M/S. M.P.STATE COOPERATIVE MARKETING FEDERATION LTD., Bhopal V. ACIT2(1), Bhopal

ITA 18/Ind/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8674 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 14-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 32; 80P

Judgement Text

अपील य अ धकरण, इ दौर यायपीठ, इ दौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE MS. SUCHITRA R. KAMBLE, JUDICIAL MEMBER AND SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER Virtual Hearing ITA No.18/Ind/2019 Assessment Year: 2013-14 M/s. M.P. State Cooperative Marketing Federation Ltd. Bhopal बनाम/ Vs. ACIT-2(1) Bhopal (Appellant) (Respondent ) P.A. No.AABAT4628H Appellant by Shri Anil Khabya AR, Revenue by Shri P.K. Mitra, CIT-DR Date of Hearing: 02.02.2022 Date of Pronouncement: 17.02.2022 आदेश / O R D E R PER BHAGIRATH MAL BIYANI, A.M.: This is an appeal by assessee against the order dated 27.11.2018 passed by Ld. CIT(A)-3, Bhopal in Appeal No. CIT(A)-3/BPL/IT-10354/2018-19/888, arising out of the assessment-order dated 10.03.2016 passed by Ld. AO u/s 143(3) of Income-tax Act, 1961 (in short “the Act”) for Assessment Year 2013-14. M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 2 2. The assessee has raised following Grounds: “1. That the Ld. CIT(A) erred in maintaining disallowance of deduction u/s 80P of Rs. 5,02,23,957/- in respect of storage income derived from CAP storage. 2. That the Ld. CIT(A) erred in maintaining disallowance of claim of deduction u/s 80P of Rs. 1,18,52,613/- on account of depreciation (protective).” 3. Brief facts are such that the assessee is an apex body of marketing societies, registered under M.P. State Co-operative Societies Act, 1960. The assessee filed return of income after claiming depreciation u/s 32 of Rs. 1,60,23,529/- and deduction u/s 80P of Rs. 33,43,57,235/-. While completing assessment, the Ld. AO disallowed the deduction of depreciation of Rs. 1,60,23,529/- fully. Regarding the deduction u/s 80P, the Ld. AO made a part-disallowance of Rs. 5,02,23,957/- in so far it related to the income from CAP storage and allowed the remaining deduction of Rs. 28,41,33,278/-. In respect of the allowed portion of deduction of Rs. 28,41,33,278/- u/s 80P, the Ld. AO also made a protective disallowance of Rs. 1,63,23,529/- on account of consequential effect of equal amount of depreciation- disallowance already made. Being aggrieved by the order of Ld. AO, the assessee filed appeal to Ld. CIT(A). During appellate proceeding, the Ld. CIT(A) deleted the disallowance of depreciation u/s 32 of Rs. 1,60,23,529/-, confirmed the disallowance of deduction u/s 80P of Rs. 5,02,23,957/- and M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 3 confirmed the protective disallowance partly to the extent of Rs. 1,18,52,613/-. Being aggrieved by the order of Ld. CIT(A), the assessee has preferred this appeal and now before us. 4. Ground No. 1: 4.1 The issue involved in this Ground relates to the disallowance of deduction u/s 80P to the extent of Rs. 5,02,23,957/- pertaining to the income from CAP storage. 4.2 During assessment proceeding, the Ld. AO observed that the assessee has claimed a total deduction of Rs. 33,43,57,235/- u/s 80P out of which the deduction to the extent of Rs. 5,02,23,957/- related to the income from the letting of CAP storage. The Ld. AO observed that section 80P(2)(e) allows deduction in respect of income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. The Ld. AO further observed that the CAP storage is merely an improvised arrangement for storage of food grains which was born of necessity because harvests increased faster than the storage capacity over the time, but there is no construction of permanent structure involved in the CAP storage. According to the Ld. AO, therefore, the CAP storage does not fit in “godown” or “warehouse” and hence the income derived therefrom is not eligible for deduction u/s 80P. M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 4 4.3 The Ld. CIT(A) agreed with the observation of Ld. AO to the effect that the section 80P(2(e) allows deduction when there is a permanent warehousing structure and in absence thereof, the CAP storage is not as per requirement of section 80P(2)(e) and therefore not eligible for deduction. The Ld. CIT(A) also placed reliance on the decisions in (i) CIT Vs. Ahmedabad Maskati Cloth Dealers Co-operative Warehouses Society Ltd. (1986) 162 ITR 142 (Guj) and, (ii) Surat Vankar Sahakari Sangh Ltd. Vs. CIT (1971) 79 IT 722 (Guj). 4.4 Before us, the Ld. A/R started his arguments with the submission that it’s true that section 80P allows deduction in respect of income derived by a co-operative society from the letting of “godown” or “warehouse”. But the words “godown” or “warehouse” are not defined in section 80P or anywhere in Income-tax Act, 1961 and therefore we may gainfully refer the definitions prescribed in other laws which are primarily dealing with the development and regulation of warehouses. In this regard, the Ld. A/R placed before us the following definitions: Section 2(s) of The Warehousing (Development and Regulation) Act, 2007: “Warehouse” means any premises (including any protected place) conforming to all the requirements including manpower specified by the Authority by regulations wherein the warehouseman takes custody of the goods deposited by the depositor and includes a place of storage of goods under controlled conditions of temperature and humidity” M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 5 Section 2(d) of The Madhya Pradesh Agricultural Warehouse Act, 1947: “Warehouse” means a building or protected enclosure which is used or may be used for the purpose of storing agricultural produce” Analyzing these definitions, the Ld. A/R argued that nowhere these definitions prescribe that only a permanent structure is a warehouse. He further submitted that these definitions clearly prescribe that even a protected place or protected enclosure used for the purpose of storage, is also a “warehouse”. 4.5 Then the Ld. AO made a detailed submission on the nature and characteristics of CAP storage, which can be summed up as under: (i) CAP Storage is a “Cover and Plinth” Storage wherein a plinth is constructed upto a certain level, normally 14”, from the ground level. Such plinth is enclosed by a waterproof cover. The cover is held down by nets and nylon lashing. Thus CAP storage is a protected place or protected enclosure for storage of commodities. (ii) CAP storage is a legally approved storage. The Ld. A/R invited our attention to Page No. 15 of the Paper-Book where an order bearing No. 7146/Khadya-Uparjan/2012 dated 08.10.2012 issued by Joint Director, Khadya, Nagrik Apurti evam Upbhokta Sanrashan Sanchalanalay, Madhy Pradesh, Bhopal is placed. In this order, the M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 6 concerned authorities of State Govt. of Bhopal have given approval for construction of CAP storage. In the opening sentence of this Order, it has been clearly stated that CAP storage is being approved for storage of grains. (iii) The CAP storage are constructed and operated under controlled conditions as per directives formulated in this regard. The Ld. A/R invited our attention to Page No. 26 of the Paper-Book where an order bearing No. Bhandaran/01/4830/2020 dated 26.11.2020 issued by the Madhya Pradesh State Co-operative Marketing Federation Limited, Bhopal is placed. This order contains as many as 28 instructions and directions for construction and operation of CAP Storage. With this, the Ld. A/R strongly submitted that CAP storage is a “warehouse”. 4.6 The Ld. A/R also made a useful reference to the following passage in CIT Vs. Podar Cement Pvt. Ltd. judgement dated 27.05.1997 reported in 226 ITR 647: “At this juncture, we can also refer to the judgment cited by Mr. Syali regarding updating construction of the words used in the statute. In State (Through CBI/New Delhi) v. S.J. Choudhary, [1996] 2 SCC 428, this Court has quoted the following passage with approval in support of updating construction: “Statutory Interpretation by Francis Bennion, 2nd edition, Section 288 with the heading "Presumption that updating construction to be given" states one of the rules thus: (p. 617) M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 7 "xxxxxxxxx (2) It is presumed that Parliament intends the court to apply to an ongoing Act a construction that continuously updates its wording to allow for changes since the Act was initially framed (an updating construction). While it remains law, it is to be treated as always speaking. This means that in its application on any date, the language of the Act, though necessarily embedded in its own time, is nevertheless to be construed in accordance with the need to treat it as current law. In the comments that follow it is pointed out that an ongoing Act is taken to be always speaking. It is also, further, stated thus: "In construing an ongoing Act, the interpreter is to presume that Parliament intended the Act to be applied at any future time in such a way as to give effect to the true original intention. Accordingly the interpreter is to make allowances for any relevant changes that have occurred, since the Act's passing, in law, social conditions, technology, the meaning of words, and other matters. Just as the US Constitution is regarded as 'a living Constitution', so an ongoing British Rct is regarded as 'a living Act'. That today's construction involves the supposition that Parliament was catering long ago for a state of affairs that did not then exist is no argument against that construction. Parliament, in the wording of an enactment, is expected to anticipate temporal developments. The drafter will try to foresee the future, and allow for it in the wording. An enactment of former days is thus to be read today, in the light of dynamic processing received over the years, with such modification of the current meaning of its language as will now give effect to the original legislative intention. The reality and effect of dynamic processing provides the gradual adjustment. It is constituted by judicial interpretation, year in and year out. It also comprises processing by executive officials." Relying upon this, the Ld. A/R submitted that the construction of section 80P should also done be in an updated manner so as to encompass the CAP storage within the fold of warehouse, M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 8 because CAP storage is a modern form of warehousing developed due to the need of hour. 4.7 The Ld. A/R also submitted that the Ld. CIT(A) has wrongly placed reliance on (i) CIT Vs. Ahmedabad Maskati Cloth Dealers Co-operative Warehouses Society Ltd. (1986) 162 ITR 142 (Guj) and, (ii) Surat Vankar Sahakari Sangh Ltd. Vs. CIT (1971) 79 IT 722 (Guj). In those decisions, the assessees had let out godowns and warehouses for a purpose other than storage, processing or facilitating the marketing of commodities and therefore the deduction u/s 80P was not allowable. In the present case, there is no such dispute. 