage of agricultural produce and for their transport, was an authority established for marketing of commodities and that it was entitled to exemption in respect of its income from letting of godowns and the warehouses for the mentioned activities, including facilitating marketing of commodities. He further referred to the decision of the Hon'ble Supreme Court reported inU.P.StateWarehousing Corpn.'s case at page 55, where the Hon'ble Supreme Court had observed as under : " As is apparent, the assessee would be entitled to exemption if--- (i) it is an authority constituted under any law ; (ii) it is an authority constituted for marketing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguishable on facts. The learned DR thereafter proceeded to refer in detail to the decision of the Honble Rajasthan High Court reported in Rajasthan State Warehouising Corpn.'s case. He referred to the headnotes and submitted that procurement of wheat on behalf of the Government/FCI constituted an independent activity and did not relate to letting of godowns or warehouses for facilitating marketing of commodities. In this connection he stressed that expression " facilitating marketing of commodities " could not be considered independently and that the same is connected with the activity of letting of godowns or warehouses. He further stressed that the Hon'ble Rajasthan High Court have clearly held that " though the words facilitating marketing of commodities " occurring in clause (29) of section 10 are of wider scope and include a number of activities they have to be read along with any income derived from letting of godowns or warehouses for facilitating marketing of commodities ". Income which is exempt under section 10(29) must be derived from letting of godowns for facilitating marketing of commodities. The words facilitating marketing of commodities could not be considered ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned that it is not a case of indivisible activity and that the assessee itself has apportioned the various receipts and expenses in relation to trading of wheat. He, therefore, summed up that the profit from trading of wheat is of the assessee and not of the Government or any other person and is liable to tax. 7. The learned counsel in his reply referred to the provisions of section 39 of the Warehousing Corporation Act, 1962 and submitted that the scope of the provisions of section 10(29) of the I.T. Act, exempting income of an authority constituted for the marketing of commodities is neither subject to nor controlled by section 39 of the Warehousing Corporation Act. In this connection he referred to the decision of the Hon'ble Punjab Haryana High Court in the case of Haryana Warehousing Corpn.'s case. With reference to the point made by the learned DR that storage charges of Rs. 2,11,11,280 have been debited separately in relation to trading of wheat, the learned counsel submitted that it was a notional debit regarding storage of wheat on behalf of FCI and that it was just an estimate. He submitted that these charges are included in the total figure of warehousing charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case reported in U.P. State Warehousing Corpn.'s case was as to whether the U.P. State Warehousing Corporation was an authority constituted under any law for marketing of commodities so as to be covered by the provisions of section 10(29) of the I.T. Act. In the said case, the Hon'ble Supreme Court clearly held that since the income derived by the U.P. State Warehousing Corporation was from letting of godown or warehouses the third test with regard to income exempt under section 10(29) presented no difficulty. Thus on the facts and in the circumstances of the case, we feel that the learned CIT(A) has rightly brought to tax the income from trading of wheat and that his orders need no interference. This ground is, therefore, rejected. 9. Ground No. 2 urged by the assessee relating to exemption of gross income of Rs. 8,88,87,689 was not pressed by the learned counsel and the same is, therefore, rejected. 10. The learned counsel sought permission of the Tribunal to move the following additional ground of appeal, namely :--- " Without prejudice to ground Nos. (1) and (2) with memorandum of appeal, the charge of interest amounting to Rs. 2,85,26,243 under section 234B is wholly unj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Harjivandas [1981] 129 ITR 276/6 Taxman 87 and the decision of the Hon'ble Punjab Haryana High Court in the case of Atlas Cycle Industries Ltd v. CIT [1982] 133 ITR 231. 10.4 We have carefully considered the rival submissions on this issue and have also perused the case law relied upon by the learned counsel. We feel that under the circumstances of the case, the additional ground ought to be admitted and accordingly we admit the additional ground and restore this matter to the file of the Assessing Officer who may decide the issue of levy of interest under section 234B in accordance with law. ITA No. 5648 ( Del )195 : 11. Ground No. 1 urged by the department relates to deletion of the addition of Rs. 19,90,541 on account of interest. 11.1 The assessee had raised loans from various banks and had also advanced loan to Sugar Federation of India and some loan had also been given to its employees. The assessee received interest of Rs. 16 lakhs from Sugar Federation of India and of Rs. 3,90,541 from staff members. The Assessing Officer held that gross receipts of interest were taxable as income from other sources. 11.2 On first appeal, the learned counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue and have also perused the case law relied upon by the learned DR. It is observed that in the said case the Orissa State Warehousing Corporation had received an amount of Rs. 1,74,383 as interest on fixed deposits in different banks and that during the relevant period, the assessee had also paid total interest of Rs. 1,08,063 to the banks and in the process there was a difference of Rs. 66,320 which was brought to tax by the Assessing Officer. The Hon'ble High Court had held that interest received by the assessee from banks on fixed deposits was not exempt under section 10(29) of the Act. In the present case, however, the assessee had paid more interest to the banks than it had received from the Sugar Federation and the employees and, therefore, in the circumstances we feel that the said case does not apply on facts. We, therefore, see no reason to interfere with the orders of the learned CIT(A) in this behalf, as he has allowed the relief not in view of the provisions of section 10(29) but keeping in view that above facts. 12. Ground No. 2 urged by the department relates to deletion of the addition of Rs. 2,71,638 received by the assessee from forfeiture of earnest money. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges of the goods stored in the warehouses of the Corporation by its tenants. He further submitted that the Corporation extended its customers the facility to handle their stock at rail head and its transportation to the warehouses for storage on their own behalf. He also submitted that for the said services the Corporation realised the actual expenditure incurred on it and also the supervision charges for supervising the handling and transportation job. He, therefore, urged that the whole operation was a part of storage activity and the income derived therefrom is exempt under section 10(29). The learned CIT(A) observed that the supervision charges were received from the tenants to whom the godown had been let out for supervising the handling and transportation of stock kept in the warehouses and that the same were inseparable from rental income received by letting out the warehouses. He, therefore, deleted the addition of Rs. 27,01,231. 13.3 The learned DR submitted that the supervision charges had nothing to do with letting of godowns and that the letting would actually start after the wheat had arrived in the godowns. He, therefore, submitted that the learned CIT(A) has w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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