Commissioner of Income Tax, (Central) Kanpur vs U.P. State Warehousing Corporation

The income tax Appellate Tribunal, Allahabad, has referred the following question of law pursuant to the direction given by the Hon''ble Supreme Court of India in its order dated 20-11-1990 passed in Civil Appeal Nos. 5527 and 5528 of 1990 arising out of I.T.A. Nos. 1872 and 1856 (Alld.) /1980 for the assessment year 1977-78 for opinion of this Court:

Whether, on the facts and circumstances of the case, the interest income earned by the assessee on short-term deposits as well as on the interest income earned by the assessee u/s 214 of the income tax Act, 1961, is exempt u/s 10(29) of the income tax Act, 1961 ?"

Briefly stated the facts giving rise of the present reference are as follows:

The respondent-assessee is a company, which derives income from warehousing charges, interest on deposits, bank accounts and also receipts on miscellaneous accounts. According to the balance sheet as on 31-3-1977 relevant for the assessment year 1977-78, besides having income from letting out of godowns or warehouses, etc., the respondent earned the following incomes also:

(a) Deposits with Bank

Rs.

1,80,837

(b) Current Account

Rs.

1,247

(c) Savings Bank

Rs.

27,942

(d) On advance loans

Rs.

6,891

(e) From I.T. Department

Rs.

1,38,641

The income tax Officer considered that all the income of the respondent except interest on advance tax was exempt from tax u/s 10(29) of the income tax Act, 1961 (hereinafter referred to as ''the Act''). As far as the interest on advance tax, the income tax Officer held that the same could not be said to be the income from letting of godowns or warehouses for shortage, processing or facilitating the marketing of commodities, etc. The income tax Officer, therefore, assessed such interest income of Rs. 1,38,641. In appeal on 22-7-1980, the Commissioner of income tax (Appeals) following the decision of the income tax Appellate Tribunal in the respondent''s case for the earlier years held that the above interest income was exempt u/s 10(29) of the Act. Subsequently, the Commissioner of income tax passed an order u/s 263(1) of the Act, cancelled the assessment made by the income tax Officer. The Commissioner of income tax considered that the assessment order of the income tax Officer excluding interest income and various other items which were not falling u/s 10(29) of the Act, from respondent''s total income was erroneous as the same was prejudicial to the interest of the revenue. The assessment order dated 20-12-1979 of the income tax Officer was cancelled and the income tax Officer was directed to make a fresh assessment and brought to tax all income of the respondent-Corporation other than the income derived from the letting of godowns or warehouses for storage, processing of facilitating the marketing commodities.

Feeling aggrieved, the respondent and the department came up before the Tribunal and the Tribunal after considering its earlier order in I.T.A. No. 1150 (Alld.) /1979, for the assessment year 1976-77, dated 11-8-1980 dismissed the appeal filed by the department holding that the learned Commissioner of income tax (Appeals) was justified in considering the income as exempt. As regards the appeal filed by the respondent, the Tribunal held that the learned Commissioner of income tax (Central), Kanpur, could not have assumed jurisdiction u/s 263(1) of the Act and, therefore, the order dated 6-8-1980 passed by him was legally not maintainable and the appeal filed by the respondent was allowed.

We have heard Sri Shambhoo Chopra, learned standing counsel appearing on behalf of the revenue. Nobody has appeared on behalf of the respondent-assessee.

The question referred for opinion to this Court does not admit of any detailed discussion as we find that the issue is squarely covered by the decision of the Apex Court in the case of Orissa State Warehousing Corpn. v. CIT [1999] 237 ITR 589 1 in which the Apex Court has held as follows:

On a plain reading of section 10(29) of the income tax Act, 1961, it appears that the pre-requisite element for the entitlement as regards the claim for exemption is the income which is derived from letting out of godowns or warehouses for storage, processing or facilitating marketing of commodities and not otherwise. The Legislature has been careful enough to introduce in the section itself, a clarification by using the words ''any income derived therefrom'', meaning thereby obviously for market- ing of commodities by letting out of godowns or warehouses for storage, processing or facilitating the same. If the letting out of godowns or warehouses is for any other purpose, the question of exemption would not arise. Section 10(29) is categorical in its language and this exemption is applicable only in the circumstances as envisaged under the section. The word ''any income'' as appearing in the body of the statute is restrictive in its application by reason of the user of the expression ''derived from''. Sections 10(20A), 10(21), 10(22B), and section 10(27) show that wherever as a matter of fact the Legislature wanted an unrestrictive exemption the same has used ''any income'' without any restriction so as to make it explicit that the entire income of the assessee would be exempt. Having due regard to the language used, the question of exemption would arise pertaining to that part of the income only which arises or is derived from the letting of godowns or the warehouses and for the purposes specified in section 10(29). The statute has been rather categorical and restrictive in the matter of grant of exemption : storage, processing or facilitating the marketing of the commodities are definitely regarded as three different forms of activities which are entitled to exemption in the event of there being any income therefrom. In the event of the letting of godowns or warehouses is for any other purpose or if income is derived from any other sources, then and in that event such an income cannot possible come within the ambit of section 10(29) of the Act and is, thus, not exempt from tax. (p. 589)

The Apex Court has held that any interest income earned from the bank, etc., is not exempt u/s 10(29) of the Act. We, accordingly, answer the question referred to us in negative, i.e., in favour of the revenue and against the assessee. There will be no order as to costs.