Orissa State Warehousing Corporation, Bhubaneswar V. DCIT, Circle-1(1), Bhubaneswar, Bhubaneswar

ITA 346/CTK/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5392 (ITAT-CUTTACK)
• Duration Of Justice: 3 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 02-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUNAL SINGH
• Assessee Lawyers: B K MOHAPATRA
• Section: 80IB

Judgement Text

1 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 ORISSA STATE WAREHOUSING CORPORATION, PLOT NO.2, CUTTACK ROAD, BHUBANESWAR. VS. DCIT, CIRCLE - 1(1), BHUBANESWAR PAN/GIR NO. AAACO 4742 N (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI B.K.MOHAPATRA, AR REVENUE BY : SHRI KUNAL SINGH, CIT DR DATE OF HEARING : 30/08 / 2017 DATE OF PRONOUNCEMENT : 20 /09 / 2017 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 1, BHUBANESWAR DATED 11.6.2014 FOR THE ASSESSMENT YEAR 2010 - 2011. 2. GROUND NOS.1 & 2 READ AS UNDER: 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 PREJUD ICES, SURMISES, GUESSES AND MIS UNDERSTANDING OF THE FACT AND LAW AND IS CONTRARY TO THE EVIDENCE ON RECORD. 3. THESE GROUNDS ARE GENERAL IN NATURE AND HENCE, REQUIRE NO SEPARATE ADJUDICATION BY US. 2 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 4. GROUND NO.3 OF THE APPEAL READS AS UNDER: THAT THE LD CIT(A) HAS ERRED IN CON FIRMING THE DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S.80IB OF THE ACT ON THE CONTENTION THAT THE NEW WAREHOUSES ARE MERE EXTENSION OR EXPANSION OF THE EXISTING BUSINESS AND SHOULD NOT BE CONSIDERED AS AN UNDERTAKING FOR THE PURPOSE OF THE PROVISIONS OF SECTION 80 - IB. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS AND OTHER MATERIALS. MOSTLY, THE COMPANY HANDLES THE FOOD GRAINS ON BE HALF OF M/S. FOOD CORPORATION OF INDIA (FCI). TILL ASSESSMENT YEAR 2002 - 03, THE ASSESSEE WAS CLAIMING EXEMPTION U/S. 10(29) OF THE ACT UNTIL THE REMOVAL OF SAID EXEMPTION. DURING THE FINANCIAL YEAR 2002 - 03, THE ASSESSEE WAS IDENTIFIED AS A NODAL AGENCY FOR CONSTRUCTION OF 2 .00 LACS MT ADDITIONAL STORAGE CAPACITY IN ORISSA AND M/S. FCI STOOD GUARANTOR FOR THE USE OF ABOVE ADDITIONAL CAPACITY FOR 7 YEARS. ACCORD INGLY, THE ASSESSEE UNDERTOOK THE CONSTRUCTION OF ADDITIONAL GODOWNS AND COMPLETED CONSTRUCTION OF ADDITIONAL STORAG E CAPACITY OF 1.825 LACS MT DURING THE FINANCIAL YEAR 2002 - 03 AND OFFERED THE THE SAME FOR COMMERCIAL USE. IN REGARD TO SUCH NEWLY CONST RUCTED WAREHOUSES, THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SUB - SECTION (11 A) OF SECTION 80 - IB OF THE ACT. THE ASSESSIN G OFFICER WAS OF THE VIEW THAT IN THIS CASE THERE HAS BEEN MERE CONSTRUCTION OF ADDITIONAL WAREHOUSES ENHANCING THE CAPACITY. IT CANNOT BE TREATED AS A NEW UNDERTAKING MAKING IT ELIGIBLE FOR DEDUCTION U/S.80 - IB. TO SUPPORT HIS VIEW, THE ASSESSING OFFICER RELIED 3 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 UPON THE DECISION OF THE SUPREME COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. V. CIT (107 ITR 195) WHER E IT WAS HELD THAT THE TRUE TESTS OF A NEW (INDUSTRIAL) UNDERTAKING IS WHETHER A NEW OR AN IDENTIFIABLE UNDERTAKING SEPARATE AND DISTIN CT FROM THE EXISTING BUSINESS COMES INTO BEING. IT SHOULD NOT BE A CASE OF SUBSTANTIALLY THE SAME PERSON CARRYING ON SUBSTAN TIALLY THE SAME BUSINESS. THE ASSESSING OFFICER OBSERVED T HAT IN THE CASE OF THE ASSESSEE , THE P&L ACCOUNT OF THE ENTIRE BUSINESS WAS A CONSOLIDATED ONE AND THERE IS NO BIFURCATION FOR THE NEW UNIT FOR WHICH DEDUCTION U/S.80 - IB HAS BEEN CLAIMED. THE DEDUCTION HAS BEEN WORKED OUT ON APPORTIONATE METHOD. THERE IS ABSOLUTELY NO DIFFERENCE IN THE MANNER IN WHICH BUSINESS WAS CARRIED ON B Y ADDITION TO THE EXISTING CAPACITY IN THE FORM OF N EW WAREHOUSES. THEREFORE, THE ASSESSING OFFICER HELD THAT NO NEW UNDERTAKING HAS COME INTO EXISTENCE AND THE UNDERTAKING IN QUESTION IS AN OLD ONE WHICH HAS GONE FOR EXTENSION O F OLD BUSINESS AND, THEREFO RE, DISALLOWED THE CLAIM OF DEDUCTION U/S.80 IB OF THE ACT. 6. BEFORE THE CIT(A), THE ASSESSEE FILED A WRITTEN SUBMISSION, WHEREIN, IT IS STATED THAT THE ASSESSEE IS AN ELIGIBLE UNDERTAKING WHICH IS DERIVING PROFIT FROM INTEGRATED BUSINESS OF HANDLING, STO RAGE AND TRANSPORTATION OF FOOD GRAINS. THE ELIGIBLE UNDERTAKING IS REQUIRED TO BEGIN OPERATION OF SUCH BUSINESS ON OR AFTER 1.4.2001. IN THE CASE OF THE ASSESSEE, THE ENTIRE CAPACITY OF MINI GODOWNS MEASURING 1,98,500 MT IS TO BE CONSIDERED AS NEW UNDERTA KING AS IT CONFIRMS TO THE FOLLOWING CONDITIONS: 4 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 I) NEW GODOWNS HAVE BEEN CREATED TO CATER TO THE NEED OF WAREHOUSING IN THE STATE . II) THE NEW GODOWNS ARE EXCLUSIVELY USED FOR STORAGE OF FOOD GRAINS PURSUANT TO THE 7 YEARS GUARANTEE PROVIDED BY FOOD CORP ORATION OF INDIA. III) THE NEW GODOWNS HAVE BEEN CREATED PURSUANT TO THE 'GRAMIN BHANDARAN YOJANA' OF THE GOVT, OF INDIA. IV) THE NEW GODOWNS HAVE BEEN CREATED AS COMPLETELY NEW STRUCTURES WITHOUT ANY RESTRUCTURING / RELOCATION OF ANY OF THE EXISTING GODOWNS. V) THE NEW GODOWNS HAVE BEEN CREATED BY EMPLOYING FRESH CAPITAL BY AVAILING LOAN FACILITIES FROM NATIONALIZED BANKS PURSUANT TO THE ABOVE SAID SCHEMES OF GOVT, OF INDIA. VI) THE NEW GODOWNS HAVE BEEN PUT TO USE AFTER THE SPECIFIED DATE IN THE ACT I.E. 01.04.2001. VII) THE GODOWNS HAVE BEEN UTILIZED FOR THE PURPOSE OF THE ELIGIBLE BUSINESS AS SPECIFIED UNDER THE PROVISIONS OF SECTION 80 IB (11A) I.E. 'INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRA INS'. IT WAS SUBMITTE D THAT THE ASSESSEE HAS MAINTAINED SEPARATE RECORDS IN RESPECT OF INCOME GENERATED FROM THE NEW GODOWNS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE ALSO PRODUCED PROFIT & LOSS ACCOUNT AND BALANCE SHEET FOR THE NEW BUSINESS BEFORE THE A SSESSING OFFICER AS A PART OF THE REPORT IN FORM - IOCCB. THE ASSESSEE RELIED UPON THE DECISION IN THE CASE OF CIT V. BHAGEERATHA ENGINEERING LTD. (1992), 193 ITR 674 (KER.) WHICH WAS AFFIRMED BY THE SUPREME COURT IN 199 ITR 12, WHEREIN THE EXPRESSION 'IND USTRIAL UNDERTAKING' IN SECTION 80 - J HAS BEEN INTERPRETED TO MEAN ANY VENTURE OR ENTERPRISE WHICH A PERSON UNDERTAKES TO DO AND WHICH HAS RELATION TO SOME INDUSTRY OR HAS SOME INDUSTRIAL 5 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 CONSEQUENC ES. THE ASSESSEE ALSO RELIED UPON THE DECISION IN THE CASE OF CIT V. ASSOCIATED CEMENT COMPANIES LTD., (1979) 118 ITR 406 (BOM.). 7. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING DEDUCTION U/S.80 IB OF THE ACT FOLLOWING THE DECISION OF HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2006 - 07 IN THE CASE OF THE ASSESSEE, WHICH IS EXTRACTED BELOW: 'THE UNDISPUTED FACT OF THE CASE IS THAT THE APPELLANT CORPORATION IS AN EXISTING ENTITY ENGAGED IN THE BUSINESS OF HANDLING, STORAGE AND TR ANSPORTATION OF FOOD GRAINS AND OTHER MATERIALS, AS PAR DETAILS PROVIDED DURING THE APPELLATE PROCEEDINGS, IT HAD, 1 ,84,550 MT EXISTING GODOWN CAPACITY AT 49 DIFFERENT PLACES - IN ORISSA. TO THE ABOVE, IT ADDED GODOWN CAPACITY OF 1,98,500 MT IN 17 OF THE EXISTING 49 PLACES UNDER GRAMIN BHANDARAN YOJANA, THE USE OF WHICH WAS GUARANTEED BY FCI FOR 7 YEARS. THE ISSUE TO BE DECIDED HERE IS WHETHER THE ABOVE ADDITIONAL GODOWNS WOULD CONSTITUTE AN UNDERTAKING COMMENCING BUSINESS AFTER 1.4.2001 OR MERELY EXPANSION OF EXISTING WAREHOUSING CAPACITY. TO BE ELIGIBLE FOR DEDUCTION U/S.80 - IB (11 A), THE ADDITION AL GODOWNS OPERATIONALIZED DURING THE PREVIOUS YEAR HAVE TO CONSTITUTE A NEW UNDERTAKING DIFFERENT FROM THE EXISTING UNDERTAKING/UNDERTAKINGS. WHILE IT IS CORRECT THAT THE COMPANY AND UNDERTAKING ARE DIFFERENT AND THE NEW UNDERTAKING MAY CARRY OUT THE EXIS TING BUSINESS, IT HAS TO BE NECESSARILY A SEPARATE UNDERTAKING DISTINGUISHABLE FROM THE EXISTING SET UP. THE AO HAS RIGHTLY OBSERVED THAT EVERY NEW GODOWN SET UP BY THE APPELLANT WOULD NOT RESULT IN A NEW UNDERTAKING. THE MEANING OF THE WORD 'UNDERTAKING' CAN BE UNDERSTOOD FROM FOLLOWING JUDICIAL PRONOUNCEMENTS: I) THE WORD 'UNDERTAKING' MUST BE DEFINED AS ANY BUSINESS OR ANY WORK OR PROJECT WHICH ONE ENGAGES IN OR ATTEMPTS AS AN ENTERPRISE ANALOGOUS TO BUSINESS OR TRADE. SECRETARY, MADRAS GYMKHANA CLUB, AIR 1968 SC 54, 563. I I) THE EXPRESSION 'UNDERTAKING' MEANS A SEPARATE AND DISTINCT BUSINESS OR INDUSTRIAL ACTIVITY AND DOES NOT COMPREHEND AN INFINITESIMALLY SMALL PART OF MANUFACTURING 6 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 PROCESS. PAINTING SECTION OF A FACTORY IS NOT 'UNDERTAKING'. A. S. PRODUCTION AGENCIES V. IND. TRIBUNAL, HARYANA, AIR 1979 SC 170, 180. THEREFORE, A NEW , UNDERTAKING HAS TO HAVE A SEPARATE IDENTITY AND DISTINGUISHABLE FROM THE EXISTING BUSINESS. IN THE CASE OF THE APPELLANT CORPORATION, WHAT H AS HAPPENED IS CONSTRUCTION OF NEW GODOWNS AT THE SAME PLACES WHERE THERE WERE EXISTING GODOWNS. THE MANAGEMENT AND FINANCIAL CONTROL AT THE PLACES WHERE THE - GODOWNS WERE ADDED AND AT THE CENTRAL LEVEL REMAINED UNCHANGED. NOTHING HAS HAPPENED WHEREBY THE EXISTING OF A NEW UNDERTAKING CAN BE SEEN AND IDENTIFIED. AS ALREADY OBSERVED, IT WILL NOT BE CORRECT TO TREAT EVERY NEW GODOWN AS A NEW UNDERTAKING IN ITSELF. THIS WILL DILUTE THE MEANING OF 'UNDERTAKING' TO INFINITESIMALLY SMALL PART OF THE BUSINES S ACTIVITY. THE AO HAS ALREADY OBSERVED ON ACCOUNTING ASPECTS WHERE THE EXPENSES HAVE BEEN EARMARKED ON PROPORTIONATE METHOD. THEREFORE, THE OBVIOUS NATURE OF THE TRANSACTION IS THE EXPANSION OF THE EXISTING WAREHOUSING CAPACITY IN RESPONSE TO A CENTRAL GOVT, SCHEME AND IT HAS TO BE ACCEPTED AS :SUCH. A FORCED INTERPRETATION OF THE EXPANSION OF EXISTING CAPACITY AS COMING INTO EXISTENCE A NEW UNDERTAKING WITH EVERYTHING ELSE REMAINING UNCHANGED, , IS NOT CONSISTENT WITH THE FACTS OF THE CASE OR LA W ON THE SUBJECT. THE DENIAL OF DEDUCTION BY THE AO U/S.80 - IB (HA) IS UPHELD' 8. AT THE TIME OF HEARING, LD A.R. OF THE ASSESSEE SUBMITTED THAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2004 - 05 TO 2008 - 09, DEDUCTION U/S.80 IB(11A) WAS DISALLOWED B Y THE ASSESSING OFFICER AND CONFIRMED IN APPEAL BY THE CIT(A). THE MATTER WAS CARRIED IN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL IN ITS ORDER DATED 22.10.2014 IN ITA NOS.330, 331 & 332/CTK/2010 FOR THE ASSESSMENT YEARS 2004 - 05, 2006 - 07 AND 200 7 - 08 AND ITA NO.396/CTK/2011 FOR THE ASSESSMENT YE A R 2005 - 06 AND ITA NO.305/CTK/2012 FOR ASSESSMENT YEAR 2008 - 09 HAS DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM FOR DEDUCTION U/S. 80IB IN RESPECT OF NEW UNDERTAKING SET UP ON OR AFTER 1.4.2001 AND ALLOW DEDU CTION IN ACCORDANCE WITH LAW TO THE ASSESSEE AND, THEREFORE, FOLLOWING THE SAME, 7 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 DEDUCTION U/S.80IB(11A) SHOULD BE ALLOWED FOR THE YEAR UNDER APPEAL. HE SUBMITTED THAT FOR THE ASSESSMENT YEAR 2011 - 2012, THE ASSESSING OFFICER HAS ALLOWED DEDUCTION U/S.80I B(11A) OF THE ACT FOLLOWING THE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 2004 - 05 TO 2008 - 09 (SUPRA), WHICH HAS BEEN UPHELD BY THE CIT(A) IN HIS ORDER DATED 4.10.2016. HE FURTHER SUBMITTED THAT FOR THE ASSESSMENT YEAR 2009 - 2010, THE ASSESSING OFFI CER HAS ALLOWED DEDUCTION TO THE ASSESSEE FOLLOWING THE DECISION OF THE TRIBUNAL DATED 2.2.2015 IN ITA NO.553/CTK/2013. 9. LD D.R. CONCEDED TO THE ABOVE SUBMISSION OF LD A.R OF THE ASSESSEE. 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE ORDE RS OF LOWER AUTHORITIES AS WELL AS THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2004 - 05 TO 2008 - 09 (SUPRA) , WE FIND THAT THE TRIBUNAL HAS ALLOWED THE DEDUCTION U/S. 80 IB(11A) OF THE ACT TO THE ASSESSEE BY OBSERVING AS UNDER : 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 BEEN HELD AS UNDER: 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 ASSESS EE HAS TAKEN UP ANY NEW ACTIVITY OF HANDLING AND TRANSPORTATION OF FOOD GRAINS SUBSEQUENT TO 2002, ASSESSEE IS NOT ENTITLED FOR RELIEF UNDER 8 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 S.80IB(11 A), SINCE RELIEF UNDER THAT SECTION IS AVAILABLE ONLY FOR FIVE YEARS FROM 'INITIAL YEAR', VIZ. EITHER FRO M 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 GODOWNS 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 UNDERT AKINGS 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 I N 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 UNDERTAKING SET UP BY IT. IT APPEARS FROM THE IMPUGNED ORDERS THAT THE LOWER AUTHORITIES HAVE PROCEEDED. AS IF T HE 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 ASSES SEE, 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 EX ISTING 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 RE LATING 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 9 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 EFFIC IENCY 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 I NTEGRATED 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 FOODGRAINS. 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 FOODGRAINS. THE ASSESSEE HAS BEEN CONSTITUTED UNDER WITH THESE VERY OBJECTS I N VIEW. MERELY BECAUSE 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 INTEGRATED BUSINESS OF HANDLING AND STORAGE OF FOODGRAINS. IN THE COURSE OF THE IR INTEGRATED BUSINESS, THE ASSESSEE HAD COLLECTED RENTALS FOR STORING FOODGRAINS 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 CLAIM ING 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 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 [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 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 DEDUCTI ON UNDER S.80IB(11A) OF THE ACT. IN OUR OPINION THEREFORE, THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB(11 A), 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.80IA( 11A) OF THE ACT IN 10 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 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.80IA(11 A) ARE ALLOWED FOR STATISTICAL PURPOSES. 24. WE FIND THAT IN THE PRESENT CASE, THE MAIN REASONS FOR DISALLOWANCE ARE ALMOST SIMILAR TO THAT IN THE CASE OF A.P. STATE WAREHOUSING CORPORATION (SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THE SAID DECISION, WE RESTORE THIS MATTE R TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO VERIFY THE CLAIM FOR DEDUCTION U/S. 80IB IN RESPECT OF NEW UNDERTAKING SET UP ON OR AFTER 1.4.2001 AND ALLOW THE DEDUCTION IN ACCORDANCE WITH LAW AND AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HE ARD TO THE ASESSEE. HENCE, ASSESSEES GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 11. WE FIND THAT THE FACTS IN THE PRESENT ASSESSMENT YEAR IS SIMILAR TO THE FACTS FOR THE ASSESSMENT YEARS 2004 - 05 TO 2010 - 2011 (SUPRA) AND RESPECTFULLY FOLLOWING THE DEC ISION OF THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE(SUPRA), WE SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S. 80IB(11A) OF THE ACT TO THE ASSESSEE AND ALLOW THIS GROUND OF APPEAL. 12. GROUND NO.4 OF THE APPEAL READS AS UNDER: THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF LIABILITIES DUE TO DISALLOWANCE OF INSURANCE CLAIM OF RS.34,22,860/ - MADE BY THE AO ON THE BASIS OF AUDIT REPORT OF THE ASSESSEE AND WITHOUT CONSIDERING THE FACT THAT THE AMOUNT IS UNDER RECONCILIATI ON PENDING WHICH NO ADJUSTMENT IS MADE IN THE BOOKS OF ACCOUNT OF THE APPELLANT CORPORATION. 13. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER NOTICED THAT AT SL. NO.5 OF THE ANNEXURE - A TO AUDITORS REPORT, THE AUDITOR HAS MENTIONED THAT LI ABILITIES DUE TO DISALLOWANCE OF INSURANCE CLAIM OF RS.34,22,860/ - IN SCHEDULE - I SHOULD BE WRITTEN BACK . THE ASSESSING 11 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 OFFICER REQUIRED THE ASSESSEE TO EXPLAIN WHY THE ABOVE AMOUNT OF RS.34,22,860/ - SHALL NOT BE DISALLOWED. BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT RS.34,22,860/ - REPRESENTS LIABILITY DUE TO DISALLOWANCE OF INSURANCE CLAIM WHICH IS STILL UNDER RECONCILIATION AND STANDS UNADJUSTED IN THE ACCOUNTS OF THE ASSESSEE. THE ABOVE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTABLE TO T HE ASSESSING OFFICER AND, THEREFORE, HE ADDED THE SUM OF RS.34,22,860/ - AS CESSATION OF LIABILITY U/S.41(1) OF THE ACT IN THE HANDS OF THE ASSESSEE. 14. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE OUTSTANDING LIABILITY ON ACCOUNT OF INSURA NCE CLAIMS IS BROUGHT FORWARD BALANCE FROM THE EARLIER YEARS . THE SAID AMOUNT REPRESENTS LESS/NON - SETTLED AMOUNTS BY THE INSURANCE COMPANY WHICH REMAINS PAYABLE TO THE DEPOSITORS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 15. THE CIT(A) CONFIRMED THE ADDITI ON OF RS.34,22,860/ - OBSERVING THAT THE AMOUNTS OF INSURANCE CLAIM NOW OUTSTANDING HAVE ALREADY BEEN CLAIMED AS EXPENDITURE IN THE EARLIER YEARS. 16. BEFORE US LD A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE SUBMITTED THAT AS PER THE PRACTICE FOLLOWED BY THE ASSESSEE IN THE EVENT OF SHORTAGE FOUND IN GODOWN THE ASSESSEE LODGES CLAIMS WITH INSURANCE COMPANY FOR ITS SETTLEMENT. AFTER THE CLAIMS ARE SETTLED, ADJUSTMENTS ARE MADE IN INSURANCE CLAIMS RECEIVABLE ACCOUNT AND THE LESS/UNS ETTLED AMOUNT IS CREDITED TO LIABILITIES DUE TO DISALLOWANCE OF 12 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 INSURANCE CLAIMS. THE AMOUNT OF RS.34,22,859.72 REPRESENTS LESS/UNSETTLED AMOUNTS BY THE INSURANCE COMPANY, WHICH REMAINS P A YABLE IN THE BOOKS OF ACCOUNT OF THE CORPORATION TO THE DEPOSITORS . IT WAS SUBMITTED THAT THE FOLLOWING 15 OUTSTANDING ENTRIES ARE THE INSURANCE CLAIMS: SL NO. NAME OF THE WAREHOUSE NATURE OF CLAIM CLAIM PREFERRED CLAIM SETTLED CLAIM DISALLOWED 1 BERHAMPUR (1999 - 2000) FLOOD 1,057,840.00 360,611.00 697,229.00 2 JATNI (1999 - 2000) FLOOD 3,459,168.00 1,481,104.00 1,978,064.00 3 JAGATSINGHPUR (1999 - 2000) FLOOD 866,531.00 537,756.00 328,775.00 4 BHADRAK (1999 - 2000) FLOOD 1,116,675.40 776,841.00 339,834.40 5 BERHAMPUR (1999 - 2000) CYCLONE 483,160.00 154,150.00 329,010.00 6 BHADRAK (1998 - 1999) FLOOD ! 