Orisssa State Warehousing Corporation, Bhubaneswar V. ITO, Bhubaneswar

ITA 330/CTK/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81481 (ITAT-CUTTACK)
• Duration Of Justice: 4 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 20-10-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 13-09-2010
• Court: TRIBUNAL
• Department Lawyers: K AJAY KUMAR
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Depreciation; Opportunity of being heard; Difference of opinion; Capital receipt; Change of opinion; Reassessment proceedings
• Section: 143(3); 80IB; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK BEFORE S/SHRI S.V.MEHROTRA (AM) AND GEORGE MATHAN (JM) I.T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I.T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2007-08 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 ORISSA STATE WAREHOUSING CORPN., PLOT NO.2, CUTTACK ROAD, BHUBANESWAR. PA NO. AAACO 9742 N VS. A CIT, RANGE - 1 (1) , BHUBNANESWAR. APPELLANT RESPONDENT FOR THE APPELLANT: SHRI B.K.MOHAPATRA FOR THE RESPONDENT: SHRI K. AJAY KUMAR DATE OF HEARING: 20/10/.2014 DATE OF PRONOUNCEMENT: 22 /10/2014 ORDER PER BENCH: THESE APPEALS FILED BY THE ASSESSE ARE DIRECTED AG AINST SEPARATE ORDERS DATED 21.6.2010, 5.7.2010, 22.6.2011,5.7.2010 & 2.2.2012, RESPECTIVELY OF LD CIT(A), BHUBANESWAR- I, FOR THE ASSESSMENT YEARS, 2004-05, 2006-07, 2005 -06, 2007-08 & 2008-09. 2. SINCE COMMON ISSUE IS INVOLVED IN ALL THESE APPE ALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. FIRST WE TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2004-05 IN ITA NO.330/CTK/2010. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A PUBLIC LIMITED COMPANY, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN PROVIDING WARE HOUS ING FACILITIES TO DIFFERENT COMPANIES & PRIVATE PARTIES FOR STORAGE OF FOOD GRAINS, FERTILI ZERS, ETC. THE ASSESSEE HAD FILED ITS RETURN OF 2 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 INCOME DECLARING TOTAL LOSS OF RS.36,45,830/-. THE ASSESSMENT WAS COMPLETED ON 27.3.2006 ON A LOSS OF RS.20,73,950/-. SUBSEQUENTLY, PROCEEDING S U/S.147 OF THE ACT WERE INITIATED. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS.2, 20,72,240/-, INTER ALIA, MAKING AN ADDITION OF RS.278,80,000/- ON ACCOUNT OF EXCESS DEPRECIATIO N ALLOWED TO THE ASSESSEE. 5. LD CIT(A) CONFIRMED THE ADDITION MADE BY THE ASS ESSING OFFICER. 6. BEING AGGRIEVED WITH THE ORDER OF LD CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS: 1. THAT THE ORDER APPEALED AGAINST IS BAD IN LAW, WITHOUT JURISDICTION AND VOID. 2. THAT THE ORDER APPEALED AGAINST IS BAD IN LAW AS IT IS PASSED ON THE PREJUDICES, SURMISES, GUESSES AND MISUNDERSTANDING OF THE FACTS AND LAW AND IS CONTRARY TO THE EVIDENCE ON RECORD., 3. THAT THE ID CIT(APPEAL) HAS ERRED IN CONFIRMING THE ORDER U/S 147 OF THE ACT WITHOUT TAKING NOTE OF THE FACT THAT FOR THE INSTAN T ASSESSMENT YEAR ALREADY