DEPUTY COMMISSIONER OF INCOME TAX, NEW DELHI V. LTC COMMERCIAL COMPANY PRIVATE LIMITED, NEW DELHI

ITA 3357/DEL/2024

AI Insights

The case revolves around the Revenue's appeal against the CIT(A)'s decision which allowed LTC Commercial Company Pvt. Ltd. a deduction under section 80IB(11A) for the Assessment Year 2013-14. The primary contention was whether the assessee was engaged in an 'integrated business' of handling, storage, and transportation of food grains as required by section 80IB(11A). The Assessing Officer (AO) had initially denied the deduction, citing that the assessee's income primarily came from storage charges and not from the integrated activities as a whole. However, the CIT(A) reversed this decision, leading to the Revenue's appeal. The Tribunal, referencing previous judgments and the specific activities of the assessee, upheld the CIT(A)'s decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31488 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Other Referred Cases: AP State Ware Housing Corporation in ITA No. 834 to 836/Hyd./2012, Orisa State Warehousing Corporation vs. ACIT, ITO vs. Shankar K Bhange
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR
• Keywords: Set aside; Business income; Depreciation
• Section: 143(3); 195; 250; 73; 80IB

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI Before Sh. Satbeer Singh Godara, Judicial Member & Sh. S. Rifaur Rahman, Accountant Member ITA No. 3357/Del/2024 : Asstt. Year: 2013-14 DCIT, Room No. 316A, 3rd Floor, C.R. Building, I.P. Estate, New Delhi-110002 Vs LTC Commercial Company Pvt. Ltd. Kh. No. 180, 1st Floor, Bijapur Village Budhpur, Behind Garud Motors, New Delhi-110036 (APPELLANT) (RESPONDENT) PAN No. AAACL5416A Assessee by : None Revenue by : Sh. Sanjay Kumar, Sr. DR Date of Hearing: 21.01.2025 Date of Pronouncement: 21.01.2025 ORDER This Revenue’s appeal for Assessment Year 2013-14, arises against the CIT(A)/NFAC, Delhi’s DIN & order No. ITBA/NFAC/S/250/2024-25/1065102145(1) dated 28.05.2024, in proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”). 2. Case called twice. None appears at the assessee’s behest. He is accordingly proceeded ex-parte. 3. Learned departmental representative invites our attention to the Revenue’s sole substantive ground raised in the instant appeal as under: ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 2 “1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) erred in holding that the assessee is engaged in integrated business of handling, storage and transportation of food grain, where as the AO has categorically held in the assessment order that the assessee has only 1% revenue pertaining to handling and transportation activities.” 4. We next come to learned lower appellate authority’s detailed discussion partly accepting the assessee’s section 80IB(11A) deduction claim of Rs.7,19,52,067/- as under: “4.2.1 I have carefully considered the submission of the appellant, assessment order, details brought on record and the judgments relied upon. Ground 1, 5, and 6 are general in nature and require no specific adjudication and are therefore, dismissed. Ground no. 2 relates to disallowance of section 80IB deduction amounting to Rs 7,19,52,067/-. 4.2.2 The appellant is engaged in the business of storage, handling and transportation of various commodities and during the year under consideration it has shown total receipt of Rs. 31,55,26,587/- from storage charges , Rs. 65,28,571/- from Assaying charges, Rs. 3,36,821/- from transportation charges, Rs.28,31,773/- from handling charges and Rs.22,69,187/-on account of net interest income. The entire receipt including interest income has been treated as business receipt in the computation of income; after allowing for depreciation and other expenses as per I.T. Act the income from Business has been worked out at Rs.8,18,96,197/- out of which an amount of Rs.7,19,52,067/- has been claimed as deduction under section 80IB (11A) of the I.T. Act 1961. 4.2.3 The AO has not allowed the claim of deduction amounting to Rs.7,19,52,067/- due to the reason that the appellant has earned income from subletting various godowns which were already in existence and there is hardly any warehouse owned or constructed by the appellant. Thus there is no godown specifically constructed for stocking food grains. It is also pointed out that the major receipts of the appellant are from the ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 3 storage charges and the other receipts are very dismal in comparison to the same. It is also mentioned by the AO that on the prevailing circumstances it cannot be said that appellant is engaged in the integrated business of handling storage and transportation of food grains. 4.2.4 It has been contended by the appellant, as reproduced earlier that the appellant company fulfils all the conditions as provided u/s 80IB(11A) of the Act as follows and accordingly it is entitled for the claim. (a) Profits and gains have to be derived from eligible business i.e. from the integrated business of handling, storage and transportation of food grains. (b) The profits have to be derived from the operation of integrated business of handling, storage and transportation of food grains. (c) The eligible undertaking has to begin such business from the initial year of claim of deduction. (d) The units in respect of which it claims deduction, should have started operations on or after 1st day of April, 2001. 