4.8 With above submissions, the Ld. A/R strongly argued that the income derived from CAP storage is perfectly eligible for deduction u/s 80P and the lower authorities have wrongly disallowed the claim of assessee. 4.9 Per contra, the Ld. D/R supported the orders of lower authorities and submitted that the Ld. AO has rightly disallowed the deduction and the Ld. CIT(A) has rightly confirmed the disallowance. 4.10 We have carefully considered the rival contentions and submissions of both sides. We observe that there is no specific definition of “godown” and “warehouse” prescribed in Income- tax Act, 1961. We also observe that section 80P does not state in specific terms that there must be a structure of permanent M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 9 nature. What section 80P requires is only “godown” or “warehouse”. As noted earlier, the Ld. A/R has made a considerable submission on the definition of “warehouse” prescribed in the laws governing the development and regulation of warehousing, namely, Section 2(s) of The Warehousing (Development and Regulation) Act, 2007 and Section 2(d) of The Madhya Pradesh Agricultural Warehouse Act, 1947. We have carefully considered these definitions and observe that even a protected place or protected enclosure used for the purpose of storage of commodities, is also a “warehouse”. We have also considered the detailed submission made by Ld. A/R on the nature and characteristics of CAP storage noted in earlier paragraphs, more particularly the Orders of statutory authorities placed at Page No. 15 and 26 of the Paper-Book referred to by Ld. A/R and refrain from repeating the same here for the sake of brevity. But after a thoughtful consideration of the same, we find that CAP storage is a protected place for storage of commodities approved by the statutory Orders. In view of these factual submissions and legal position, we feel that the CAP storage must be held to be a “warehouse” for the purpose of section 80P and we hold so. At this stage, we also note that the section 80P is a beneficial provision and the purpose is to incentivize the warehousing activity of co-operative societies. Therefore, the interpretation of section 80P must be liberal so as to advance the avowed objective. Taking into account all these aspects, we are M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 10 persuaded to conclude that the income from letting of CAP storage derived by the assessee is eligible for deduction u/s 80P and there is no justification in denying the same to the assessee. Therefore, we delete the disallowance made by lower authorities. This ground is, therefore, allowed. 5. Ground No. 2: 5.1 In this ground, the assessee has challenged the protective disallowance of Rs. 1,18,52,613/- out of deduction u/s 80P confirmed by the Ld. CIT(A). 5.2 Facts as noted in the beginning and once again being repeated to understand this ground smoothly are such that while filing return, the assessee claimed depreciation u/s 32 of Rs. 1,60,23,529/- and deduction u/s 80P of Rs. 33,43,57,235/-. While completing assessment, the Ld. AO disallowed the deduction of depreciation of Rs. 1,60,23,529/- fully. Out of the deduction of Rs. 33,43,57,235/- u/s 80P, the Ld. AO made a part-disallowance of Rs. 5,02,23,957/-and allowed the remaining deduction of Rs. 28,41,33,278/-. Thereafter, in respect of the allowed portion of deduction u/s 80P amounting to Rs. 28,41,33,278/-, the Ld. AO also made a protective disallowance of Rs. 1,63,23,529/- on account of consequential effect of the equal amount of depreciation- disallowance already made. During first appellate proceeding, the Ld. CIT(A) deleted the disallowance of depreciation of Rs. M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 11 1,60,23,529/- fully. But while deciding the grievance of assessee in respect of protective-disallowance, the Ld. CIT(A) observed that out of total depreciation of Rs. 1,63,23,529/-, the depreciation related to godown or building was Rs. 1,18,52,613/- only and the balance depreciation of Rs. 41,70,916/- related to other assets. On this basis, the Ld. CIT(A) deleted the protective disallowance to the extent of Rs. 41,70,916/- but upheld the protective disallowance of Rs. 1,18,52,613/-. 5.3 We observe that the depreciation disallowance of Rs. 1,63,23,529/- has been fully deleted by the Ld. CIT(A) and this deletion has already attained finality as there is no appeal or cross-objection from Revenue contesting this. Regarding the disallowance of Rs. 5,02,23,957/- out of deduction u/s 80P, we have already deleted the same in preceding paras. Thus both of the disputes, namely the disallowance of depreciation u/s 32 and disallowance of deduction u/s 80P made by Ld. AO stand fully settled in favour of the assessee at this stage. Being so we feel that the issue of protective disallowance of deduction u/s 80P on account of consequential effect of depreciation- disallowance, does not survive further. Therefore, this Ground of assessee becomes infructuous and does not require adjudication. M.P. State Cooperative Marketing Federation Ltd. ITA No.18/Ind/2019 12 6. In the result this appeal of assessee is partly allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 17.02.2022. Sd/- (SUCHITRA R. KAMBLE) Sd/- (BHAGIRATH MAL BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore; दनांक Dated : 17/02/2022 Patel/Sr. PS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Assistant Registrar, Indore