TMI Blog2008 (1) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, processing or facilitating marketing of agricultural products, seeds, manure, fertilizer, agricultural implements and notified commodities. The Assessing Officer asked the assessee to explain as to why the receipts not directly related to warehousing activities be denied exemption under section 10(29) and also to give details of income and expenditure relating to the different activities. The Assessing Officer also asked the assessee to explain why the deduction under section 10(29) should not be denied in respect of interest and dividend income, misc. receipts and income from investment and other joint ventures. The assessee explained that the major income of the assessee was from warehousing activities and the remaining income was from the activities, which were incidental to warehousing such as agency commission from handling of transportation. It was also submitted that though the income from interest dividend, income from investments and from joint ventures etc., was not exempt as held by Hon'ble Supreme Court, the assessee had one and only indivisible business and, therefore, the entire expenditure incurred by the assessee had to be set off against taxable income as held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 14A were, therefore, not applicable in case of the assessee. Reference was also made to the decision of the Tribunal in assessee's own case in assessment years 1976-77 to 1979-80 in ITA Nos. 696-699 in which it was held that business of the assessee was indivisible. CIT(A) was satisfied with the explanation given by the assessee. It was held by him that provisions of section 14A were not applicable for the assessment year 2000-01 and considering the judgment of Hon'ble Supreme Court in case of Rajasthan State Warehousing Corpn., the expenses relating to exempted income could not be disallowed. 2.2 Subsequently CIT examined the assessment records and noted that though the Assessing Officer had denied exemption under section 10(29) on the ground of non-furnishing of details, he did not mention in the assessment order that in case the exemption was found allowable in appeal, the claim of expenses relating to warehousing activities would be disallowed. He noted' that the assessee had claimed depreciation on warehousing building amounting to Rs. 12,69,10,786 which stood allowed after the decision of CIT(A) allowing exemption under section 10(29). It was also noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which CIT(A) had given a decision and, therefore, such issue could not be made subject-matter of jurisdiction under section 263. As regards the prior period expenses, it was submitted that as per CIT, the prior period expenses disallowable were to the tune of Rs. 2.58 crores in place of only Rs. 1.51 crores added by the assessee. It was pointed out that the assessee in the revised computation of income, which is available at page 2 of the paper book had already added a sum of Rs. 2.70 crores on account of prior period expenses, which consisted of Rs. 1,51,23,578 and Rs. 1,19,30,086. As the assessee had already added more than the sum pointed out by CIT, the order of the Assessing Officer could not be prejudicial to the interest of the revenue. 3.1 The ld.Sr. DRappearing for the revenue on the other hand supported the order of CIT. It was submitted that the issue relating to section 14A did not arise before the Assessing Officer as the Assessing Officer had treated the entire income as non-exempt. The issue of apportioning the expenses was not, therefore, before the Assessing Officer. The CIT had, therefore, jurisdiction to pass order under section 263. 3.2 In reply, the ld. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come could not be disallowed in such cases following the judgment of Hon'ble Supreme Court in case of Rajasthan State Warehousing Corpn. In appeal, CIT(A) held that the business of CFS/ICD was not separate line of business but only the storage charges received by the assessee in respect of CFS/ICD activities would qualify for exemption under section 10(29). He also held that the assessee was entitled to exemption under section 10(29) only in respect of warehousing charges and not in respect of other income such as interest etc. CIT(A) also examined the applicability of section 14A. It was held by him that in view of the amendment made by the Finance Act, 2002, the provisions of section 14A were effective only from 11-5-2001 and, therefore, not applicable to the present case which related to assessment year 2000-01. As the provisions of section 14A were not applicable, CIT(A) held that expenditure in relation to exempted income could not be disallowed following the judgment of Hon'ble Supreme Court in case of Rajasthan State Warehousing Corpn. as the assessee had one indivisible business. 4.1 The power of CIT to modify an assessment made by the Assessing Officer has to be examined ..... X X X X Extracts X X X X X X X X Extracts X X X X
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