TMI Blog2008 (4) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... . Nos. 6/Agra/2005 and 56/Agra/2006. 3. We take up the Departmental appeal in the case of M/s Ambika Sheet Grah (P) Ltd. for asst. yr. 2001-02. The Department has raised following grounds: "1. That the learned CIT(A)-II, Agra has erred in law and on the facts in allowing the assessee's claim under s. 80-IB(11) taking recourse to the rule of literal interpretation of the relevant section and brushing aside the AO's discussion on the matter in the assessment order and ignoring the fact that cold storage and cold chain facilities are not the same. 2. That the learned CIT(A)-II, Agra has erred in law and on the facts in allowing the assessee's claim under s. 80-IB(11) without properly appreciating the facts on record. 3. That the decision of learned CIT(A)-II, Agra being erroneous in law and on facts deserves to be quashed and that of the AO deserves to be restored." 4. The main issue in this appeal and other three appeals is whether assessees, who are running a cold storage plant for preservation of agricultural produce are entitled to deduction under s. 80-IB(11) of the Act, being 100 per cent deduction of the profit derived by industrial undertaking for five years and at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e units which were carrying on the business of storage/transportation of the agricultural produce under scientifically controlled conditions. 7. The learned Authorised Representative for the assessee submitted before the learned CIT(A) that an industrial undertaking does not require an integrated business (of storage and transportation) as is required for giving deduction under s. 80-IB(11A). He referred to the certificate issued to the assessee by the District Horticulture Officer, who certified that his undertaking has necessary chain of facilities for the storage and preservation of potatoes under scientifically controlled conditions. The assessee also submitted a certificate of the Government approved engineer for the purposes of obtaining licence wherein it is certified that the undertaking is having various facilities for storage of agricultural produce under scientifically controlled conditions including refrigeration. A certificate of one Shri B.D. Sharma, a refrigeration engineer was also filed to this effect. 8. The learned CIT(A) sent these arguments to the AO for his comments wherein AO practically repeated the same arguments as he had taken in the assessment order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of IPCA Laboratory vs. Dy. CIT (2004) 187 CTR (SC) 513 : (2004) 266 ITR 521 (SC) and of Prakash Nath Khanna Anr. vs. CIT (2004) 187 CTR (SC) 97 : (2004) 266 ITR 1 (SC), decision of Hon'ble Allahabad High Court in the case of Krishi Utpadan Mandi Samiti, Bulandshahr vs. Union of India Anr. (2004) 188 CTR (All) 556 : (2004) 267 ITR 460 (All) on interpretation of the statutes. According to these authorities, the statute should be read in its ordinary, natural and grammatical sense. Accordingly, the learned CIT(A) allowed the claim of the assessee. 10. Opening up the arguments, the learned Departmental Representative submitted that the assessee is only running a cold storage plant and not a "cold chain facility", hence it is not entitled for deduction under s. 80-IB(11). The conditions laid down for deduction under s. 80-IB(11) are: (a) The gross total income of an assessee should include profits and gains from eligible business. (b) Eligible business for this section should be that an industrial undertaking derives profit from the business of setting up and operating "cold chain facility" for agricultural produce. (c) "Cold chain facility" has been defined as " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king operating cold storage plant will get deduction during the period from 1st April, 1995 to 31st March, 2002 to the extent provided in that sub-section. 13. Similarly, the learned Departmental Representative referred to ss. 80-IB(4) and 80-IB(5) which allow deduction to an. industrial undertaking in an industrially backward State specified in the Sch. VIII and to an industrial undertaking including cold storage plant located in industrially backward district respectively for the period mentioned in those sub-sections and deduction to the extent provided therein. Thus, according to learned Departmental Representative, there are specific sections which allow deduction to a cold storage plant if. (a) it is a small scale industrial undertaking, or (b) it is set up in industrially backward State, or (c) it is set up in industrially backward district. 14. The learned Departmental Representative then referred to s. 80-IB(14)(c)(i), which defines "initial assessment year". It also distinguishes between a cold storage plant and "cold chain facility" in the following manner: ".....an industrial undertaking or cold storage plant or ship or hotel, means the assessment year relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailer. The concept of "end to end" is inbuilt in the concept of "cold chain facility". Merely storage in cold storage plant cannot be said to be a cold chain facility as envisaged in s. 80-IB(11) r/w s. 80-IB(14)(a). What is required, the learned Departmental Representative submitted, is to link modern cold storages to the farmer and market through logistic network based on the use of refrigerated trucks and containers supported by an IT network with latest software application for managing an efficient supply chain. 