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TMI Blog2021 (10) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... n contention of the Assessing Officer in disallowing the deduction claimed u/s 80IB(11A) is that the predominant activity of the assessee is milling/de-husking of paddy, which does not constitutes a 'manufacturing activity', and is beyond the scope of Section 80IB(11A) and that the activity of storage and transportation undertaken by the assessee are only incidental to the main manufacturing activity off the assessee. It is also a matter of record that the similar addition has been deleted by the ld. CIT(A) for the A.Ys. 2009 - 10 and 2010 -11. 5. At the outset, it was submitted that the aforesaid issue is squarely covered in favour of the assessee by the order of the Co-ordinate Bench of Tribunal in assesse's own case for the A.Y. 2009-10 in ITA No. 4042/Del/2013 wherein the Tribunal, following the order of the co-ordinate Bench in the case of a group company, LT Foods Ltd. for the A.Y. 2007 - 08 in ITA No. 4046/Del/2013, allowed deduction claimed u/s 80 IB(11 A) of the Act and dismissed the appeal of the revenue. The relevant findings of the Tribunal, is extracted hereunder: " 24. We have heard both the parties and perused all the relevant material available on record. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Company & Ors. CA No. 3327 of 2007 (SC), the Hon'ble Supreme Court held that while interpreting the taxing statutes, the applicability of the section has to be seen in strict sense, and once the section is found to be applicable, then it has to be constructed l iberally. Since undoubtedly the provisions of section 80IB(11A) of the Act are applicable to the activities of the assessee like clearing, steaming, soaking, drying, polishing and grinding it can also be not denied that de- husking the paddy would significantly enhance the life of the food grain, thereby reduces the loss of food grain and contributes to the preservation of food grains. In such an event, we are unable to understand how this particular process does not fit in the expression " handling". For these reasons, we are of the considered opinion that the de- husking of the paddy to convert it into rice is also an integral part of reducing the post- harvest food grain loss. " 63. We, accordingly find that the assessee cannot be denied the deduction under section 80IB(11A) of the Act either in respect of the activities conducted by the assessee to meet the demand of the section, namely, deriving income from the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose behind the enactment of section 80IB(11A) of the Act was enhanced food security, because a large quantity of food grains was rotting in the country every year because of inadequate storage facility, and that to enhance food security and agricultural development, upgradation and modernization of infrastructure for storage, handling and transportation of food grains in order to minimize the post-harvest food grain losses by creating infrastructure, therefor. 36. In this context, it is not out of place to note the observations of the Mumbai Bench of the Tribunal in the case of ITO vs. Shankar K. Bhanage 25 taxmann.com 310, to the effect that the literal interpretation of words "integrated business of handling, storage and transportation of food grains" will not lead to any absurdity or produce any manifestly unjust result; that the Legislative intent is not to encourage transportation or handling of food grains but the Legislative intent is to encourage construction of godowns and warehouses with a view to providing storage of food grains. If we consider the entire combat of the scheme relating to the tax holiday provided by the Legislature, we find that the deductions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the agricultural operations and both the rice and ask continue to remain food grain and continue to remain agricultural products. 41. Orders of the authorities below made reference to and extracted the legal opinion given by Shri Porus Ferrack Kaka. The activities of the assessee with reference to which the legal opinion was given clearly establishes /corroborate the said fact only. According to assessee, they are conducting all the necessary activities from collection of the Paddy from the fields/mandi till they are made ready for human consumption by placing them in the markets, and more particularly, avoiding the losses in threshing and winnowing by better mechanical methods, following sanitation during drying, milling and after milling to avoid contamination of grains and protect from insects, rodents and birds, using proper technique of processing i.e. cleaning, parboiling and milling, adopting the grading practices to get more profit and to avoid the economic losses, and using efficient and good packaging for storage, as well as in transportation, by investing more than Rs. 30 crores for setting up of the eligible unit and for this purpose advanced machinery with i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Tribunal dealt with the meaning of expression 'Handling' and held that the activities involving cleaning, steaming, soaking, drying, polishing, grinding etc. clearly fall within the expression " handling" as contemplated under section 80 IB(11 A) of the Act by observing as under: "44. While there is no problem in understanding the expressions like storage and transport, the expression " handling" has to be understood in the context of the integrated business of handling, storage and transportation of food grains. According to the Ld. DR handling answers certain description