Asst. CIT, Circle 11(1), Pune V. M/s. Maharashtra State Warehousing Corporation, Pune

ITA 968/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1844 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R G NAHAR
• Keywords: Capital asset; Opportunity of being heard; Capital receipt
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 819 /PN/2013 %' ( ')( / ASSESSMENT YEAR : 2008-09 MAHARASHTRA STATE WAREHOUSING CORPORATION, M/S. MZSK & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, BUSINESS BAY, PLOT NO. 84, WELLESLEY ROAD, NEAR RTO, PUNE 411001 PAN : AABCM3988M ....... / APPELLANT ' / V/S. DY. COMMISSIONER OF INCOME TAX, CIRCLE 11(2), PUNE / RESPONDENT / ITA NO. 820/PN/2013 %' ( ')( / ASSESSMENT YEAR : 2009-10 MAHARASHTRA STATE WAREHOUSING CORPORATION, M/S. MZSK & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, BUSINESS BAY, PLOT NO. 84, WELLESLEY ROAD, NEAR RTO, PUNE 411001 PAN : AABCM3988M ....... / APPELLANT ' / V/S. ADDL. COMMISSIONER OF INCOME TAX, RANGE 11, PUNE / RESPONDENT 2 ITA NOS. 819, 820, 968 & 969/PN/2013 / ITA NOS. 968 & 969/PN/2013 %' ( ')( / ASSESSMENT YEARS : 2008-09 & 2009-10 THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 11(1), PUNE ....... / APPELLANT ' / V/S. M/S. MAHARASHTRA STATE WAREHOUSING CORPORATION, 583/13, VAKHAR MAHAMANDAL MARKET YARD, GULTEKDI, PUNE 411037 PAN : AABCM3988M / RESPONDENT ASSESSEE BY : SHRI R.G. NAHAR REVENUE BY : SHRI ACHAL SHARMA / DATE OF HEARING : 10-03-2016 / DATE OF PRONOUNCEMENT : 09-05-2016 * / ORDER PER VIKAS AWASTHY, JM : THESE CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AN D THE REVENUE AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 01-02-2013 FOR THE ASSESSMENT YEAR 2008-0 9 AND SEPARATE ORDER OF EVEN DATE FOR ASSESSMENT YEAR 2009-10. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A STATE GOVT. UNDERTAKING ESTABLISHED UNDER THE WAREHOUSING CORPORATIONS ACT, 1962 WITH THE MAIN OBJECT OF PROVIDING WAREHOUSING FACILITIES PRIMARILY FOR AGRICULTURAL PRODUCE, SEEDS , FERTILIZERS ETC. DURING THE PERIOD RELEVANT TO THE ASSESSM ENT YEARS 3 ITA NOS. 819, 820, 968 & 969/PN/2013 UNDER APPEAL THE ASSESSEE DERIVED INCOME FROM WAREHOUSIN G CHARGES, FUMIGATION CHARGES, HANDLING CHARGES, WEIGHTMENT CHARGES, SU PERVISION CHARGES, EDI SERVICE CHARGES, WEIGHBRIDGE CHARGES AND FRO M DISINFECTION EXTENSION SERVICE SCHEME, ETC. FOR PROVIDING WA REHOUSING SERVICES THE ASSESSEE CLAIMED DEDUCTION U/S. 80IB(11A) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER INTER ALIA DISALLOWED THE CLAIM OF DEDUCTION MA DE BY THE ASSESSEE U/S. 80IB(11A) OF THE ACT. SIMILARLY, IN THE A SSESSMENT YEAR 2009-10 THE ASSESSING OFFICER APART FROM DISALLOWING DE DUCTION U/S. 80IB(11A), DISALLOWED DEDUCTION U/S. 80IA(4) OF THE ACT CLAIMED BY THE ASSESSEE. AGGRIEVED BY THE ASSESSMENT ORDERS FOR THE RESPECTIVE ASSESSMENT YEARS, THE ASSESSEE FILED APPEALS BEFORE THE COMMISSIONER O F INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDERS FOR THE RESPECTIVE ASSESSMENT YEARS, U PHELD THE FINDINGS OF ASSESSING OFFICER IN REJECTING THE CLAIM OF THE ASS ESSEE U/S. 80IB(11A) IN BOTH THE IMPUGNED ASSESSMENT YEARS AND U/S . 