18. The learned Departmental Representative then referred to the Working Document Series No. 6 on "Agricultural Analyses and Design", being a paper on "Cold Chain for Agricultural Products in Rwanda", authored by Mr. Andrew Friend and Mr. Ricardo Frohmader funded by United States Agency for international development and released in March, 2000. He also referred to a paper taken from internet-Wikipedia and also to a paper published by Container Corporation of India Ltd. to highlight the concept of "cold chain facility". According to him, in all these documents, concept of integrated facility is highlighted. A "cold chain facility" should necessarily operate from the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not claim deduction under s. 80-IB(11). 20. The learned Departmental Representative referred to following decisions for the proposition that liberal interpretation cannot be carried to the extent of doing violence to the plain and simple language used in the enactment: (i) CIT vs. N.C. Budharaja Co. Anr. (1993) 114 CTR (SC) 420 : (1993) 204 ITR 412 (SC); (ii) Petron Engineering Construction (P) Ltd. Anr. vs. CBDT Ors. (1989) 75 CTR (SC) 20 : (1989) 175 ITR 523 (SC); (iii) CIT vs. Lokmat News Papers (P) Ltd. (1995) 126 CTR (Bom) 395 : (1995) 216 ITR 199 (Bom); (iv) A.G.S. Tiber Chemicals Industries (P) Ltd. vs. CIT (1997) 141 CTR (Mad) 467 : (1998) 233 ITR 207 (Mad). 21. Against this, the learned Authorised Representative for the assessee submitted that cold storage plant is a part and parcel of "cold chain facility". In fact, "cold chain facility" is a larger concept. A cold storage plant is also a cold chain facility though all cold chain facilities may not be cold storage plants. Therefore, if cold chain facility is entitled for deduction then cold storage plant being a part of it should also be entitled for deduction. The learned Authorised Representa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition which has used the conjunction "or" i.e. if an industrial undertaking has cold chain facility for storage then it should be entitled for deduction provided other conditions are satisfied. Thus, to have the additional facility of refrigerated transportation is not essential in Indian conditions. He submitted that agricultural produce is brought by tractor-trolleys from the farm land. One cannot impose the cost of transportation in a refrigerated van on the farmers. Further, any produce from the farm land cannot be directly put into a cold storage or into a refrigerated van as it requires a certain degree of pre-cooling which cannot be given on the open farm land where agricultural produce is subjected to intense heat from the sunrays. He submitted that if agricultural produce is directly put into refrigerated van from the farm land then it will severely affect its life which is against the intention of the legislature which has highlighted the need of preservation of agricultural produce. Thus, if an assessee has "cold chain facility" for storage, then it would satisfy the conditions laid down in s. 80-IB(14)(a). Further, neither the learned Departmental Representative nor the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds adequate for efficient preservation of the potatoes by maintaining the desired temperature and relative humidity. (xii) It has facility of monitoring temperature control which provides further facility during preservation in cold chambers to maintain such temperatures for initial period of storage of potatoes as required which is being gradually monitored and sufficiently brought down to about I to 3 degrees centigrade for efficient preservation of potatoes. (xiii) It has further facility of evenly distributed aluminum finned cooling coils fitted with low speed, high volume natural draft cooling arrangement having a better control in the maintenance of proper relative humidity for efficient preservation of potatoes. (xiv) It has further facility of providing uniformity of temperature in the preservation of potatoes in cold chambers which give the efficient minimum weight loss during the preservation of potatoes. This also enhances the storage life of potatoes and help in ensuring the smooth and uniform distribution of potatoes. (xv) It is having facility of adequate electric connection required to run the unit. (xvi) It has facility of standby generator of adequate cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld also have refrigerated transportation system in addition to storage system and only then it will be called a chain of facilities. No such inference can be drawn from the language used in the section or in the definition. He submitted that so far as other conditions, such as, storage system functioning under scientifically controlled facilities are concerned, there is no dispute. The facilities, the assessee has, are scientifically controlled and regulated. These facilities, in fact, work in sequence to each other. It, therefore, satisfies all the conditions laid down in ss. 80-IB(11) and 80-IB(14)(a). He submitted that