AN ASSESSMENT HAS BEEN MADE UNDER THE PROVISIONS OF SE CTION 143(3) OF THE ACT AND THERE BEING NO NEW FACTS AVAILABLE TO THE A.O., THE ORDER U/S 147 IS NOTHING BUT MERE CHANGE OF OPINION ON THE PART OF THE A.O. 4. THAT THE ID CIT(APPEAL) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS.27,80,000/- ON THE CONTENTION TH AT THIS REPRESENTS EXCESS DEPRECIATION WITHOUT CONSIDERING THE FACT THAT THE CORPORATION HAS NOT ADJUSTED THE SUBSIDY AMOUNT AGAINST THE COST OF THE FIXED AS SETS AS IT WAS A BACK ENDED SUBSIDY AND THUS HAS CORRECTLY CLAIMED DEPRECIATION THEREON. 7. GROUND NOS.1 & 2 ARE GENERAL IN NATURE. 8. GROUND NO.3 WAS NOT PRESSED, THEREFORE, SAME IS DISMISSED AS NOT PRESSED. 3 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 9. APROPOS GROUND NO.4, FACTS ARE THAT THE ASSESSEE WAS GRANTED SUBSIDY OF RS. 2.78 CRORE UNDER GRAMIN BHANDARAN YOJANA INSTITUTED BY THE MIN ISTRY OF AGRICULTURE, GOVT, OF INDIA FOR CREATION OF FIXED ASSETS I.E. GODOWNS, WHICH WAS RE LEASED BY NABARD THROUGH ALLAHABAD BANK (RS. 2.41 CRORE) AND U.CO BANK (RS. 0.37 CRORE). T HE AO OBSERVED THAT AN AMOUNT OF RS. 28.56 LAKH WAS RECEIVABLE UNDER THE SAID SCHEME TAK ING TOTAL SUBSIDY TO RS. 3.07 CRORE. THE AO OBSERVED THAT THE SUBSIDY WAS RELEASED TO THE LEND ING BANKS WITH STIPULATION THAT THE EQUIVALENT LOAN AMOUNT WOULD NOT BE CHARGED WITH IN TEREST AND THE SUBSIDY AMOUNT WOULD ALSO NOT EARN ANY INTEREST TILL THE FINAL REPAYMENT OF L OAN. THE AMOUNT OF RS. 2.78 CRORE BEING AN ADVANCE SUBSIDY RECEIVED BY THE LENDING BANKS WAS K EPT UNDER SUBSIDY RESERVE ACCOUNT. THE ASSESSEE DID NOT TREAT THE SUBSIDY OF RS. 2.78 CROR E AS RECEIPT AND ALSO HAD NOT MADE THE ADJUSTMENT IN FIXED ASSETS OF THE ASSESSMENT YEAR U NDER CONSIDERATION. THE AO DID NOT ACCEPT THE ACCOUNTING TREATMENT CHOSEN BY THE ASSESSEE AND OBSERVED THAT THE MAIN ISSUE WAS CREATION OF ASSETS I.E. GODOWNS, FOR WHICH SUBSIDY OF RS. 2.78 CRORE WAS RECEIVED DURING THE YEAR. THEREFORE, SUBSIDY AMOUNT OF RS. 2.78 CRORE SHOULD HAVE BEEN TAKEN AS CAPITAL RECEIPT AND ADJUSTMENT SHOULD HAVE BEEN MADE BY DEDUCTION F ROM THE GROSS VALUE OF THE CONCERNED ASSET FOR THE PREVIOUS YEAR RELEVANT FOR THIS ASSES SMENT YEAR UNDER CONSIDERATION. AS THIS WAS NOT DONE, HE CONCLUDED THAT ASSETS WERE OVERSTATED BY THE SAME AMOUNT AND EXCESS DEPRECIATION WAS CLAIMED TO THE EXTENT OF RS. 27,80 ,000/- I.E. @ 10% ON GODOWN VALUED AT RS. 2.78 CRORES. 10. LD CIT (A) DID NOT ACCEPT ASSESSEES CONTENTION OBSERVING, INTER ALIA, IN PARA 4.2 AS UNDER: I HAVE GIVEN CAREFUL CONSIDERATION TO THE MATTER A ND HAS GONE THROUGH A COPY OF GRAMIN BHANDARAN YOJANA (RURAL GODOWN SCHEME) FILED BY THE APPELLANT. THE SCHEME MAKES ABUNDANTLY CLEAR THAT THE SUBSIDY IS F OR SETTING UP A NETWORK OF RURAL GODOWNS. THE MODALITY OF THE DISBURSEMENT HAS BEEN SPELT OUT IN PARA 4 OF THE SCHEME. THE SUBSIDY HAS BEEN LINKED TO INSTI TUTIONAL CREDIT. IT IS RELEASED TO THE BANKS/NCDC