were according to the assessee their activities fitting the description of handling. In the absence of any legislative clarification as to precisely which activities would amount to handling, and when the meaning of handling is a lefty to be interpreted context surely, it is necessary to meet some concreteness on this aspect as against imagination. No doubt the activities enumerated by the Ld. DR too answer the description of handling in the context of food grains under section 80IB(11A) of the Act, is necessary that in order to be eligible to claim the benefits under section 80IB(11A) of the Act, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese activities have to be classified as handling and storage etc. because if the meaning was restricted only to creating of stores then legislature would have made the deduction available in case of warehousing facilities then instead of using the expression ' the integrated business of handling, storage and transportation of food grains' the deduction would have been provided ' for the business of modern warehouses' which has not been done. In such circumstances, while reaching the conclusion that the assessee is entitled to deduction under section 80IB(11A) of the Act, the Tribunal made a reference to the case of L.T. Overseas (P.) Ltd for the assessment year 2004-05 and 2005-06 in which case the deduction under section 80IB(11A) of the Act was allowed to the assessee who was conducting the activities which were identical to the activities conducted by the assessee in the case of Laxmi Energy (supra) and the assessee before us. 49. For that matter, Ld. DR admitted during the course of arguments while dealing with this alternative prayer for remand of the matter to the file of learned Assessing Officer that the facts involved in Laxmi energy (supra) are identica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection is found to be applicable, then it has to be constructed liberally. Since undoubtedly the provisions of section 80IB(11A) of the Act are applicable to the activities of the assessee like clearing, steaming, soaking, drying, polishing and grinding it can also be not denied that de- husking the paddy would significantly enhance the life of the food grain, thereby reduces the loss of food grain and contributes to the preservation of food grains. In such an event, we are unable to understand how this particular process does not fit in the expression " handling". For these reasons, we are of the considered opinion that the de-husking of the paddy to convert it into rice is also an integral part of reducing the post-harvest food grain loss." 7. On the basis of the aforesaid findings and reasoning, the Tribunal allowed the claim of deduction under section 80IB(11) of the Act by holding as under: "63. We, accordingly find that the assessee cannot be denied the deduction under section 80 IB(11A) of the Act either in respect of the activities conducted by the assessee to meet the demand of the section, namely, deriving income from the integrated business of handling, storage and tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngth in the ornament of the Ld. AR that in order to avoid the double taxation once in the hands of the firm and secondly in the hands of the partner, the share in the profits of the partnership form is not taxable in the hands of the partner as has been held by the Mumbai bench of the Tribunal in the case of Sudhir Kapadia VS. ITO in ITA No. 7888 of 2013, which was followed in the case of Hamid A Moochhala VS. ACIT in ITA No. 2218/Mum/2010 . 97. Further, there is no denial of the fact that as on 31/3/2006 and 31/3/2007, the capital and free reserves of the assessee were Rs. 60, 92, 50, 784/- and Rs. 1,19,99,27,510/- respectively as against the investment in the partnership form on 31/3 /2006 and 31 /3/2007 stood at Rs. 3,49,55,937 /- and 3,67,57,562/- only and therefore, it cannot be said that any borrowed funds could have been utilised to make such investment incurring any interest expenditure. 98. Viewing from any angle, we did not find any ground to sustain addition made under 14A of the Act read with Rule 8D of the Rules. Such an addition is, therefore, is directed to be deleted. Ground number 17 is accordingly allowed." 12. In view of the aforesaid, it was submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to re- compute the disallowance, keeping in view the guidelines mentioned above. Prior period Expenses (A.Y. 2012- 13) 15. The assessee had debited a sum of Rs. 8,79,356/- on account of prior period expense to the profit and loss account which was claimed as deduction while computing the taxable income for the relevant assessment year. 16. The aforesaid amount comprised of excess input tax receivable of Rs. 8,16,068/- and bank processing charges of Rs. 63,288/-. The Assessing Officer disallowed prior period expenses aggregating to Rs. 8,79,356/- on the grounds that they do not relate to the relevant previous year. On appeal, the CIT(A) deleted the disallowance made by the Assessing Officer. 17. The relevant facts are that the aforesaid expenditure was duly claimed as deduction in the computation of income as the same were business expenditure incurred in the ordinary course of running the business and allowable revenue deduction u/s 37(1) of the Act. Further, in so far as bank processing charges of Rs. 63,288 /- is concerned, the processing charges was accounted and charged by the bank during the relevant assessment year only, but the assessee inadvertently debited the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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