4.2.5 It is also contended by the appellant that it is not provided in the Act that for this claim u/s 80IB (11A), the appellant has to own the warehouse or to say that if the warehouses are taken on rent for providing integral handling, storage and transportation services (HST) the claimant will not be eligible for this deduction. In this regard the appellant relied upon the judgment by Hon’ble ITAT Hyderabad in the case of AP State Ware Housing Corporation in ITA No. 834 to 836/Hyd./2012, wherein it is clearly held that it is not necessary that appellant should own the said warehouse/go-downs. 4.2.6 It is observed from the assessment order that AO has not disputed the receipts of the appellant from the various activities such as storage charges, transportation charges and handling charges. The AO has disallowed the same on the reasoning that the integrated business of appellant of handling, storage and transportation of food grains is over whelmed by the receipts from storage charges which is much more in comparison to the handling and transportation charges. Bulk of the receipts relates to the godowns and thus appellant is not eligible for this deduction, looking to the major godown receipts and the godowns are not owned by appellant therefore the appellant cannot be said to have been engaged in the integrated business of handling storage and transportation of food grains. The remarks of AO in this regard is reproduced as follows:- “I have carefully gone through the submission of the Assessee ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 4 Company as discussed in the show cause letter dated 20.12.2016 the receipt of the Assessee Company from Transportation and Handling charges is almost negligible and the submission of the Assessee that it is engaged in the integrated business of handling storage and transportation of food grains does not hold good. The word Integrated has been defined in Oxford dictionary as ‘with various parts or aspects linked or coordinated’ In common parlance, it means combining or coordinating separate elements so as to provide a harmonious interrelated whole. A plain reading of section 80IB(11A) shows that three conditions have to be fulfilled for availing deduction under said provision. First handling second storage and third transportation of food grains. All the three conditions should be integrated with each other. In the case of the Assessee Company, on verification of the Profit & Loss account it is evident that it is engaged in purely storage of food grains. Out of the total receipts of Rs. 31,55,26,587/- from storage charges, only a small portion amounting to Rs. 3,36,773/- pertains to receipt from transportation charges and another small percentage of Rs. 28,31,773/- pertains to handling charges which are at best incidental to the overwhelmingly predominant actively of letting out go-downs. Hence, the Assessee cannot be said to be engaged in the integrated business of handling, storage and transportation of food grains.” 4.2.7 The appellant has stated that in various cases the receipt from integrated business of service includes handling and transportation charges. Part of transportation charges received is inbuilt in the storage charges. The appellant company as a part of integrated business is providing transportation service to all clients and in few cases transportation charges are directly paid by clients to the service provider and to that extent transportation receipts and expenses are not accounted for in its books of accounts. It is also stated that the appellant has warehouses at numerous locations and it is not possible nor prudent business decision to have office in each location. 4.2.8 As per the provisions of section 80IB(11A) of the Act: “80IB Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings (11A). The amount of deduction in a case of an undertaking deriving profit ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 5 from the business of processing preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or from the integrated business of handling storage and transportation of food grains shall be hundred percent of the profits and gains derived from such undertaking for five assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived from the operation of such business in a manner that the total period of deduction does not exceed ten consecutive assessment years and subject to fulfillment of the condition that it begins to operate such business on or after the 1st day of April, 2009.” 4.2.9 A plain reading of the Act reveals that it is not a basic and essential condition that appellant should own such warehouses. Further, it is also held in the case of AP State Warehousing Corporation (Supra) by the Hon’ble ITAT that the warehouse need not be owned by the appellant. Further, it is also to be mentioned that appellant has carried out the integrated business of handling storage and transportation of food grains, which is also accepted by the AO. Therefore, if one part is yielding more revenue in comparison to other part, it will not make the claim of appellant u/s 80IB(11A) as not an allowable claim. It is to be seen whether these activities are being carried out by the appellant or not irrespective of the amount of revenue received for these activities. Further, it is also stated by the appellant that the storage charges are also inclusive of handling and transportation charges in few cases. Therefore, this argument of AO is not tenable. 4.2.10 The appellant also distinguished the decision relied upon by the AO in the case of ITO vs. Shankar K Bhange (Supra) where the facts are different. The appellant further relied upon the case of Orisa State Warehousing Corporation vs. ACIT (Supra) and other decisions to substantiate that it is not necessary to have warehouse of its own or construction of warehouse to be eligible for this claim. 