The Commissioner Of Income-Tax, Panchkula v. M/S Haryana State Co-Op. Supply & Marketing Federation Ltd

*** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income Tax Appeal No.112 of 2004 Date of decision: 26.4.2011 The Commissioner of Income-tax, Panchkula ...Appellant Versus M/s Haryana State Co-op. Supply & Marketing Federation Ltd. ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Yogesh Putney, Senior Standing Counsel for the appellant.**** ADARSH KUMAR GOEL, J (Oral). 1.This Appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (for short “the Act”)against order dated 31.7.2003 passed by the Income Tax AppellateTribunal, Chandigarh Bench 'A', Chandigarh in ITANo.520/CHANDI/98, for the assessment year 1992-93, raisingfollowing substantial questions of law:- “i)Whether on the facts and in the circumstances ofthe case, the Ld. ITAT is justified in cancelling theorder of Commissioner of Income tax u/s 263 byholding that the Assessing Officer's order was noterroneous and was not prejudicial to the interest ofrevenue?the case, the Ld. ITAT is justified in cancelling theorder of Commissioner of Income tax u/s 263 byholding that the Assessing Officer's order was noterroneous and was not prejudicial to the interest ofrevenue? ii)Whether on the facts and in the circumstances ofthe case, the Ld. ITAT is justified in cancelling theorder of Commissioner of Income tax u/s 263wherein he had held the action of the AssessingOfficer as unsustainable in law?” 2.The assessee is a federation of cooperative societies andis engaged in marketing agricultural produce of its members. Itclaimed exemption under Section 80P(2)(a)(iii) of the Act in respectof income derived from marketing of produce of its members. Theassessing officer disallowed the exemption but after remand, theassessing officer allowed claim under Section 80P(2)(e) of the Actwhich was set aside by the Commissioner under Section 263 of theAct on the ground that income was derived from business and notfrom letting out of storage space. It was observed :- “The payment made to the assessee is not for letting outof a premises for storage, processing for facilitating themarketing of commodities. Rather the money isreceived as a component of the price at which the grainis further supplied by the assessee. Accordingly in myopinion, the case of the assessee is distinguishable fromthe case of Haryana Warehousing Corporation to whichthe assessee has referred to. It thus appears that theorder of the A.O. was erroneous.” 3. On appeal of the assessee to the Tribunal, the order ofthe Commissioner has been set aside on the ground that the order ofAssessing Officer could not be held to be prejudicial to the interest ofrevenue. It was observed:- “Thus, as per provisions of the Act, the assesseewas entitled to such deduction u/s 80P(2)(e). In factsuch deduction in respect of storage chargesamounting to Rs.57,88,204/- received from othershad been claimed and allowed at the time ofcompleting the original assessment. The claim ofassessee is also supported by the judgment of *** 3. On appeal of the assessee to the Tribunal, the order ofthe Commissioner has been set aside on the ground that the order ofAssessing Officer could not be held to be prejudicial to the interest ofrevenue. It was observed:- “Thus, as per provisions of the Act, the assesseewas entitled to such deduction u/s 80P(2)(e). In factsuch deduction in respect of storage chargesamounting to Rs.57,88,204/- received from othershad been claimed and allowed at the time ofcompleting the original assessment. The claim ofassessee is also supported by the judgment of *** Rajasthan High Court in the case of CIT Vs.Rajasthan State Warehousing Corpn., 210 ITR 906,where it has been held that only income derivedfrom letting of godowns or warehouses forfacilitating marketing of commodities qualifies fordeduction. The ITAT, Delhi Bench in the case ofHaryana Warehousing Corporation Vs. DCIT, 61ITD 420, followed this judgment. Even the Hon'bleSupreme Court in the case of Orissa StateWarehousing Corporation and Rajasthan StateWarehousing Corporation Vs. CIT 237 ITR 589 hasheld that assessee is entitled to deduction inrespect of income derived from letting of godownsand warehouses. We also observe that the totalincome of the assessee, as determined in theoriginal order was Rs.11,31,84,636. Thus the AOhas not