TO BE KEPT IN THE SUBSIDY RESERVE FUND ACCOUNT OF THE 4 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 CONCERNED BORROWER TO BE ADJUSTED FINALLY AGAINST T HE LOAN AMOUNT OF THE BANK ON COMPLETION OF THE PROJECT. THE CONTENTION OF THE APPELLANT IS THAT THE ADJUSTMENT REGARDING SUBSIDY HAS TO BE DONE AFTER A LL THE STIPULATIONS ARE SATISFIED AND AS AND WHEN THE SUBSIDY IS ACTUALLY A DJUSTED AGAINST LAST INSTALLMENTS OF THE LOAN. I DO NOT FIND MYSELF IN A GREEMENT WITH THE ABOVE VIEW. THE APPELLANT HAS ACTUALLY RECEIVED THE SUBSIDY. IT IS BEING KEPT IN ITS NAME BY THE CONCERNED BANK AGAINST ITS NAME. THE ONLY DIFFE RENCE IS THAT HE IS BEING ALLOWED TO USE THE SUBSIDY NOT IN THE BEGINNING BUT AT THE END. THE DEFERMENT OF USE OF THE SUBSIDY DOES NOT ALTER THE FACT THAT THE SUBSIDY HAS ACTUALLY BEEN RECEIVED. THEREFORE, THE APPELLANT IS REQUIRED TO R EDUCE THE COST OF ASSETS BY THE ABOVE AMOUNT. THEREFORE, THE STAND TAKEN BY THE AO IS UPHELD. 11. LD COUNSEL FOR THE ASSESEE SUBMITTED THAT A SSESSEE HAD NOT RECEIVED SUBSIDY IN THE CURRENT ASSESSMENT YEAR BECAUSE IT WAS SUBJECT TO S ATISFACTORY COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE SCHEME AND LIQUIDATION OF THE LOA NS. HE POINTED OUT THAT THE AMOUNT WAS ACTUALLY RECEIVED IN ASSESSMENT YEAR 2010-2011, IN WHICH, IT HAS BEEN DULY ACCOUNTED FOR. 12. LD D.R. RELIED ON THE ORDER OF LD CIT(A). 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PE RUSED THE RECORD OF THE CASE. FROM THE FACTS ON RECORD, IT IS EVIDENT THAT THE SUBSIDY WAS RELEASED TO THE LENDING BANKS WITH THE STIPULATION THAT THE EQUIVALENT LOAN AMOUNT WOULD N OT BE CHARGED WITH INTEREST AND SUBSIDY AMOUNT WOULD ALSO NOT EARN ANY INTEREST TILL THE FI NAL REPAYMENT OF LOAN. THEREFORE, THE MAIN ISSUE IS AT WHAT STAGE THE SUBSIDY ACTUALLY ACCRUED TO THE ASSESSEE WHETHER WHEN IT WAS RELEASED BY NABARD TO ALLAHABAD BANK AND UCO BANK O R WHEN FINALLY ASSESSEE LIQUIDATED THE LOANS TAKEN FROM THESE BANKS. IN OUR OPINION, SINC E THE CORPORATION HAD NO ACCESS TO THE FUND TILL THE SATISFACTORY COMPLIANCE WITH THE TERMS AN D CONDITIONS OF THE SCHEME AND LIQUIDATION OF THE LOAN, THEREFORE, IT CANNOT BE SAID THAT THE SUB SIDY HAD ACCRUED TO THE ASSESSEE. IF THE ASSESSEE FAILED TO COMPLY WITH THOSE TERMS AND COND ITIONS AND DEFAULTED IN LIQUIDATION OF LOANS, THEN THE SUBSIDY COULD NOT BE RELEASED TO TH E ASSESSEE. THEREFORE, THE ACCRUAL OF 5 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 RECEIPTS WAS IN FAVOUR OF THE ASSESSEE ONLY IN THE YEAR IN WHICH ALL THE TERMS AND CONDITIONS OF THE SCHEME WERE DULY COMPLIED AND THE LOANS TO THE BANKS WERE LIQUIDATED. WE ARE NOT IN AGREEMENT WITH THE FINDINGS OF LD CIT(A) THAT THE A SSESSEE HAD ACTUALLY RECEIVED THE SUBSIDY. IT IS WELL SETTLED LAW THAT UNLESS THE ASSESSEE IS ABL E TO EXERCISE THE CONTROL AND RIGHTS OVER THE RECEIPT, IT CANNOT BE TREATED AS BEING ACCRUED TO H IM. WE ARE IN AGREEMENT WITH THE CONTENTIONS OF THE ASSESSEE THAT IT COULD BE ADJUST ED IN THE ASSESSMENT YEAR IN WHICH IT WAS ACTUALLY RECEIVED. HENCE, THIS GROUND IS ALLOWED. 