TMI Blog1985 (10) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided by the society. In pursuance of these objectives, the society built shops in the New Cloth Market owned by the society. These shops have been given on leave and licence basis to its Class 'B' members on the terms and conditions set out in the licence agreement, annexure 'G' (in Income-tax Reference No. 202 of 1976). The terms of the said agreement show that the shop is to be used by the licensee for the sole purpose of carrying on business in cloth. It is specifically provided that it shall not be used for any other business nor shall goods be stored therein which are prohibited by law. The income derived by way of licence fee from the members to whom the shops came to be allotted by the assessee was sought to be taxed by the Income-tax Officer. The contention of the assessee is that the said income is deductible from the gross total income by virtue of section 80P(2)(e) of the Income-tax Act, 1961 (hereinafter called " the Act "). Alternatively, the assessee contends that the income to the extent of Rs. 20,000 would be deductible under clause (c) of sub-section (2) of section 80P of the Act. It appears that the assessee which follows the mercantile system of accounting su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee contended that it would be entitled to a deduction of Rs. 20,000 under section 80P(2)(c) of the Act. The Tribunal examined these contentions in the light of the decision of this court in Surat Vankar Sahakari Sangh Ltd. v. CIT [1971] 79 ITR 722 and concluded that the entire income was deductible under section 80P(2)(e) of the Act. This decision has given rise to Income-tax Reference No. 202 of 1976. In respect of the assessment years 1971-72 and 1972-73, as pointed out earlier, the Appellate Assistant Commissioner came to the conclusion that the income derived by the assessee by way of licence fees from the allottees of the shops was exempt both under section 80P(2)(c) and 80P(2)(e) of the Act. The Revenue, therefore, carried the matter in appeal to the Tribunal. The Tribunal, following its own decision relating to the assessment year 1970-71, confirmed the order of the Appellate Assistant Commissioner and dismissed the appeal of the Revenue. So far as the assessment year 1974-75 is concerned, as pointed out earlier, the Appellate Assistant Commissioner came to the conclusion that the assessee was entitled to a deduction of Rs. 20,000 only under section 80P(2)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) and 81 (iv) of the Act, section 81 (iv) being a verbatim reproduction of section 14(5) with the headnote (1) " Income of Co-operative Societies ". After the amendment brought about by the Finance (No. 2) Act, 1967, with effect from April 1, 1968, section 81(iv) was replaced by section 10(29) and section 81(i) was replaced by section 80P with which we are concerned. Sub-section (1) of section 80P provides that where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to its provisions, the sums specified in subsection (2), in computing the total income of the assessee. Clauses (c) and (e) of sub-section (2) of section 80P which are relevant for our purposes read as under: " (2) The sums referred to in sub-section (1) shall be the following, namely:-... (c) in the case of a co-operative society, engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oad meaning is not given to the expression " godowns or warehouses ", the object of the enactment would be defeated. We will consider these rival contentions immediately. Under sub-section (1) of section 80P, the assessee must be a co-operative society. Under clause (e) of sub-section (2) of section 80P, co-operative society must have income derived from the letting of godowns or warehouses and these godowns or warehouses must be let for the purpose of storage, processing or facilitating the marketing of commodities. In other words, if the godowns or warehouses are let for a purpose other than any of the aforesaid three purposes, the benefit of deduction under the said clause would not be available to the society. Therefore, in order to earn the benefit under clause (e) of sub-section (2) of section 80P, the following conditions must be satisfied, namely, (i) the assessee must be a co-operative society; (ii) the co-operative society must have income from letting of godowns or warehouses; and (iii) the godowns or warehouses must be let for any one or more of the three purposes, namely, storage, processing or facilitating the marketing of commodities. This court, while interpreting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 3, c. 12), it was held that 'warehouses' meant 'not mere repositories for goods but such places where merchants and other traders keep their goods for sale in the nature of shops, and whither customers go to view them." It must immediately be mentioned that this is not a common parlance meaning but a meaning given to a warehouse referred to in Clerks of Assize Act, 1698. In Black's Law Dictionary (fifth edition), " warehouse " has been described as a " structure used for the reception and storage of goods and merchandise ". It further states that " the term may include any structure used to hold goods, stores or wares temporarily or for a length of time ". Aiyar's judicial Dictionary (ninth edition), defines " godown " as a storage, or warehouse. According to that dictionary, a " warehouse " is a place licensed for the storage of goods. Halsbury's Laws of England (fourth edition), Note 3 to paragraph 428 on page 204 reads as under : " 'Warehouse' means a place used for the storage of goods, even temporarily, as in a dock transit shed: A storage place which is ancillary to a business which is wholly or substantially retail is not a warehouse: A room in the basement under retai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss within the meaning of the expression "godown or warehouse". We would also be justified in departing from the literal meaning to be given to these expressions if we are satisfied that the literal interpretation is likely to produce a manifestly unjust result which could not have been intended by the Legislature. We shall presently point out that if a literal meaning is given to the expression " godowns or warehouses " used in clause (e) of sub-section (2) of section 80P, it is not likely to produce any absurd or manifestly unjust result nor would such an interpretation run counter to the legislative intent. It will appear from the recommendation made by the Taxation Enquiry Committee that it considered the extension of a system of warehouses in rural areas of importance and with a view to encouraging co-operative societies to construct warehouses which are likely to prove useful in the development of rural economy, it was thought that such co-operative societies should enjoy exemption from tax on such part of their income as is derived from the letting of godowns and warehouses. In other words, the Committee was of the view that unless total exemption is granted so far as incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e societies. The intention is not to encourage construction of shops or other premises by co-operative societies but the legislative intent is to encourage construction of godowns and warehouses with a view to providing storage and other facilities to those who are otherwise unable to afford storing facilities for themselves. Placing strong reliance on the decision of this court in CIT v. Gujarat State Warehousing Corporation [1980] 124 ITR 282, the learned counsel for the assessee argued that the words " facilitating the marketing of commodities" used in clause (e) of sub-section (2) of section 80P which include all activities including buying and selling should give colour to the words " godowns or warehouses " and wherever such activity is carried on, it should be understood to be a godown or warehouse for the purposes of this clause. In the decision on which reliance is placed, the court was concerned with the interpretation of section 10(29) of the Act. According to that provision, in the case of an authority constituted under any law for the time being in force for the marketing of commodities, any income derived from the letting of godowns or warehouses for storage, proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a person buys or sells; he, according to the definition propounded by the revenue, indulges in marketing. He cannot be said to facilitate marketing. The use of the word 'facilitating' seems to refer to functions like gradation or standardisation in the warehouses or giving of facilities by way of distribution by the authorities running the warehouses of goods or commodities belonging to others. " These observations do support the contention canvassed on behalf of the Revenue that the expression "facilitating the marketing of commodities" would suggest a stage prior to the stage of sale of the commodity. We need not examine this contention in detail because we are of the opinion that in order to earn the benefit of total exemption under clause (e) of sub-section (2) of section 80P, the assessee society must show that it has derived income from the letting of godowns or warehouses. It is only after the assessee has succeeded in establishing that the income is derived from the letting of godowns or warehouses, that the court would be concerned in considering the next question whether the godowns or warehouses were let for any one or more of the three purposes set out in the clause ..... X X X X Extracts X X X X X X X X Extracts X X X X
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