allowed deduction in respect of the entireincome. He had restricted the deduction u/s 80P(2)(e) only in respect of income by way of storagecharge received for letting of godowns andwarehouses. These facts show that the AO has notdecided the matter on incorrect facts or by incorrectapplication of law. Therefore, the order passed bythe AO could not be considered as erroneousotherwise the order passed by the AO could also not be considered prejudicial to the interests of therevenue merely because the CIT did not agree withthe view taken by the AO. We may further point outthat this is a case of Govt. undertaking. Theassessee had made purchases of wheat andrendered various service on behalf of FCI and theState Govt. The amount received from the FCIwere sanctioned by the Govt. of India. The sameincluded not only the support price but also variousother charges like Mandi charges, Mandi labourcharges, internal movements, storage charges,establishment charges, interest charges etc. Thus,the assessee had not only purchased wheat but hadrendered various other services also. It is also notdenied that assessee owned warehouses andgodowns where the wheat purchased was stored.Storage charges of such a huge amount of Rs.5.87crores were paid by own godowns the Govt. forproviding storage facilities. Had the FCI owned itsown godowns the Govt. would have not paid suchstorage charges. The object of providing deductionin respect of income derived by cooperativesocieties from letting of godowns and warehouses isto promote the development of rural economy. Inthis case the object of providing such deduction to cooperative societies in respect of such income isfully met. It is not the case of the revenue that theAO had passed the order in undue haste withoutexamining the relevant aspects of the case.Moreover, the claim of the assessee is alsosupported by the various judgments referred toabove. The revenue has not led even a singlecase where such claim for deduction is held to beas not allowable thus such income qualified fordeduction u/s 80P(2)(e) and the AO allowed thesame after due application of mind and after makingproper inquiries. In the light of these facts we donot find any error in the order of the AO. The AOlook a reasonable view based on facts, evidenceand material on record, therefore, such order cannotbe called prejudicial to the interests of the revenue.We are, therefore, of the considered opinion thattwin conditions for assuming jurisdiction u/s 263 i.e.(i) the order should be erroneous and (ii) it shouldbe prejudicial to the interests of the revenue havenot been satisfied in this case. Accordingly, wehold that CIT was not justified in revising the orderof the AO u/s 263. We cancel the order of the CITpassed u/s 263 and allow the respective grounds ofappeal.” 4.We have heard learned counsel for the appellant. 5.Learned counsel for the appellant relied upon order of thisCourt dated 8.9.2010 in ITA No.157 of 2005 The Commissioner ofIncome Tax, Panchkula Vs. M/s Haryana State Coop. Supply andMarketing Federation Limited, Panchkula holding that deductionunder Section 80P(2)(e) is available only in respect of income fromletting out for storage and if the assessee used the storage only formarketing, the deduction is not permissible. The observations thereinare:- “In the present case, it has been clearly held thatthe assessee was purchasing the goods and thenselling the goods to FCI and in such a situation,storing was part of business of the assessee anddid not amount to letting out of storage capacity astill the goods were sold to FCI, goods belonged tothe assessee itself and not to the FCI. This beingthe factual situation, the matter is fully covered byjudgment of the Hon'ble Supreme Court in SuratVenkar Sahakari Sangh and A Ventaka Subbaraoas reiterated in Udaipur Sahkari Upbhokta. Theincome of the assessee for storage could not betreated at par with hire charges.” 6.We find the judgment relied upon is fully applicable.Accordingly,the view taken by the assessing officer was clearlyerroneous and prejudicial to the interest of the revenue which *** justified invocation of powers under Section 263 of the Act. The viewtaken by the Tribunal cannot, thus, be sustained. Questions raisedare answered in favour of the revenue. The appeal is allowed. (Adarsh Kumar Goel) Judge April 26,2011Pka (Ajay Kumar Mittal) Judge