14. IN THE RESULT, APPEAL IS PARTLY ALLOWED. 15. NOW WE TAKE UP THE APPEAL FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.331/CTK/2010. 16. THE ASSESSEE HAD FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.3,03,54,949. REASSESSMENT PROCEEDINGS WERE INITIATED ON THE PLEA THAT DEDUCTION U/S. 80-IB WAS NOT ALLOWABLE IN THIS CASE. THE AO NOTICED THAT IN THE ANNEXURE TO COMPUTATION STATEMENT, ASSESSEE HAD CLAIMED DEDUCTION U/S. 80-IB AS UNDER: INCOME FROM NEW ELIGIBLE BUSINESS : 13,66,57,99 8/- LESS: ALLOWABLE, EXPENSES I) PROPORTIONATE HANDLING & TRANSPORTATION EXPENSES 3,97,09,570/- (RS.8,94,9L,618/RS.U,14,73,643*RS.4 / 94,63,520) II) INTEREST ON TERM LOAN 52,34,509/- III) DEPRECIATION 1,80,80,929/- IV)PROPORTIONATE OPERATING EXPENSES (RS.5,67,58,483/RS.23,96,72,677*RS.L3,66,57,998)3 ,23,62,89 1/ 9,53,87,899 6 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 TAXABLE PROFIT FOR ELIGIBLE BUSINESS (U/S. 80 IB) 4,12,70,099/- 17. THE ASSESSING OFFICER EXAMINED THE ISSUE OF ELI GIBILITY OF THE ASSESSEE TO THE DEDUCTION CLAIMED UNDER SECTION 80 IB(11A) AND HAS NOTED FOLL OWING FACTS: I. THE COMPANY IS ENGAGED IN THE BUSINESS OF HANDLING , STORAGE AND TRANSPORTATION OF FOOD GRAINS AND OTHER MATERIALS. MOSTLY THE COMPANY HANDLES THE FOOD-GRAINS ON BEHALF OF M/S. FOOD CORPORATION OF INDIA APART FROM STORAGE OF FERTILIZERS ETC. FOR FEW OTHER PARTIES. II. THE ASSESSEE WAS HITHERTO CLAIMING EXEMPTION ON WAR EHOUSING, HANDLING & TRANSPORTATION RECEIPT U/S. 10(29) OF THE I.T. ACT TILL A/Y 2002-03. THIS EXEMPTION HAS BEEN REMOVED W.E.F. AY-03-04. III. AS PER THE ASSESSEE, SINCE THE FINANCIAL YEAR 2002- 03, THE CORPORATION HAS BEEN IDENTIFIED AS THE NODAL AGENCY FOR CONSTRUCTION OF 2.00 LACS M.T. ADDITIONAL STORAGE CAPACITY IN ORISSA AND M/S. FOOD CORPORATIO N OF INDIA HAS BEEN GUARANTOR FOR USE OF SUCH ADDITIONAL CAPACITY AT LE AST FOR A PERIOD OF 7 YEARS. ACCORDINGLY, THE CORPORATION HAS UNDERTAKEN THE CON STRUCTION OF ADDITIONAL STORAGE CAPACITY OF ABOUT 2.00 LAC M. T. NEW STORAG E CAPACITY. THE CORPORATION HAS COMPLETED CONSTRUCTION OF THE ADDITIONAL STORAG E CAPACITY OF 1.825 LAC M. T. DURING THE FINANCIAL YEAR 2002-03 RELEVANT TO THE A SSESSMENT YEAR 2003-04 AND HAS OFFERED IT FOR COMMERCIAL USE DURING THAT YEAR. IV. THE ASSESSEE IN THIS CONNECTION HAS ALSO SUBMITTED AN AGREEMENT DT.22.04.2002 WITH FCI FOR CONSTRUCTION OF NEW GO-D OWN OF 2.00 M. T. CAPACITY CONSTRUCTED AT 17 PLACES TO BE USED BY THE LATTER F OR AT LEAST 7 YEARS. IT IS SUBMITTED THAT OUT OF THE TOTAL GO-DOWN CAPACITY OF 3,96,050 M. T. OF THE CORPORATION, 1,98,500 M. T. OF THE CORPORATION HAS BEEN TAKEN BY FCI PURSUANT TO THE ABOVE AGREEMENT. V. THE CORPORATION HAS, THEREAFTER, MADE A CLAIM OF DE DUCTION IN RESPECT OF INCOME FROM SUCH NEWLY