JAI JINENDRA COLD STORAGE P. LTD, NAVI MUMBAI V. ITO 10(3)(4), MUMBAI

ITA 325/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8428 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 19-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 13-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: RITIKA GARG
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH BEFORE SHRI D.K.AGARWAL, JUDICIAL MEMBER & SHRI T.R.SOOD, ACCOUNTANT MEMBER I.T.A.NOS.325, 1237 & 1238/MUM/2010 A.YRS.2004-05, 2005-06 & 2006-07 M/S JAI JINENDRA COLD STORAGE PVT. LTD., C/74-75, APMC MARKET YARD, TURBHE, NAVI MUMBAI PAN: AABCJ 0852 F VS. INCOME TAX OFFICER 10 (3) (4), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. RITIKA GARG. RESPONDENT BY : MR. S.K.SINGH. O R D E R PER BENCH: IN ALL THESE THREE APPEALS COMMON GROUNDS HAVE BEEN FILED THROUGH WHICH DENIAL OF PARTIAL DEDUCTION U/S.80IB[ 11] WAS CHALLENGED. THE REFERENCE WAS MADE WRONGLY AS U/S.80IB[10] IN T HE ORIGINAL GROUNDS THEREFORE ASSESSEE HAS FILED AMENDED GROUND S WHICH ARE AS UNDER: 1. BECAUSE, LD. CIT[A] ERRED IN LAW ON FACTS IN UPHOLD ING THE ACTION OF LD. ASSESSING OFFICER IN RESTRICTING THE CLAIM OF EXEMPTION U/S.80IB(10) OF THE ACT ONLY ON AGRICULTU RAL PRODUCE. 2. BECAUSE, ONCE ALL CONDITIONS OF SECTION 80IB(10) ST OOD SATISFIED, THE LD. AO COULD NOT HAVE RESTRICTED THE CLAIM U/S.80IB(10) TO ANY ARTIFICIAL FIGURE AND SUCH CLAI M WAS ALLOWABLE IN FULL. 2. A COMMON DISPUTE HAS BEEN RAISED IN ALL THE THRE E YEARS. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROV IDING SERVICES IN RELATION TO COLD CHAIN FACILITIES FOR AGRICULTURAL PRODUCE AND, ACCORDINGLY 2 CLAIMED DEDUCTION U/S.80IB[11]. THE ASSESSEE WAS AS KED TO GIVE LIST OF ITEMS ON WHICH SUCH SERVICES WERE PROVIDED. IN RESP ONSE, IT WAS POINTED OUT THAT ASSESSEE WAS MAINLY DERIVING PROFI TS FROM THE OPERATION OF COLD CHAIN FACILITIES IN AGRICULTURAL PRODUCE AND SUCH PROFITS WERE TO BE ALLOWED U/S.80IB[11] @ 100%. THE AO OBSE RVED THAT ITEMS LIKE LONI BOX, PULP, PARATHA BOX, KHAWA, CHOCOLATE, MEDICINES & OTHER BAKERY PRODUCTS HAVE BEEN CLASSIFIED BY THE ASSESSE E ITSELF AS MILK PRODUCTS AND MEDICINES AND BAKERY PRODUCTS COULD NO T BE TREATED AS AGRICULTURAL PRODUCE. ACCORDING TO THE AO, THE INTE NTION OF THE LEGISLATURE WAS ONLY TO EXTEND THE BENEFIT IN RESPE CT OF AGRICULTURAL PRODUCE SO THAT FARMERS IN THE RURAL AREAS ARE BENE FITED AS SUCH AGRICULTURAL PRODUCE COULD BE PRESERVED AND, THEREF ORE, SUCH BENEFITS COULD NOT BE EXTENDED TO OTHER CATEGORIES. HE ULTIM ATELY HELD THAT ASSESSEE WAS ONLY ENTITLED TO DEDUCTION IN RESPECT OF AGRICULTURAL PRODUCE AND ULTIMATELY DEDUCTION WAS DENIED IN RESP ECT OF ITEMS LIKE LONI BOX, PULP, PARATHA BOX, KHAWA, CHOCOLATE, MEDI CINES & OTHER BAKERY PRODUCTS. 