411,480.95 177,029.00 234,451.95 7 PHULBANI (1993 - 1994) FIDELITY 327,496.00 218,702.00 108,794.00 8 BERHAMPUR (1990 - 1991) FLOOD 29,644.00 - 29,644.00 9 CUTTACK (1993 - 1994) FLOOD 382,206.00 194,135.00 188,071.00 10 JATNI (1991 - 1992) BURGLARY 26,274.53 - 26,274.53 11 JAGATPUR (1991 - 1992) BURGLARY 6,000.00 2,740.00 3,260.00 12 BERHAMPUR (1992 - 1993) BURGLARY 8,400.00 176.00 8,224.00 ' 13 JATNI (1991 - 1992) BURGLARY 11,000.00 - 11,000.00 14 BOLANGIR BURGLARY 25,800.00 - 25,800.00 15 PARADEEP TRANSIT 606,438.80 34,868.89 571,569.91 TOTAL : 8,818,114.68 3,938,112.89 4,880,001.79 LESS: LIABILITY REDUCED IN 2001 - 2002 1,457,142.07 BALANCE AS ON 31.03.2005 3,422,859.72 17. LD D.R. SUPPORTED THE ORDER OF THE CIT(A). 18. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER MADE ADDITION OF RS.34,22,860/ - U/S. 41(1) OF THE ACT ON ACCOUNT OF CESSATION OF LIABILITY, WHICH WAS CONFIRMED IN APPEAL BY THE 13 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 CIT(A). THE CONTENTION OF THE ASSESSEE IS THAT IT FOLLOWS THE PRACTICE WHEREBY SH ORTAGE FOUND IN THE GODOWN OF THE CORPORATION IS CLAIMED FROM INSURANCE COMPANY BY LODGING THE CLAIM. WHEN THE CLAIM IS SETTLED, THE ASSESSEE CREDITS THE INSURANCE CLAIM RECE IV ABLE ACCOUNT FOR THE AMOUNT RECEIVED AND FOR THE BALANCE AMOUNT SHORT RECEIVED AGAINST THE INSURANCE CLAIM IS PUT UNDER THE HEAD LIABILITIES DUE TO DISALLOWANCE OF INSURANCE CLAIM. THE AMOUNT OF RS.34,22,859.72 REPRESENTS LESS/UNSETTLED AMOUNTS BY THE INSURANCE COMPANY WHICH REMAINS PAYABLE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HENCE, IT WAS HIS SUBMISSION THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 19. WE FIND FROM THE ORDER OF THE ASSESSING OFFICER THAT WHILE MAKING ADDITION, IT HAS BEEN STATED THAT THE AUDITORS IN THEIR REPORT HAVE STATED THAT THE LIABIL ITY DUE TO DISALLOWANCE OF INSURANCE CLAIM OF RS.34,22,860/ - SHOULD BE WRITTEN BACK. THUS, IT IS SEEN THAT THE ASSESSING OFFICER AFTER CARRYING OUT VERIFICATION OF FACTS OF THE CASE HAS NOT BROUGHT THE ENTIRE MATERIALS ON RECORD BEFORE MAKING THE ADDITIO N. THEREFORE, IN OUR CONSIDERED VIEW, THE ISSUE REQUIRES TO BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION OF THE SAME AFRESH. WE ORDER ACCORDINGLY. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER SHALL ALLOW REASONABLE AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE ADJUDICATING THE ISSUE AFRESH. WITH THESE DIRECTIONS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 14 ITA NO.346/CTK/2014 ASSESSMENT YEAR : 2010 - 2011 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 20 /09 /2017. SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) J UDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 20 /09 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : ORISSA STATE WAREHOUSING CORPORATION, PLOT NO.2, CUTTACK ROAD, BHUBANESWAR 2. THE RESPONDENT. DCIT, CIRCLE - 1(1), BHUBANESWAR 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//