CONSTRUCTED WAREHOUSES UNDER SUB-SECTION (11 A) OF SECTION 80-IB OF THE ACT FROM AY-03-04. IT THUS HAS DECLARED THE ADDITIONAL STORAGE CAPACITY AS THE ELIGIBLE BUSINES S FOR THE PURPOSE OF SECTION 80-IB AND ALSO DECLARES THE ASSESSMENT YEAR 03-04 AS THE INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING THE DED UCTION UNDER SUB- 7 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 SECTION (11 A) OF SECTION 80-IB OF THE ACT. HOWEVER , FOR THE IMMEDIATELY PRECEDING YEARS I.E., ASST. YEAR-03-04 & 04-05, IT HAS INCURRED LOSS FROM THESE ADDITIONAL WAREHOUSES TO THE EXTENT OF RS.2,3 8,05,069 & RS.28,79,809 RESPECTIVELY. 18. THE AO CONSIDERED THE PROVISIONS OF SUB-SECTION (11A) OF SECTION 80-IB AND OBSERVED AS UNDER: 3 THUS THE NEWLY INSERTED SUB-SECTION HA IN THE S ECTION 80IB SAYS THAT (A) THE DEDUCTION IS AVAILABLE FOR AN UNDERTAKING DERIVING PROFIT FROM THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS, (B) THE AMOUNT DEDUCTIBLE WOULD BE 100% FROM THE PROFITS AND GAINS DERIVED FROM SUCH UNDERTAKING AND THE PERIOD FOR WHICH SUCH CLAIM IS ELIGIBLE IS 5 ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEARS AND THE REAFTER 30% FOR THE ASSESSEE IS A COMPANY OF THE PROFITS AND GAINS SUCH THAT THE TO TAL PERIOD OF DED UCTION DOES NOT EXCEED 10 CONSECUTIVE ASSESSMENT YEARS AND SUBJECT TO THE FULFILLMENT OF THE CONDITION THAT SUCH BUSINESS IS OPERATED ON OR AFTE R 1.4.2001. 19. HE DISALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S. 80-IB, INTER ALIA, OBSERVING THAT THERE HAS BEEN MERE CONSTRUCTION OF ADDITIONAL WARE HOUSES ENHANCING THE CAPACITY. HE DID NOT ACCEPT ASSESSEES CONTENTION THAT THESE WERE NEW UN DERTAKING. ASSESSEE RELIED ON FOLLOWING DECISIONS: (I) CIT CS. ACC1 ,TD. 118 ITR 406 (BOM) (II) CIT VS. ROHTAS IND LTD. 120 ITR HO(CAL) (HI) CIT V GAEKWAR FOAM & RUBBER CO LTD 35 ITR 662 (BOM) (IV) CIT V GANGA SUGAR CORPORATION LTD 92 ITR 173 (DEL) (IV) CIT VS. GEDORE TOOLS (IND) PVFC. LTD. 126 ITR 673 (DEL) (V) TEXTILE MACHINERY CORPN. LTD. VS. CIT 107 ITR 1 95 (SC) 8 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 20. THE AO OBSERVED THAT THESE DECISIONS EMPHASIZES IF FRESH CAPITAL IS INTRODUCED FOR PURCHASE OF PLANT & MACHINERY AND THE NEW UNIT IS C APABLE OF PRODUCTION OF GOODS, THEN THE UNIT CAN BE CLAIMED AS A NEWLY ESTABLISHED INDUSTRI AL UNDERTAKING. HE FURTHER OBSERVED THAT THESE JUDGMENTS WERE RENDERED IN THE CONTEXT OF IND USTRIAL UNITS ENGAGED IN PRODUCTION WHEREAS, IN CASE OF THE ASSESSEE, THE WAREHOUSES WE RE MERE BUILDINGS AND NOT PLANT & MACHINERY. THE AO AFTER CONSIDERING THE ANNUAL REP ORT FURTHER OBSERVED THAT THIS DEDUCTION IS AVAILABLE TO THE NEW UNDERTAKING ON OR AFTER 1.4.2 001 AND THE ASSESSEE IN THE INSTANT CASE IS AN OLD UNDERTAKING DOING THIS BUSINESS SINCE LONG A ND SO CALLED UNDERTAKING WAS NOTHING BUT AN EXTENTION OR AN EXPANSION OF THE EXISTING BUSINESS. HE, ACCORDINGLY, HELD THAT THERE WAS NO NEW