Commissioner of Income Tax, Bangalore vs Karnataka State Warehousing Corporation

N.K. Patil, J.—All these appeals arise out of the common order, dated 5-7-2004 passed in ITA Nos. 239, 240, 241, 242, 243 & 244/Bang./2003, on the file of the income tax Appellate Tribunal, Bangalore Bench (A), for the assessment years from 1992-93 to 1997-98 insofar as it relates to fumigation, disinfestation charges and supervisory charges. Since all these appeals arise out of a common order, they are disposed of by this common judgment.

In these appeals, the following substantial questions of law arise for consideration:

(i) Whether the Tribunal was correct in allowing the entire income derived from fumigation, disinfestation and supervisory charges without recording a categorical finding as to whether the same had been incurred in the internal storage process or the external storage process as held by this Hon''ble Court in 185 In this regard 25?

(ii) Whether the Tribunal was correct in holding that the entire income derived from fumigation, disinfestation and supervisory charges are exempted u/s 10(29) of the Act especially when this income was derived by the assessee in an external activity?

The brief facts of the case are as follows:

The assessee is the State Government undertaking. It is carrying on business in warehousing. For the assessment years 1992-93 to 1997-98, return of income was filed and the Assessing Officer passed the assessment orders. During the course of assessment proceedings, the assessee had declared the income from the business of warehousing as well as other income, which included fumigation, disinfestation charges and supervisory charges. Therefore, the assessee claimed exemption u/s 10(29) of the Act for the income derived under the above heads. The Assessing Officer held that the same do not form integral part of the warehousing business. The assessee maintained separate accounts where these incomes had been accounted for with corresponding expenditure incurred against each of these items of incomes. The Assessing Officer concluded that these different incomes stated to be derived from the business do not form an integral part of the assessee''s business of warehousing and therefore, the said income was taxed by his order dated 28-3-2002.

Assailing the correctness of the order passed by the Assessing Officer, the assessee filed an appeal before the Commissioner of income tax (Appeals)-I, Bangalore. The Appellate Commissioner, after critical evaluation of the entire material on file, partly allowed the appeal, upholding the conclusion arrived at by the Assessing Officer by its order dated 20-1-2003.

The assessee being aggrieved by the order passed by the Appellate Commissioner, filed appeals before the income tax Appellate Tribunal, Bangalore Bench in ITA No. 239/Bang./2003 and other connected appeals for the assessment years from 1992-93 to 1997-98. Being aggrieved by a portion of the order passed by the Appellate Commissioner, Revenue also filed appeals before the Appellate Tribunal. All the appeals had come up for consideration before the Appellate Tribunal. The Appellate Tribunal allowed the appeals filed by the assessee while dismissing the cross appeals filed by the revenue. Being aggrieved by the common order passed by the income tax Appellate Tribunal, the revenue has filed these appeals for consideration of the substantial questions of law referred to above.

We have heard the learned counsel for the appellants and the learned counsel for the respondent.

Learned counsel appearing for the revenue at the out set submitted that the common order passed by the Income Tax Appellate Tribunal dismissing the cross appeals filed by the revenue cannot be sustained and it is liable to be set aside. To substantiate the said contention, he took us through the order passed by the Assessing Officer and the Appellate Commissioner and placing reliance on paragraphs 9 and 20 of the judgment of the Apex Court in the case of Orissa State Warehousing Corporation Vs. Commissioner of Income Tax, submitted that this aspect of the matter has been rightly appreciated and followed by the Assessing Officer as well as the Commissioner of income tax (Appeals), who decided the matter in favour of the revenue, which has been turned down by the Appellate Tribunal without reference to the law laid down in Paragraphs 9 and 20 of the judgment referred to supra. Therefore, he submitted that the order impugned, at any stretch of imagination, cannot be sustained and is liable to vitiate.

Per contra, learned counsel for the assessee inter alia contended that the order passed by the Appellate Tribunal is just and proper and the same does not call for interference.

On careful consideration of the submissions made by the learned counsel for the revenue and the assessee, the only point that arises for our consideration in these appeals is:

Whether the order impugned passed by the Appellate Tribunal is sustainable in law or not?

It is manifest on the face of the order impugned that the Appellate Tribunal has committed an error of law much less material irregularity in proceeding to pass the impugned order without assigning any valid reasons and without referring to paragraphs 9 and 20 of the judgment of the Supreme Court in case of Orissa State Warehousing Corpn. (supra). This has been specifically referred before the Assessing Officer and the Commissioner of Appeals. This aspect of the matter has not been looked into nor considered or appreciated. Therefore, we are of the considered view that the impugned order of the Appellate Tribunal is cryptic in nature is as much as, without assigning any valid reasons, it has proceeded to allow the appeals filed by the assessee referring to the judgment of the Rajasthan High Court. The said reasoning given in paragraphs 5 and 6 cannot be sustained and is liable to be set aside without expressing any opinion on the merits and demerits of the case. Having regard to the facts and circumstances of the case, all the 12 appeals filed by the revenue are allowed. The common order passed by the Income Tax Appellate Tribunal dated 5-7-2004 passed in ITA Nos. 239, 240, 241, 242, 243, 244/Bang./2003 for the assessment years 1992-93 to 1997-98 are hereby set aside. The matter stands remitted back to the Income Tax Appellate Tribunal, Bangalore (Appeals), to decide the same afresh and pass appropriate orders in accordance with law and in the light of the judgment of Apex Court referred to above after affording reasonable opportunity to both the parties either personally or through their counsel, as expeditiously as possible, at any rate, within a period of six months from the date of receipt of copy of this Judgment. All the contentions urged by both the parties are kept open.