once agricultural produce is brought from the field, it has inbuilt heat and it also absorbs heat from the atmosphere. It cannot keep the produce directly into a zero or sub-zero temperature. The temperature of the agricultural produce has to be brought down to room temperature by keeping it to air circulation through fans. Thus, once the produce is cooled down to room temperature it is then shifted to a chamber having moderately low temperature of 10 degrees centigrade and then further shifted to a desired temperature of 1-2 degrees centigrade. The agricultural p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortation to qualify for deduction under s. 80-IB(11). The learned Authorised Representative for the assessee then submitted that when a beneficial section is capable of giving two interpretations then the one which confers the benefit should be preferred as compared to the one which denies such benefit. He referred to various case law on the subject as under: (i) Mysore Minerals Ltd. vs. CIT (1999) 156 CTR (SC) 1 : (1999) 239 ITR 775 (SC); (ii) CIT vs. Podar Cement (P) Ltd. Ors. (1997) 141 CTR (SC) 67 : (1997) 226 ITR 625 (SC); (iii) Orissa State Warehousing Corporation vs. CIT (1999) 153 CTR (SC) 177 : (1999) 237 ITR 589 (SC); (iv) CIT vs. Naga Hills Tea Co. Ltd. 1973 CTR (SC) 329 : (1973) 89 ITR 236 (SC); (v) CIT vs. Madho Pd. Jatia 1976 CTR (SC) 438 : (1976) 105 ITR 179 (SC); (vi) CIT vs. Kulu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC); (vii) CIT vs. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 104 CTR (SC) 243 : (1992) 196 ITR 149 (SC); (viii) CIT vs. Shahzada Nand Sons Ors. (1966) 60 ITR 392 (SC). 26. In the rejoinder, the learned Departmental Representative submitted that the facilities which the assessee is describing are not the chain o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. 80-IB(14) For the purposes of this section,- (a) "cold chain facility" means a chain of facilities for storage or transportation of agricultural produce under scientifically controlled conditions including refrigeration and other facilities necessary for the preservation of such produce. 28. So far as the other conditions for eligibility of deduction under s. 80-IB(11) are concerned, there is no dispute. It is fairly admitted by both the parties that whatever facilities assessee has, they are under scientifically controlled conditions. Thus, the dispute is centralized on the interpretation of the definition of "cold chain facility" as provided in sub-s. (14)(a) as reproduced above. The first view of definition is ..... cold chain facility means "a chain of facilities for storage or transportation.....". From this interpretation, we find that even though words "storage" and "transportation" have been separated by the conjunction "or" but both are linked together to the words "chain of facilities" and hence an industrial undertaking should have both systems of storage as well as transportation to become a part of the chain of facilities. In other words, conjunction "or" would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to this deduction. In absence of any specific list of facilities which could alone form a chain, the list of facilities provided by the assessee and highlighted by the learned CIT(A) are, therefore, acceptable if we consider the second interpretation. There is no material on record or suggested by Revenue so as to reject these facilities as not in sequence and therefore, not a chain. It is not proved by the Revenue that facilities provided by the assessee are inbuilt or integral to cold storage plant and hence, are not additional and thus do not become part of chain of facilities. On the other hand, the learned Authorised Representative for the assessee suggested that these facilities are not available in every cold storage plant. For example, for preservation of meat or dairy products, there is no facility for pre-cooling or of multi-chambers or of aluminum finned coils or of dehumidifiers. The Revenue has not referred to any decided authorities as to which interpretation is to be followed. In absence of this, we feel that both the interpretations of the definition of cold chain facilities are plausible and discernible from the words used in s. 80-IB(14)(a). Both have apparent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IB. 39.4-3 The term "cold chain facility" has been defined to mean a chain of facilities for storage and transportation of agricultural produce under scientifically controlled conditions including refrigeration and other facilities necessary for the preservation of such produce. This amendment will come into force with effect from the 1st day of April, 2000, and will, accordingly, apply in relation to the asst. yr. 2000-2001 and subsequent years. (Section 50)" 30. It is also apparent from the speech of the Hon'ble Finance Minister delivered while introducing section, referred to by the learned CIT. Thus, intention has been made clear that more and more cold storage plants and cold storage transportation either singly or in integrated manner should come up and help in preservation of agricultural produce. This intention cannot be fulfilled if we give a restricted meaning to the definition of cold chain facility i.e. unless there is an integrated