UNDERTAKING AND, THEREFORE, DENIED DEDUCTION U/ S. 80-IB OF THE ACT. 21. LD CIT(A) UPHELD THE AOS ACTION. BEING AGGRIE VED, ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER APPEALED AGAINST IS BAD IN LAW, WITHOUT JURISDICTION AND VOID. 2. THAT THE ORDER APPEALED AGAINST IS BAD IN LAW AS IT IS PASSED ON THE PREJUDICES, SURMISES, GUESSES AND MISUNDERSTANDING OF THE FACTS AND LAW AND IS CONTRARY TO THE EVIDENCE ON RECORD., 3. THAT LD CIT(A) HAS ERRED IN CONFIRMING THE DISAL LOWANCE OF THE CLAIM OF DEDUCTION U/S. 80-IB OF THE ACT ON THE CONTENTION T HAT THE NEW WAREHOUSES ARE MERE EXTENTION OR EXPANSION OF THE EXISTING BUSINES S AND SHOULD NOT BE CONSIDERED AS AN UNDERTAKING FOR THE PURPOSE OF T HE PROVISIONS OF SECTION 80- IB. 22. GROUND NOS. 1 & 2 ARE GENERAL IN NATURE. 23. APROPOS GROUND NO.3, AT THE OUTSET, LD COUNSEL SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF ITAT HYDERABAD BENCH IN THE CASE OF A.P. STATE WAREHOUSING CORPORATION VS DCIT, 45 TAXMANN.COM.332 (HYD), WHEREIN, IT HAS BEE N HELD AS UNDER: 9 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED 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 DISA LLOWED 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, ASSES SEE CORPORATION, HAVING BEEN INCORPORATED IN 1958, AND IN THE ABSENCE OF ANYTHIN G ON RECORD TO SUBSTANTIATE THAT THE ASSESSEE HAS TAKEN UP ANY NEW ACTIVITY OF HANDL ING AND TRANSPORTATION OF FOOD GRAINS SUBSEQUENT TO 2002, ASSESSEE IS NOT ENTITLED FOR RELIEF UNDER S.80IB(11 A), SINCE RELIEF UNDER THAT SECTION IS AVAILABLE ONLY F OR 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 CORRECTNES S 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 ARE A IT EITHER CONSTRUCTS OR OFFERS AN INVESTOR TO CONSTRUCT NEW GODOWNS, WHICH THE CORPOR ATION TAKES ON LEASE. IT IS THE CLAIM OF THE ASSESSEE BEFORE THE CIT(A) THAT THE PL INTH 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 GODOWNS STAR TED IN THE YEAR 2002. EACH UNIT IS AN UNDERTAKING BECAUSE FOOD-GRAINS ARE STORED AN D HANDLED AND TRANSPORTED THERETO AND THEREFROM. IT MAY BE NOTED AT THIS JUNC TURE THAT THERE IS NO RESTRICTION IN S.80-IB THAT AN EXISTING BUSINESS UNIT CANNOT SET U P NEW UNDERTAKINGS TO CARRY ON THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TR ANSPORTATION OF FOOD GRAINS. THE GODOWNS WHERE THIS BUSINESS IS TO BE CARRIED ON NEE D 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 SUC H NEW UNDERTAKING SET UP BY IT. IT APPEARS FROM THE IMPUGNED ORDERS THAT THE LOWER AUT HORITIES HAVE PROCEEDED. AS IF THE ASSESSEE'S CLAIM FOR RELIEF UNDER S.80IB(11A) I S IN RESPECT OF EXISTING GODOWNS, AND NOT MERELY IN RESPECT OF THE NEW ONES STARTED A FTER 2001. IT IS SO BECAUSE THE PERIOD OF FIVE YEARS WAS SOUGHT TO BE COUNTED FROM THE YEAR OF INCORPORATION OF THE ASSESSEE, VIZ. 1958; AND ALSO OBSERVING THAT NO NEW ACTIVITY WAS TAKEN UP AFTER 2001. SINCE EACH NEW GODOWN IS AN UNDERTAKING IN IT SELF, ASSESSEE IS ENTITLED FOR SUCH RELIEF UNDER S.80IB(11A) FOR FIVE YEARS IN RES PECT OF EACH SUCH UNDERTAKING FROM THE 'INITIAL YEAR' IN WHICH IT WAS SET UP. 13. AS FOR THE ELIGIBILITY OF THE ACTIVITY OF THE ASSES SEE TO THE RELIEF UNDER S.80IB(11A), IT IS WORTHWHILE TO REFER TO THE INTEN TION 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 RESPEC T OF PROFITS DERIVED FROM A NEW 10 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 INDUSTRIAL UNDERTAKING OR A SHIP OR THE BUSINESS OF A HOTEL. TO ADDRESS THE COUNTRY'S BASIC CONCERNS RELATING TO ENHANCED FOODSECURITY AN D 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 GR AIN 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 PROVID ING THAT ANY UNDERTAKING ENGAGED IN INTEGRATED BULK HANDLING, STORAGE AND TR ANSPORTATION 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 APPLICA BLE TO INCOME DERIVED FROM THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSP ORTATION OF FOODGRAINS. A PERUSAL OF THE ACTIVITIES OF THE ASSESSEE IN ASSOCIATION WI TH THE FOOD CORPORATION OF INDIA, AS DEMONSTRATED BY THE LEARNED COUNSEL FOR THE ASSE SSEE IN THE PAPER-BOOK FILED, CLEARLY INDICATES IT IS ENGAGED IN THE INTEGRATED B USINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS. THERE IS NO DISPUTE THE ASSESSEE'S MAIN BUSINESS IS TO PROVIDE WAREHOUSING FACILITY FOR FOODGRAINS. THE AS SESSEE HAS BEEN CONSTITUTED UNDER WITH THESE VERY OBJECTS IN VIEW. MERELY BECAU SE THE ASSESSEE HAS ENGAGED OUTSIDERS FOR TRANSPORTATION OR LEASED OUT SOME OF THE GODOWNS FOR STORAGE DOES NOT MEAN THAT THE ASSESSEE IS NOT ENGAGED IN THE IN TEGRATED BUSINESS OF HANDLING AND STORAGE OF FOODGRAINS. IN THE COURSE OF THEIR I NTEGRATED BUSINESS, THE ASSESSEE HAD COLLECTED RENTALS FOR STORING FOODGRAINS AND HA D ENGAGED OUTSIDERS TO TRANSPORT THE FOOD GRAINS. FURTHER, THE FACT THAT THE ASSESSE E HAD BEEN CARRYING ON SIMILAR BUSINESS WOULD NOT DISENTITLE THE ASSESSEE FROM CLA IMING RELIEF U/S 80IB(11 A), IN RESPECT OF THE NEW WAREHOUSES PUT TO USE AFTER THE INTRODUCTION OF SEC 80IB(11A) 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 O F NEW UNDERTAKINGS SET UP BY THE ASSESSEE BY WAY OF EXPANSION OF THE EXISTING UN DERTAKINGS, AS HELD BY THE APEX COURT IN THE CASES OF TEXTILE MACHINERY CORPN. LTD. V. CIT [19771 107ITR195(SC) AND CIT V. INDIAN ALUMINIUM CO. LTD. [19771 108 ITR367 (SC) . THE NUMBER OF NEW GODOWNS OPERATED BY THE ASSESSEE AFTER 1.4.2001 CLE ARLY SHOWS THAT THERE WAS SUBSTANTIAL EXPANSION OF THE ASSESSEE'S BUSINESS OF HANDLING, STORING AND TRANSPORTATION OF FOOD GRAINS, WHICH OBVIOUSLY COUL D HAVE BEEN DONE ONLY BE UNDERTAKING NEW WAREHOUSING FACILITIES YEAR AFTER Y EAR 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 DEDU CTION U/S 80IB(11 A), IN RESPECT OF INCOME DERIVED FROM THE NEW UNDERTAKINGS, WAREHOUSE S, SET UP AND OPERATED FROM 1.4.2001 FOR STORAGE, HANDLING AND TRANSPORTATION O F FOOD GRAINS. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDERS OF THE CIT(A) ON THIS ISSUE FOR ALL THE THREE YEARS 11 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 AND SET ASIDE THE MATTER TO THE FILE OF THE ASSESSI NG OFFICER, WITH A DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDE R S.80IA(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 HEARI NG TO THE ASSESSEE. 14. ASSESSEE'S GROUNDS ON THE ISSUE OF DEDUCTION UNDER S.80IA(11 A) ARE ALLOWED FOR STATISTICAL PURPOSES. 24. WE FIND THAT IN THE PRESENT CASE, THE MAIN REAS ONS FOR DISALLOWANCE ARE ALMOST SIMILAR TO THAT IN THE CASE OF A.P. STATE WAREHOUSING CORPORAT ION (SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THE SAID DECISION, WE RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO VERIFY THE CLAIM FOR DEDUCTION U/S. 80 IB IN RESPECT OF NEW UNDERTAKING SET UP ON OR AFTER 1.4.2001 AND ALLOW THE DEDUCTION IN ACCORDANC E WITH LAW AND AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASESSEE. HENCE, ASSESSEES GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 25. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. 25. IN ITA NO.332/CTK/.2010, ITA NO.396/CTK/2011 & ITA NO.3 05/CTK/2012 FOR THE ASSESSMENT YEARS 2007-08, 2005-06 AND 2008- 09, ASSESSEE HAS TAKEN SIMILAR GROUND TAKEN IN ASSESSMENT YEAR 2006-07 I.E. DENIA L OF DEDUCTION UNDER SECTION 80-IB(11A) OF THE I.T.ACT FOR ELIGIBLE BUSINESS OF INTEGRATED BU SINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOODS. 26. THIS ISSUE CAME UP FOR CONSIDERATION BEFORE US FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.331/CTK/2010 VIDE GROUND NO.3, WHEREIN, WE HAVE RESTORED THE MATTER TO THE FILE OF THE AO TO VERIFY THE CLAIM FOR DEDUCTION U/S. 80-IB IN RES PECT OF NEW UNDERTAKING SET UP ON OR AFTER 1.4.2001 AND ALLOW THE DEDUCTION IN ACCORDANCE WITH LAW FOLLOWING THE DECISION OF HYDERABAD BENCH OF ITAT IN THE CASE OF A.P. STATE WAREHOUSING CORPORATION (SUPRA). HENCE, THIS GROUND FOR THESE ASSESSMENT YEARS ALSO ARE RESTORED TO THE FILE OF THE AO WITH SIMILAR DIRECTION. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 12 I .T.A. NO.330/CTK/2010 : ASSESSMENT YEAR: 2004-05 I.T.A. NO.331/CTK/2010 : ASSESSMENT YEAR: 2006-07 I .T.A. NO.396/CTK/2011 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.332/CTK/2010 : ASSESSMENT YEAR: 2005-06 I.T.A. NO.305/CTK/2012 : ASSESSMENT YEAR: 2008-09 28. IN THE RESULT, THESE APPEALS ARE ALLOWED FOR ST ATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 22 ND OCTOBER, 2014. SD/- SD/- ( GEORGE MATHAN) (S.V.MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, CUTTACK 22 /10/2014 B.K.PARIDA, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT: ORISSA STATE WAREHOUSING CORPN., PLO T NO.2, CUTTACK ROAD, BHUBANESWAR 2. THE RESPONDENT: ACIT, CIRCLE 1(1), BHUBANESWAR 3. THE CIT, BHUBANESWAR 4. THE CIT(A),BHUBANESWAR 5. DR, CUTTACK BENCH 6. GUARD FILE. TRUE COPY// BY ORDER