4.2.11 Looking to the facts and circumstances of this case and in law, as discussed in foregoing paragraphs, the claim of appellant u/s 80IB(11A) is not required to be rejected on the reasoning as discussed in the assessment order and following the decision relied upon and ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 6 considering the activities of the appellant, which is as per the provisions of section 80IB(11A), the appellant is found eligible for this claim. 4.2.12 Further the major thrust of the appellant’s claim is that the decision in the subsequent AY 2014-15 has been decided in favour of the appellant and as such warrants the same treatment for the Assessment Year under consideration as the assessment order for AY 2014-15 was on similar lines as the year under this appeal. It is therefore necessary to refer to the finding of the Hon’ble ITAT in the appellant’s own case (order submitted in paper book). The operative para’s of the Hon’ble Tribunal’s order dated 10.06.2021 for AY2014-15 are as under: “9. We have heard the rival submissions and also perused the orders of the authorities below and also the material referred to before us at the time of hearing. The entire dispute is with regard to claim of deduction u/s 80IB (11A) which the assessee has claimed on the ground that, it has derived income from the business of integrated business of handling, storage and transportation of food grains. For the sake of ready reference the said provision is reproduced here under: “(11A) The amount of deduction in a case of an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or from the integrated business of handling, storage and transportation of food grains, shall be hundred per cent of the profits and gains derived from such undertaking for five assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (o0072thirty per cent where the assessee is a company) of the profits and gains derived from the operation of such business in a manner that the total period of deduction does not exceed ten consecutive assessment years and subject to fulfilment of the condition that it begins to operate such business on or after the 1st day of April, 2001: Provided that the provisions of this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it begins to operate such business before the 1st day of April, 2009.” ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 7 On perusal of the relevant section, it is seen that the following conditions must be fulfilled to become eligible for claim deduction under the said section: a. Profits and gains must be derived from the ‘eligible businesses, i.e., integrated business of handling, storage and transportation of food grains. b. Such undertaking must begin such business from the initial year of claim of deduction. c. The units in respect of which deduction is claimed should have started operations on or after 1st day of April, 2001. 10. Ergo, we have to examine, firstly, whether the assessee company is in the integrated business of handling, storage and transportation of food grains or not to be eligible for deduction; secondly, whether the undertaking which has began such business from its own constructed godowns and also subletting godowns on rent is eligible for deduction u/s 80IB (11A); and lastly, whether the undertaking has commenced its operation on or after first day of April 2001. 11. From a bare perusal of the financial statement, it is seen that the revenue from operations for the year ending 31st March 2014 (i.e. ASSESSMENT YEAR 2014- 15) are as under: 1. Storage charges: Rs. 34,76,98,228/- 2. Transportation charges: Rs. 71,40,254/- 3. Handling charges: Rs. 1,55,65,857/- 4. Assaying charges: Rs. 78,27,067/- 5. Collateral management charges: Rs. 16,19,520/- 6. Income from weighing scale: Rs. 1,64,515/- 12. Thus, out of total receipt of more than Rs. 38 crores, revenue from storage, transportation and handling charges of food grains are Rs. 37 crores. The AO has denied the claim on the ground that transportation charges and handling charges are meagre which at best can be said to be incidental to the assessee’s business. The assessee, according to Assessing Officer was earning income from sub letting of godowns which was already in existence. It has been clarified during the course of hearing by the Ld. Counsel that assessee has constructed various godowns and some of them were also taken on rent. Assessee has ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 8 more than 250 rented warehouses and most of them were NCDEX accredited which is strict standard for use of modern technology for storage of food grains and prevention of post harvest loss to the agriculture commodities. From the plain reading of the provision for eligibility for claim of deduction nowhere it is provided that assessee has to own the warehouse or if the warehouses are taken on rent for providing integrated handling storage and transportation services, it would disentitle the assessee for claiming any deduction u/s 80IB (11A). The contribution of the assessee towards infrastructure development cannot be undermined, because the construction of the warehouses will be dependent on the requirement of business of handling, storage and transportation of the food grains. There is no fetter in the law; whether the warehouses are constructed by the assessee itself, or warehouses are taken on rent from others. What is relevant is that, profit and gains have to be derived from eligible business from the integrated business of handling, transportation of food grains. Thus, the reasoning and the grounds given by the Ld. AO to reject the claim of deduction cannot be sustained. 