TMI Blog2021 (6) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no fetter in the law; whether the warehouses are constructed by the assessee itself, or warehouses are taken on rent from others. What is relevant is that, profit and gains have to be derived from eligible business from the integrated business of handling, transportation of food grains. Thus, the reasoning and the grounds given by the Ld. AO to reject the claim of deduction cannot be sustained. Whether the undertaking of the assessee had commenced its operation on or after 1st April, 2001 or not ? - It has already been clarified by the Ld. Counsel by placing the audited balance sheet as on 31.03.2007 to substantiate that Assessee Company has commenced its operation after 31st March 2007 only which is much after the year 2001. The balance sheet for 31st March 2008 and 2009 clearly shows the business of storage, handling and transportation has started from assessment year post 31st March 2008. Thus, the construction of storage godowns and on rent had started much after the Asstt. Year 2007-08. On these facts it cannot be held that assessee had not commenced its business of operation after the year 2001 which is one of the conditions prescribed u/s 80IB (11A). Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,60,04,480/- from the total receipt of ₹ 38,00,15,441/-, which comprised of:- i) Storage charges of ₹ 34,76,98,228 ii) Assaying charges of ₹ 78,27,067/-; iii) Transportation charges of ₹ 71,40,254/; iv) Handling charges of ₹ 1,55,65,857/-; v) Collateral management charges of ₹ 16,19,520/-;. Besides these, amount of ₹ 4,41,047/- was shown on account of net interest income. The entire receipt including interest income has been treated as business receipt in the computation of income, after allowing for depreciation as per I T Act, the Income from Business has been worked out at ₹ 7,54,53,146/- out of which an amount of ₹ 6,40,43,928/- has been claimed as deduction under section 80IB (11A) of the I T Act, 1961. 3. The assessee during the course of assessment proceedings has filed copy of Form No. 10 CCB, wherein it was mentioned that assessee is engaged in the integrated business of handling, storage and transportation of food grains which is an eligible business u/s 80IB(11A) of the Act. 4. Ld. AO after discussing the provision of Section 80IB (11A) observed that, three conditions are req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the disallowance in the following manner:- It is further noticed that the Assessee Company has earned interest income of ₹ 84,27,683/-which is as follows:- 1 Bank of India (FDR) 11,88,078.30 2 Oriental Rank of Commerce (FDR) 68,56,507.00 3 Bank of India 41,127.67 4 Oriental Bank of Commerce 34,19,870.00 Total Income 84,27,682.97 The assessee has also claimed corresponding interest expenses of ₹ 79,86,636/-.The net interest income of ₹ 4,41,047/- (84,27,683 - 79,86,636) is not related to the business of the Assessee and therefore is to be treated as 'Income from other sources as has been held in the case of M/s Pandian chemicals Ltd 262 ITR 278 and M/s Dollar Apparels vs. ITO (2007) 294 ITR 484 (Mad). Accordingly, the disallowance under section 801B(11A) works out to ₹ 6,40,43,928/- (Business income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, as discussed in foregoing paragraphs, the claim of appellant u/s 80IB(11A) is not required to be rejected on the reasoning as discussed in the assessment order and following the decision relied upon and considering the activities of the appellant, which is as per the provisions of section 80IB(11A), the appellant is found eligible for this claim. Accordingly the AO is directed to allow the claim as made by the appellant. This ground of appeal is allowed. 7. Before us, Ld. DR after referring to the various observations and findings of the Ld. Assessing Officer, submitted that it has been clearly made out by the AO that the assessee company does not fulfil the conditions laid down in section 80-IB (!1A). He further submitted that assessee is only eligible to claim deduction u/s 80IB(11A) for each undertaking which has began to operate on or after first day of April 2001, whereby employing that eligibility of claim of deduction shall be considered for each warehouse separately after claiming the date of which each of warehouse began their operations. 8. On the other hand Ld. Counsel for the assessee, Mr. Mayank Patwari strongly relied upon the order of the Ld. CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1st day of April, 2001: Provided that the provisions of this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it begins to operate such business before the 1st day of April, 2009. On perusal of the relevant section, it is seen that the following conditions must be fulfilled to become eligible for claim deduction under the said section: - a. Profits and gains must be derived from the eligible businesses, i.e., integrated business of handling, storage and transportation of food grains. b. Such undertaking must begin such business from the initial year of claim of deduction. c. The units in respect of which deduction is claimed should have started operations on or after 1st day of April, 2001. 10. Ergo, we have to examine, firstly, whether the assessee company is in the integrated business of handling, storage and transportation of food grains or not to be eligible for deduction; secondly, whether the undertaking which has began such business from its own constructed godowns and also subletting godowns on rent is eligible f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handling, storage and transportation of the food grains. There is no fetter in the law; whether the warehouses are constructed by the assessee itself, or warehouses are taken on rent from others. What is relevant is that, profit and gains have to be derived from eligible business from the integrated business of handling, transportation of food grains. Thus, the reasoning and the grounds given by the Ld. AO to reject the claim of deduction cannot be sustained. 13. In so far the decision of ITAT Mumbai bench in the case of ITO vs. Shankar K. Bhange, which has been heavily relied upon by the Assessing Officer, would not be applicable in the case of the assessee, because in that case the assessee was appointed by the Food Corporation of India as Contractor for handling of food grains. He was merely doing transportation business and there was no storage work/activity which was performed by the Contractor and neither there was any storage belonging to the assessee nor was any storage taken on rent by the assessee. In this background, it was held that assessee does not fulfil the condition as mentioned u/s 80IB (11A). Once the assessee is neither the owner nor lessee of the sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of handling, storage and transportation of food grains. The godowns where this business is to be carried on need not be owned by the assessee. When the assessee- corporation has set up these godowns in as many as in 73 towns and at different places in those towns, it is very much entitled for relief under S.80IB(11A) of the Act in respect of each such new imdertakins set up by it. It appears from the impugned orders that the lower authorities have proceeded as if the assessee's claim for relief under S.80IB(11A) is in respect of existing godowns, and not merely in respect of the new ones started after 2001. It is so because the period of five years was sought to be counted from the year of incorporation of the assessee, viz. 1958; and also observing that no new activity was taken up after 2001.Since each new godown is an undertaking in itself assessee is entitled for such relief under S.80IB(11A) for five years in respect of each such undertaking from the 'initial year' in which it was set up. 13. As for the eligibility of the activity of the assessee to the relief under S.80IB(11A), it is worthwhile to refer to the intention of the Legislature in introducing sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well settled that deduction under Chap VIA, in respect of new undertakings set up by the assessee by way of expansion of the existing undertakings, as held by the Apex Court in the cases of Textile Machinery Corpn. Ltd. v. CIT [1977] 107ITR 195 (SC) and CIT v. Indian Aluminium Co. Ltd. [1977] 108 ITR 367 (SC). The number of new godowns operated by the Assessee after1.4.2001 clearly shows that there was substantial expansion of the assessee's business of handling, storing and transportation of food grains, which obviously could have been done only be undertaking new warehousing facilities year after year even after 2001. In respect of these new warehouses, each of which constitutes an eligible undertaking, assessee is separately entitled for deduction under S.80IB(11A) of the Act. In our opinion therefore, the assessee is entitled to deduction u/s 80IB(11A), in respect of income derived from the new undertakings, warehouses. set up and operated from 1.4.2001 for storage, handling and transportation of food grains. We accordingly set aside the impugned orders of the CIT(A) on this issue for all the three years and set aside the matter to the file of the Assessing Officer, with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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