3. ON APPEAL, LD. CIT(A) REJECTED THE CLAIM OF THE ASSESSEE BY OBSERVING IN A.Y 2004-05 AS UNDER: 3.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, PERU SED THE SUBMISSIONS BY THE APPELLANT AND ALSO DISCUSSED THE CASE WITH THE A/`. OF THE APPELLANT. THE AO HAS DENIED DEDUCTION U/S.8 0IB(11) ON THE INCOME STORED WHICH DID NOT FALL UNDER THE CATEGORY OF AGRICULTURAL PRODUCE AND ALLOWED PROPORTIONATE DEDUCTION ONLY. T HE APPELLANT BEFORE ME STATED THAT THE DEDUCTION SHOULD HAVE BEE N ALLOWED IN ITS ENTIRETY AND THE PROVISIONS REGARDING DEDUCTION HAV E TO BE READ LIBERALLY. HOWEVER, I DO NOT AGREE WITH THE CONTENT ION OF THE APPELLANT SINCE THE ITEMS WHICH HAS BEEN STORED IN THE COLD S TORAGE INCLUDE 3 PARATHA BOX, BUTTER BOX, MEDICINES, MILK, BUTTER ET C. WHICH BY NO STRETCH OF IMAGINATION CAN BE INCLUDED IN THE DEFIN ITION OF AGRICULTURAL PRODUCE. THE LEGISLATIVE INTEND BEHIND INTRODUCTIO N OF THIS SECTION WAS TO EXTEND THE COLD STORAGE FACILITY TO FRAMERS IN R URAL AREA SO THAT THE PERISHABLE AGRICULTURAL PRODUCE IS RETAINED FOR LO NGER PERIOD AND FETCH THEM BETTER PRICE. ACCORDINGLY, I AM OF THE CONSIDE RED OPINION THAT THE AO HAS RIGHTLY DENIED DEDUCTION U/S.80IB(11) ON STO RAGE OF NON AGRICULTURAL PRODUCE. ACTION OF THE AO IS THEREFORE UPHELD. 4. BEFORE US, LD. COUNSEL OF THE ASSESSEE REFERRED TO THE PROVISIONS OF SECTION 80IB(11) AND SUBMITTED THAT DEDUCTION WA S AVAILABLE IN RESPECT OF COLD CHAIN FACILITY FOR AGRICULTURAL PRO DUCE AND AS PER SECTION 80IB(14) CLAUSE (AA) WHICH DEFINES COLD CHAIN FACIL ITY WOULD INCLUDE COLD STORAGE FACILITY ALSO. SHE FURTHER REFERRED TO THE MEMORANDUM EXPLAINING THE PROVISIONS OF FINANCE BILL [PAGE 4 O F THE PAPER BOOK] WHEREIN TAX HOLIDAY IN RESPECT OF COLD CHAIN FACILI TY WAS INTRODUCED AND IT IS CLEARLY MENTIONED THAT PURPOSE OF SUCH DEDUCT ION WAS TO ENSURE SMOOTH DISTRIBUTION OF AGRICULTURAL AND PROCESSED P RODUCTS, WHICH MEANS PROCESSED FOODS WOULD ALSO BE INCLUDED UNDER THIS SECTION. SHE ARGUED THAT VARIOUS PROVISIONS GRANTING BENEFITS AN D DEDUCTIONS HAVE TO BE INTERPRETED LIBERALLY AND NOT IN A NARROW MAN NER AS OBSERVED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GANNON DUNKERLEY & CO. LTD. VS. CBDT & ORS. 159 ITR 162. 5. THE BENCH ASKED A QUESTION REGARDING EXHIBITS B OR D REFERRED BY THE AO WHILE CALCULATING THE DEDUCTION, AND IN R ESPONSE THE ASSESSEE HAS FILED A COPY OF THE RETURN FOR A.Y 200 3-04 IN WHICH EXHIBIT D HAS BEEN ATTACHED. SHE POINTED OUT THAT AO HAS BASICALLY DENIED 4 THE DEDUCTION IN RESPECT OF ITEMS LIKE LONI BOX, PU LP, PARATHA BOX, KHAWA, CHOCOLATE, MEDICINES & OTHER BAKERY PRODUCTS . 6. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO AND THE CIT[A]. HE FURTHER SUBMITTED THAT MEDICI NES, BUTTER, PARATHA BOX, TOMATO PUREE AND PULP ETC., CANNOT BE DESCRIBED AS AGRICULTURAL PRODUCE AND, THEREFORE, DEDUCTION HAS BEEN CORRECTLY DENIED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. THE MEMORANDUM EXPLAINING THE PROVISIONS AT PAGE 4 OF T HE PAPER BOOK READ AS UNDER: UNDER THE EXISTING PROVISIONS OF SECTION 80-IA, A FIVE YEAR TAX HOLIDAY IN RESPECT OF PROFITS AND GAINS OF AN ASSESSEE OPER ATING A COLD STORAGE IN AN INDUSTRIALLY BACKWARD STATE OR IN AN INDUSTRIALL Y BACKWARD DISTRICT, IF IT BEGINS TO OPERATE THE COLD STORAGE PLANT BEFORE THE 31 ST MARCH, 2000, IS ALLOWED WITH A FURTHER DEDUCTION OF 25% OF PROFI TS OF SUCH BUSINESS [30% IN THE CASE OF COMPANIES] FOR THE NEXT FIVE YE ARS. THE COMPLEX FOOD CHAIN FROM THE PRODUCER TO THE CON SUMER, INVOLVES VARIOUS INTERMEDIARIES FOR HANDLING AND PROCESSING. THE LOSS AND WASTAGE OF PERISHABLE AGRICULTURAL PRODUCE , VEGETA BLES AND SIMILAR COMMODITIES CONTINUES TO BE HIGH. IN ORDER TO MINIM IZE SUCH LOSS AND TO ENSURE SMOOTH AND UNIFORM DISTRIBUTION OF AGRICULTURAL AND PROCESSED PRODUCTS , IT IS PROPOSED TO PROVIDE 100% TAX HOLIDAY FOR A PERIOD FIVE YEARS AND 25% [30% IN CASE OF COMPANIES ] DEDUCTION FROM PROFITS DERIVED FROM OPERATING A COLD CHAIN FACILIT Y WHICH STARTS OPERATING AFTER THE 1 ST DAY OF APRIL, 1999, IS PROPOSED TO BE ALLOWED FOR A FURTHER PERIOD OF FIVE YEARS. THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM THE 1 ST DAY OF APRIL, 2000, AND WILL, ACCORDINGLY, APPLY IN RELATION TO A SSESSMENT YEAR 2000- 2001 AND SUBSEQUENT YEARS. THE ABOVE CLEARLY SHOWS THAT DEDUCTION IS MEANT FOR AGRICULTURAL AND PROCESSED PRODUCTS. NATURALLY THE PROCESSING PRODUC TS OF EDIBLE ITEMS WOULD ALSO BE COVERED BY THIS PROVISION. IN OUR VIE W, ITEMS LIKE BUTTER, 5 PARATHA BOX WHICH IS MADE OF FLOUR AND KNOWN AS PRE SERVED EATABLES OR TOMATO PUREE, DEFINITELY CAN BE CALLED PROCESSED AGRICULTURAL PRODUCTS AND, THEREFORE, SAME WOULD BE COVERED U/S. 80IB(11). AT THE SAME TIME, ITEMS LIKE MEDICINES WOULD NOT BE COVERE D BY THIS PROVISION, BECAUSE MEDICINES HAVE NOTHING TO DO WIT H AGRICULTURE. THEREFORE, WE SET ASIDE THE ORDER O THE LD. CIT[A] AND DIRECT THE AO TO ALSO ALLOW DEDUCTION IN RESPECT OF PROCESSED FOODS OR OTHER PROCESSED PRODUCTS WHICH ARE OF EDIBLE NATURE LIKE LONI BOX, PULP, PARATHA BOX, KHAWA ETC. 8. IN THE RESULT, APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF FEBRUARY, 2011. SD/- SD/- (D.K.AGARWAL) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 11 TH FEBRUARY, 2011. P/-*