13. In so far the decision of ITAT Mumbai bench in the case of ITO vs. Shankar K. Bhange, which has been heavily relied upon by the Assessing Officer, would not be applicable in the case of the assessee, because in that case the assessee was appointed by the Food Corporation of India as Contractor for handling of food grains. He was merely doing transportation business and there was no storage work/activity which was performed by the Contractor and neither there was any storage belonging to the assessee nor was any storage taken on rent by the assessee. In this background, it was held that assessee does not fulfill the condition as mentioned u/s 80IB (11A). Once the assessee is neither the owner nor lessee of the storage house and the ownership vested with the FCI and assessee was merely transporting food grain, it was in this background the claim for deduction u/s 80IB(11A) of transport activity was denied. On the contrary, in the present case, the assessee’s main revenue is from storage and handling charges. Thus, the aforesaid decision nowhere is applicable on the facts of the present case. In fact the decision of ITAT Hyderabad Bench in the case of AP State Warehousing Corporation vs. DCIT will squarely apply. The relevant portion of the said decision reads as under: ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 9 “11. We have considered the rival submissions and perused the material available on record. It is evident from the orders of the lower authorities that the claim of the assessee for relief under S.80IB(11A) has been disallowed mainly on the ground that the activities of the assessee do not constitute an 'integrated'. The next reason for which the claim was disallowed was also that, assessee corporation, having been incorporated in 1958, and in the absence of anything on record to substantiate that the assessee has taken up any new activity of handling and transportation of food grains subsequent to 2002, assessee is not entitled for relief under S.80IB(11A), since relief under that section is available only for five years from 'initial year', viz. either from 1958 or from the year in which such new activity was taken up by the assessee. We do not find merit in these reasons of the lower authorities for making the disallowance. We may now examine the correctness or otherwise of these reasons given by the lower authorities. 12. We find that the assessee-corporation owns premises accommodating godowns at different places all over the State. In each area it either constructs or offers an investor to construct new godowns, which the corporation takes on lease. It is the claim of the assessee before the CIT(A) that the plinth area of construction of the godowns varies from minimum area of 10,000 sft. up to a maximum area of 50,000 sft, and the scheme of construction of go downs started in the year 2002. Each unit is an undertaking because food- grains are stored and handled and transported thereto and therefrom. It may be noted at this juncture that there is no restriction in S.80-IB that an existing business unit cannot set up new undertakings to carry on the integrated business of handling, storage and transportation of food grains. The godowns where this business is to be carried on need not be owned by the assessee. When the assessee- corporation has set up these godowns in as many as in 73 towns and at different places in those towns, it is very much entitled for relief under S.80IB(11A) of the Act in respect of each such new imdertakins set up by it. It appears from the impugned orders that the lower authorities have proceeded as if the assessee's claim for relief under S.80IB(11A) is in respect of existing godowns, and not merely in respect of the new ones started after 2001. It is so because the period of five years was sought to be counted from the year of incorporation of the assessee, ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 10 viz. 1958; and also observing that no new activity was taken up after 2001.Since each new godown is an undertaking in itself assessee is entitled for such relief under S.80IB(11A) for five years in respect of each such undertaking from the 'initial year' in which it was set up. 13. As for the eligibility of the activity of the assessee to the relief under S.80IB(11A), it is worthwhile to refer to the intention of the Legislature in introducing sec 80IB(11 A), which is reproduced hereunder : \"Under the existing provisions of Sec. 80-IB of the Income-tax Act, a deduction is allowed, in computing the taxable income, in respect of profits derived from a new industrial undertaking or a ship or the business of a hotel. To address the country's basic concerns relating to enhanced food security and agricultural development, upgradation and modernization of infrastructure for storage, handling and transportation of food grains is a central concern in which introduction of modern technology would bring greater efficiency in the grain management system and minimize post harvest food grain losses. It is evident from the above, that the insertion of sub- section (11A) is intended to encourage building of storage capacities, by providing that any undertaking engaged in integrated bulk handling, storage and transportation would be allowed hundred per cent deduction for the first five years