TMI Blog1993 (12) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ources. The facts in respect of the assessment year 1976-77 are taken into consideration for adjudicating the dispute between the parties and to find out the scope of section 10(29) of the Income-tax Act. The assessee is deriving its income mainly from letting out the warehouses, interest, trading in agricultural products on behalf of the Food Corporation of India and the State Government. It was claimed before the Income-tax Officer that the entire income of the corporation is exempted under section 10(29) of the Act. The Income-tax Officer came to the conclusion that the income other than the warehousing activities is not exempt and, therefore, exemption cannot be allowed. The various heads under which the income was derived was as under : Rs. 1. Warehousing charges 51,06,433 2. Procurement of grains for the State Government and FCI 11,06,034 3. Interest 11,41,350 4. Supervision charges 23,790 5. Fumigation service charges 6,539 6. Misc. income 48,254 -------------------- Total 74,32,400 -------------------- The provision of section 10(29) reads as under : "In the case of an authority constituted under any law for the time being in force for the marketin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified in holding that the income derived by the assessee from the handling of goods or from the banks by way of interest was not covered by section 10(29) of the Act. In M. P. State Warehousing Corporation v. CIT [1984] 145 ITR 420 (MP), the dispute was with regard to the commission received from handling of goods and the interest received from the banks on the deposits of moneys. Relying on the earlier decision, the said source of income was held not covered under section 10(29) of the Act. In U. P. State Warehousing Corporation v. ITO [1974] 94 ITR 129, the Allahabad High Court has observed that section 10(29) of the Income-tax Act applies to an authority constituted for the marketing of commodities and, evidently, such authority will specifically be a business enterprise, Ex hypothesi, the term "authority", as occurring in section 10(29), cannot possibly be construed as referring to an authority having quasi-governmental powers. Any legal entity or juristic personality constituted by law for the purpose of marketing commodities would be an "authority" within the meaning of section 10(29). The petitioner which was established under the Warehousing Corporations Act, 1962, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its area by setting the field for its activity so that it serves or better promotes this purpose or object of marketing the commodities. Whatever enhances the utility value, clearly enhances the real worth of the commodities in question and looking at the matter from this crucial angle there could be no doubt that warehousing or storage is such an essential step in the whole process of marketing that it enhances the utility of the commodities in question by making them more valuable. Therefore, it has a direct impact on the very trading activities by enhancing their real value. The same is true of the other activities of processing of these commodities and even facilitating the distribution by transport to and from the warehouses. Even storage would have to be looked at by way of preservation from the ravages of natural causes and even from being eaten away by rodents and insect life. If all these essential aspects of the warehousing activities are borne in mind the wisdom of the Legislature is too apparent in using this phrase 'authority for marketing', so that warehousing corporations on the plain tenor of section 10(29) earn this exemption. As earlier pointed out, in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of Surat Vankar Sahakari Sangh Ltd. v. CIT [1971] 79 ITR 722 and the decision of the Madras High Court in the case of CIT v. South Arcot District Co-operative Marketing Society Ltd. [1973] 92 ITR 371 were also taken into consideration and it was held that the income derived by the co-operative society for the purpose of exemption under clause (e) must be relatable to the letting or the use of its godowns or warehouses. It was also held that any income derived by the society unconnected with such letting or use of the godowns or warehouses will not fall under clause (e). The Karnataka High Court in the case of CIT v. Karnataka State Warehousing Corporation Ltd. [1990] 185 ITR 25, has held that the income derived by the assessee-warehousing corporation from services rendered in respect of goods not stored in its godowns was not entitled to exemption under section 10(29) of the Act. The fumigation charges and laboratory analysis fees in respect of goods not stored in the assessee's own godown were not exempt under section 10(29) of the Act. Though the question with regard to fumigation of goods stored in its godowns was not in dispute, impliedly it was held that such- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery of the stock at the rail-head and transporting it to the godowns. The Income-tax Appellate Tribunal in the present case has observed that the income derived from the State Government/Food Corporation of India for procurement of grains, interest, supervision charges, fumigation services charges and miscellaneous income are exempt under section 10(29) and that the activity of the assessee is an integrated one and the entire activity is claimed as facilitating the marketing of goods. The assessee owns warehouses where agricultural produce is stored. The whole activity carried on being an integrated one, the activity cannot be split up. The assessee may have the income from different sources. Section 10 has granted the exemption in respect of income in different phraseology which has been specified in the different clauses of section 10. A different phraseology has been used in clause (20A) of section 10 using the words "any income" which has been exempted under that clause. This refers to the entire income of that authority which is exempt. Similarly, clauses (21) and (22) also use the words "any income" and in these cases the entire income of the assessee would be exempt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itating the marketing of commodities cannot be claimed to be exempt. The income which has been derived by the assessee from procurement of grains for the State Government/Food Corporation of India is an independent activity, other than the letting of godowns, even though letting of godowns is encouraged by such an activity it could not be said that the income which has been derived from the receipts from the State Government or the Food Corporation of India, could be considered as income from letting out of godowns. The starting point for letting out is receipt of the goods in the godowns/warehouses. If the income is not related in respect of the activities from the stage of receipt of the goods to the despatch of the goods in the godowns/warehouses it could not be said to be income related to the letting of godowns. As explained above, the object of letting out and the purpose for which the warehouse or godowns have been let out could be for facilitating the marketing of commodities. The income which has been derived from administrative overheads being surplus of recovery over cost of procurement is an independent activity. The State Government or the Food Corporation of India cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of storage of goods in the godowns of the assessee and, therefore, to, that extent the income derived therefrom could be considered as incidental to the income from letting out of the godowns for storage of goods. With regard to miscellaneous income and other income, the Tribunal has not discussed the nature thereof and, therefore, it would be proper if the matter is examined by the Tribunal afresh. Therefore, as to whether the said income could be considered as relating to the letting of godowns for the three purposes mentioned under section 10(29) of the Act, since this matter has not been considered by the Tribunal in detail, the reference in respect of income other than the three items is returned unanswered. In view of the interpretation of the provisions of section 10(29) of the Act, we are of the view that the Income-tax Appellate Tribunal was not justified in coming to the conclusion that the entire income of the assessee is exempt under section 10(29) of the Act. The reference is accordingly answered partly in favour of the Revenue and partly against the assessee. It would, however, be open to the Tribunal to consider the income which has been derive ..... 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