facility for storage and transportation from "end to end" an industrial undertaking will not be entitled to deduction under s. 80-IB(11). Following are some more reasons as to why restrictive interpretation pleaded by Revenue is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial undertaking operating the composite business of transportation and storage from farmer to the consumer, will not be entitled to such deduction under s. 80-IB(11). In other words, unless somebody has infrastructure to that extent, benefit could not be availed. This restricts conferring of benefit to a very small segment of assessees who are capable of owning such composite system and thus would restrict the deduction to a smaller number of asses sees which is against the intention of the legislature which has introduced these provisions to encourage more and more preservation of agricultural produce and more and more setting up of cold storage facilities or cold storage transportations. (8) The Revenue could not point out convincing reasons as to why assessee should be denied deduction. We are inclined to adopt the interpretation which confers the grant of benefit because out of two plausible interpretations one which confers the benefits to the assessee should be adopted as pleaded by the learned Authorised Representative for the assessee. The learned Authorised Representative for the assessee relied on various authorities. For the sake of convenience, we reproduce r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rily embedded in its own time, is nevertheless to be construed in accordance with the need to treat it as current law. In construing an ongoing Act, the interpreter is to presume that Parliament intended the Act to be applied at any future time in such a way as to give effect to the true original intention. Accordingly, the interpreter is to make allowances for any relevant changes that have occurred, since the Act's passing, in law, social conditions, technology, the meaning of words, and other matters. Assuming that there are two possible interpretations on s. 22 of the 1961 Act, which is akin to a charging section, it is well settled that the one which is favourable to the assessee has to be preferred. This view is strengthened/supported by the subsequent amendment to s. 27 of the 1961 Act. The said amendment was introduced to s. 27 of the 1961 Act by the Finance Act, 1987, by substituting cls. (iii), (iiia) and (iiib) in place of the old cl. (iii) w.e.f. 1st April, 1988. 3. CIT vs. Madho Pd. Jatia The respondent was the owner of Grand Hotel, the income from which was being assessed to tax in the hands of the respondent under s. 9 of the Indian IT Act, 1922. There was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senting): (i) Sec. 24(2) confers the benefit of losses being set off and carried forward and there is no provision in s. 22 under which losses have to be determined for the purpose of s. 24(2). Sec. 22 (2A) simply says that in order to get the benefit of s. 24(2) the assessee must submit his loss return within the time specified by s. 22(1). That provision must be read with s. 22(3) for the purpose of determining the time within which a return has to be submitted. It can well be said that s. 22(3) is merely a proviso to s. 22(1). Thus, a return submitted at any time before assessment is made is a valid return. In considering whether a return made is within time sub-s. (1) of s. 22 must be read along with sub-s. (3) of that section. A return whether it is a return of income, profits or gains or of loss must be considered as having been made within the time prescribed if it is made within the time specified in s. 22(3). In other words if s. 22(3) is complied with s. 22(1) must also be held to have been complied with. If compliance has been made with the latter provision the requirements of s. 22(2A) would stand satisfied. (ii) Even if two views are possible the view which is favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative is that deduction to a cold storage plant is provided by sub-s. (3), (4) or (5). Therefore, deduction to a cold storage plant would not be available under sub-s. (11). It may be noted that there is no condition attached for the use of the cold storage plant in sub-ss. (3), (4) and (5) whereas sub-s. (11) is specifically legislated for agricultural produce. Further, non obstante clause in sub-s. (11) clearly provided that in spite of a cold storage plant being considered for deduction under sub-ss. (3), (4) and (5) it can also be considered for deduction under sub-s. (11). Further, the Hon'ble Supreme Court in the case of CIT vs. Shahzada Nand Sons Ors. has emphasized that the doctrine, generalia specialibus non derogant, embodies a rule of construction, but it has no universal application. To invoke it, the general and special provisions should occupy the same field then special provisions will prevail over general provisions. In the present case, sub-s. (3), (4) or (5) and sub-s. (11) occupy the same field on cold storage. As sub-s. (11) is a special provision as compared to sub-s. (3), (4) or (5) which are general provisions i.e. for general use of cold storage plan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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