and thirty per cent deduction for the next five years. Thus, Sec 80IB(11A) is applicable to income derived from the integrated business of handling, storage and transportation of food grains. A perusal of the activities of the assessee in association with the Food Corporation of India, as demonstrated by the learned counsel for the assessee in the paper-book filed, clearly indicates it is engaged in the integrated business of handling, storage and transportation of food grains. There is no dispute the assessee's main business is to provide warehousing facility for food grains. The Assessee has been constituted under with these very objects in view. Merely because the Assessee has engaged outsiders for transportation or leased out some of the so downs for storage does not mean that the Assessee is not engaged in the integrated business of handling and storage of food srains. In the course of their integrated business. The assessee had collected rentals for storing food ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 11 grains and had engaged outsiders to transport the food grains. Further, the fact that the assessee had been carrying on similar business would not disentitle the assessee from claiming relief u/s 80IB(11A), in respect of the new warehouses put to use after the introduction of sec80IB(l 1A) i.e. on or after 1.4.2001. The assessee has furnished in the paper-book list of new Godowns, which have been put to use by the assessee after 1.4.2001. It is well settled that deduction under Chap VIA, in respect of new undertakings set up by the assessee by way of expansion of the existing undertakings, as held by the Apex Court in the cases of Textile Machinery Corpn. Ltd. v. CIT [1977] 107ITR 195 (SC) and CIT v. Indian Aluminium Co. Ltd. [1977] 108 ITR 367(SC). The number of new godowns operated by the Assessee after1.4.2001 clearly shows that there was substantial expansion of the assessee's business of handling, storing and transportation of food grains, which obviously could have been done only be undertaking new warehousing facilities year after year even after 2001. In respect of these new warehouses, each of which constitutes an eligible undertaking, assessee is separately entitled for deduction under S.80IB(11A) of the Act. In our opinion therefore, the assessee is entitled to deduction u/s 80IB(11A), in respect of income derived from the new undertakings, warehouses set up and operated from 1.4.2001 for storage, handling and transportation of food grains. We accordingly set aside the impugned orders of the CIT(A) on this issue for all the three years and set aside the matter to the file of the Assessing Officer, with a direction to verify the claim of the assessee for deduction under S.801A(11A) of the Act in respect of new undertakings set up after 2001, and allow the same in accordance with law, and after giving due opportunity of hearing to the assessee. 14. Assessee's grounds on the issue of deduction under S. 801A(11A) are allowed for statistical purpose.” 14. Thus, Ld. CIT (A) has correctly applied the said decision while allowing the claim of deduction to the assessee and we do not find any reason to deviate from such finding. 15. Coming to the issue whether the undertaking of the assessee had commenced its operation on or after 1st April, 2001 or not. It has 14 already been clarified by the Ld. Counsel by placing the audited balance sheet as ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 12 on 31.03.2007 to substantiate that Assessee Company has commenced its operation after 31st March 2007 only which is much after the year 2001. The balance sheet for 31st March 2008 and 2009 clearly shows the business of storage, handling and transportation has started from assessment year post 31st March 2008. Thus, the construction of storage godowns and on rent had started much after the Asstt. Year 2007-08. On these facts it cannot be held that assessee had not commenced its business of operation after the year 2001 which is one of the conditions prescribed u/s 80IB (11A). Accordingly, we hold that assessee fulfils all the mandatory conditions prescribed u/s 80IB (11A), as all its income is derived from warehouse business operation and it is deriving profit from integrated business of handling storage and transportation of food grains. Therefore, the assessee is entitled for claim of deduction u/s. 80IB (11A). Accordingly, the order of the Ld. CIT (A) is confirmed and the Revenue‘s appeal is dismissed. In the result appeal of the Revenue is dismissed. 4.2.13 The Hon’ble Tribunal has covered all parameters on the basis of which section 80IB deduction is allowable and held that assessee is entitled for deduction u/s 80IB(11A) The facts of the year under appeal are identical to AY 2014-15 for which ITAT has allowed appeal of assessee.” 5. Suffice to say, it has come on record that the assessee has already succeeded on the very issue before the tribunal (supra). That being the case and in absence of any specific definition pinpoint by the department side during the course of hearing, we adopt judicial consistency to conclude that the learned lower appellate authority has rightly accepted section 80IB deduction claim herein raised by the assessee. Rejected accordingly. ITA No. 3357/Del/2024 LTC Commercial Company Pvt. Ltd. 13 6. This Revenue’s appeal is dismissed in above terms. Order Pronounced in the Open Court on 21/01/2025. Sd/- Sd/- (S. Rifaur Rahman) (Satbeer Singh Godara) Accountant Member Judicial Member Dated: 21/01/2025 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR "