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2016 (5) TMI 111 - ITAT MUMBAI

2016 (5) TMI 111 - ITAT MUMBAI - TMI - Deduction u/s. 35AD - expenditure incurred in construction of a SILO (warehouse) for storage of agricultural produce - Held that:- CIT(A) noted that it is not in dispute that the manner in which assessee has used its warehousing facility has enabled savings on storage cost, which it had to otherwise incur in the past years. The underlying point is that the warehouse has been utilised in the course of business. Therefore, in our considered opinion, CIT(A) ma .....

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ember And Shri Amarjit Singh, Judicial Member For the Petitioner : Shri Madhur Agarwal For the Respondent : Shri Omprakash Meena ORDER Per G. S. Pannu, AM The captioned appeal by the Revenue is directed against the order of CIT(A)-17, Mumbai dated 07.05.2014, pertaining to the Assessment Year 2010-11, which in turn has arisen from the order passed by the Assessing Officer dated 15.02.2013 under section 143(3) of the Income Tax Act, 1961 (in short the Act ). 2. In this appeal, Revenue has raised .....

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the AO be restored. 3. Substantively speaking, the solitary dispute in this appeal arises from the decision of the CIT(A) in holding that assessee s claim for deduction of ₹ 2,89,54,750/- u/s. 35AD of the Act is justified in the context of the expenditure incurred in construction of a SILO (warehouse) for storage of agricultural produce. 4. The factual background necessary to adjudicate the aforesaid controversy can be summarized as follows. The respondent-assessee is a company incorporat .....

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The Assessing Officer show caused the assessee to justify its claim u/s. 35AD of the Act for the reason that assessee was not in the business of setting up and operating cold chain or warehousing facility for agricultural produce which was a requirement of Sec. 35AD of the Act. Before the Assessing Officer, the assessee made detailed submissions which have been reproduced in the assessment order, whereby factually it was asserted that during the year under consideration assessee had set up a wa .....

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not a warehouse to store agricultural produce within the meaning of Sec. 35AD of the Act; and, that the assessee company was not in the business of setting up of warehousing facility. Accordingly, the claim of the assessee for deduction u/s. 35AD of the Act amounting to ₹ 2,89,54,750/- was disallowed. The aforestated disallowance was carried in appeal before the CIT(A) on various points of law and facts. The CIT(A) considered the submissions put forth by the assessee and disagreed with the .....

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only to set up and operate a warehouse facility which was done by the assessee and that there was no merit in the argument of the Assessing Officer that the deduction is not allowable to the assessee because it is not in the business of setting up and operating warehousing facility. In a detailed discussion in paras 2.3.2 to 2.3.3 CIT(A) has considered the aforesaid objections and disagreed with the Assessing Officer, and ultimately upheld assessee s claim for deduction u/s. 35AD of the Act. 5. .....

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f specified business . Quite clearly, the other objection raised by the Assessing Officer in the assessment order to the effect that setting up a SILO was not to be regarded as a warehousing facility within the meaning of Sec. 35AD of the Act is not manifested in the Grounds of appeal raised by the Revenue. Be that as it may, we have heard the rival counsels in the context of the Grounds of appeal raised by the Revenue. 6. The learned Departmental Representative (in short the DR ) contended that .....

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tion u/s. 35AD of the Act is based on incurrence of capital expenditure by an assessee carrying on the specified business . The learned representative pointed out that before the CIT(A) as well as before the Assessing Officer, assessee had established that during the year under consideration it had diversified by setting-up and operating a warehousing facility for storage of agricultural produce and for this purpose a SILO (warehouse) was constructed by incurring capital expenditure of ₹ 2 .....

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ses of any specified business carried on during the year in which such expenditure is incurred. Sans other details, so far as it is relevant for the present controversy, clause (c) of Sub-section 8 of Sec. 35AD of the Act prescribes the meaning of the expression specified business to include setting up and operating a warehousing facility for storage of agricultural produce . The case of the assessee is that it has incurred capital expenditure of ₹ 2,89,54,750/- in constructing a warehousi .....

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res the same and then performs crushing operations. During the year under consideration assessee constructed a SILO (warehouse) where it was storing castor seeds, both its own raw material as well as those received from clients for crushing. The newly constructed facility was put to use for captive purposes instead of renting it to outsiders. Undoubtedly, if assessee had let out this SILO (warehouse) facility, it would have earned income from operation of warehousing facility, but at the same ti .....

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