Haryana Warehousing Corporation vs Commissioner of Income Tax

Following questions of law have been ref erred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh, arising out of its order dated 1-1-1998 passed in ITA No. 3342 (Delhi)/97 in respect of assessment year 1994-95:

Whether in the f acts and circumstances of the case the Income Tax Appellate Tribunal was justified in law in holding that income of Rs. 10,05,38,502 from procurement of wheat as an agent of the Government is not exempt u/s 10(29) of the Income Tax Act.

Whether Income Tax Appellate Tribunal was justified in law in upholding the disallowance of Guest House rent amounting to Rs. 39,000.

The assessee is a Government undertaking. It is constituted under are housing Corporation Act, 1962, a Central Act. The functions of the Corporation are to build godowns and warehouses for storage of agricultural produce and fertilizer etc. and to act as an agent of the Government and Central Warehousing Corporation for purchase, sale, storage and distribution of agricultural produce, fertilizer and agricultural implements etc. During the year the Corporation, acting as an agent of Government, purchased wheat on its behalf. The Corporation was paid incidental charges for the purchase and storage of wheat. The Corporation claimed that its entire income is exempt u/s 10(29) of the Income Tax Act, 1961 (for short, "the Act") Exemption u/s 10(29) of the Act was being allowed to the Corporation on its entire income, including income from procurement of wheat up to assessment year 1991-92. For the first time, in the assessment year 1992-93, the exemption to income from wheat as an agent of the Government was denied.

Following the orders for assessment year 1992-93, the assessing officer disallowed exemption to income of Rs. 10,05,38,502 from procurement of wheat in this year, i.e., assessment year 1994-95. On appeal filed by the assessee, it was upheld by the Commissioner (Appeals) and on further appeal, the Tribunal, following its order for assessment year 1992-93, sustained the levy of tax.

The assessee claimed rent in respect of Guest House as business expenditure. This was disallowed by the assessing officer, which was confirmed by the Commissioner (Appeals). The Tribunal following later decision of Bombay High Court in the case of CIT v. Ocean Carriers (P.) Ltd. (1995) 211 ITR 357, rejected the assessee''s claim.

Section 10(29) of the Act is as under:

Incomes not included in total income.In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included

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(29) 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, processing or facilitating the marketing of commodities;

We find that the first issue stands covered in favour of the revenue by the decisions of Hon''ble Supreme Court in Orissa State Warehousing Corporation Vs. Commissioner of Income Tax, , wherein it was observed as under:

On a plain reading of Section 10(29) of the Act as above, 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 coramodities 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 marketing 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.

The Hon''ble Supreme Court held that exemption u/s 10(29) of the Act was in respect of income derived from letting out of godown or warehouses for storage, processing or facilitating marketing of commodities and not otherwise and in the present case, the assessee was seeking exemption u/s 10(29) of the Act in respect of income generated from procurement of wheat as an agent of Government, which cannot be said to be income derived from letting of godowns. Accordingly, the issue is decided against the assessee and in favour of the revenue.

We also find that the second issue is also covered in favour of the revenue by the judgment of the Hon''ble Supreme Court in Britannia Industries Ltd. Vs. Commissioner of Income Tax, West Bengal, Kolkata and Another, , wherein it was observed:

...In our view, the intention of the Legislature appears to be clear and unambiguous and was intended to exclude the expenses towards rents,repairs and also maintenance of premises/accommodation used for thepurposes of a guest house of the nature indicated in Sub-section (4) ofsection 37. When the language of a statute is clear and unambiguous, thecourts are to interpret the same in its literal sense and not to give it ameaning which would cause violence to the provisions of the statute. Ifthe Legislature had intended that deduction would be allowable inrespect of all types of buildings/accommodations used for the purposesof business or profession, then it would not have feit the need to amendthe provisions of Section 37 so as to make a definite distinction withregard to buildings used as guest houses as defined in Sub-section (5) ofsection 37 and the provisions of Sections 31 and 32 would have beensuffici�nt for the said purpose. The decisions cited by Dr. Pal contemplatesituations where specific provision had been made in Sections 30 to 36 ofthe Act and it was feit that what had been specifically provided thereincould not be excluded u/s 37. The clarification introduced byway of Sub-section (5) to Section 37 was also not considered in the saidcase.

Accordingly, both the questions are answered in favour of the revenue and against the assessee.