80IA(4) IN ASSESSMENT YEAR 2009-10. HOWEVER, THE COMMISSIONER OF I NCOME TAX (APPEALS) ACCEPTED THE CLAIM OF THE ASSESSEE AND DELETED T HE FOLLOWING ADDITIONS MADE DURING ASSESSMENT PROCEEDINGS : I. PAYMENTS MADE BY THE ASSESSEE TO MAHARASHTRA STATE WAREHOUSING KARMACHARI WELFARE FUND ` 20,08,350/-. II. UNDERSTATEMENT OF WAREHOUSING CHARGES ` 31,34,000/- III. DIFFERENCE IN FIXED DEPOSITS CLOSING BALANCE ACCOUNT ` 6,83,000/- AND DIFFERENCE IN SHORT TERM DEPOSIT WITH BANK ` 3,38,000/-. IV. UNDERSTATEMENT OF INCOME RESULTING FROM OVER STATEMENT OF OTHER LIABILITY ` 16,85,000/-. 4 ITA NOS. 819, 820, 968 & 969/PN/2013 AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), BOTH, THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE THE TRIBUN AL. 3. SINCE, THE ISSUES RAISED BY THE ASSESSEE AND THE RE VENUE IN BOTH THE ASSESSMENT YEARS UNDER APPEAL ARE SIMILAR AND ARE A RISING FROM SAME SET OF FACTS, THE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION. HOWEVER, FOR THE SAKE OF CONVENIENCE WE FIRST TAKE UP THE APPEALS OF THE ASSESSEE AND THEREAFTER, THE APPEALS OF THE REVENUE. ITA NOS. 819 & 820/PN/2013 (ASSESSEES APPEALS) 4. THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 2008- 09 HAS RAISED TWO GROUNDS. THE GROUND NO. 1 RELATES TO DISALLO WANCE OF DEDUCTION ` 65,82,216/- CLAIMED U/S. 80IB(11A) OF THE ACT AND THE GROUND NO. 2 IS IN RESPECT OF DISALLOWANCE OF PAYMENT MADE TOWARDS LEAVE ENCASHMENT ` 79,62,582/-. THE LD. AR OF THE ASSESSEE STATED AT THE BAR THAT HE IS NOT PRESSING GROUND NO. 2. IN ASSESSMENT YEAR 2009-10, THE ASSESSEE HAS RAISED TWO GROUNDS. THE FIRST GROUND IS IN RESPECT OF DISALLOWANCE OF D EDUCTION ` 37,79,250/- U/S. 80IB(11A) AND THE GROUND NO. 2 IS IN RESPE CT OF DISALLOWANCE OF DEDUCTION ` 4,50,17,204/- U/S. 80IA(4) OF THE ACT. 5. SHRI R.G. NAHAR APPEARING ON BEHALF OF THE ASSESSEE SUB MITTED THAT THE ASSESSEE IS A GOVT. OF MAHARASHTRA UNDERTAKING . THE ASSESSEE HAS BEEN ESTABLISHED UNDER THE PROVISIONS OF THE AGRICULT URAL PRODUCE (DEVELOPMENT AND WAREHOUSING) CORPORATION ACT, 1956 AND T HE WAREHOUSING CORPORATIONS ACT, 1962, WITH THE OBJECTIVE OF PROVIDING WAREHOUSING, INTEGRATED FACILITIES FOR TRANSPORTATION, HANDLING OF AGRICULTURAL PRODUCE AND VARIOUS OTHER PRODUCTS AND COM MODITIES. THE 5 ITA NOS. 819, 820, 968 & 969/PN/2013 ASSESSEE IS HAVING 160 UNITS IN THE ENTIRE STATE. DURING THE ASSESSM ENT YEARS UNDER APPEAL, THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 80IB(11A) OF THE ACT. THE ASSESSEE HAD CLAIMED DEDUCTION ON INCOME FROM WAREHOUSES CONSTRUCTED AND UTILIZED AFTER 1 ST APRIL, 2001. THE ASSESSEE HAD FILED AUDIT REPORT IN THE PRESCRIBED FORM DURING THE CO URSE OF ASSESSMENT PROCEEDINGS. ADMITTEDLY, THE ASSESSEE IS PR OVIDING WAREHOUSING FACILITIES FOR STORAGE OF FERTILIZERS, COTTON BALES AND OTHER MISCELLANEOUS ITEMS IN ADDITION TO STORAGE OF FOOD GRAINS. T HE LD. AR REFERRED TO PAGE 48 OF THE PAPER BOOK TO SHOW COMMODIT Y WISE BREAKUP OF AVERAGE UTILIZATION OF WAREHOUSE DURING THE FINANCIAL YEARS 2007-08 AND 2008-09. A COMMODITIES WISE BREAKUP OF AVERAGE UTILIZA TION OF WAREHOUSE FOR THE PERIOD RELEVANT TO ASSESSMENT YEARS UNDER A PPEAL IS : COMMODITIES 2007-08 2008-09 I. FOOD GRAINS 56.22% 51.41% II. FERTILIZERS 10.77% 08.21% III. COTTON BALES 13.05% 22.23% IV. BONDED CUSTOM 4.37% 5.21% V. OTHERS 15.59% 12.30% THE LD. AR SUBMITTED THAT THE ASSESSEE HAS ESTABLISHED WAREHOUSES THROUGHOUT THE STATE OF MAHARASHTRA AND T HE BREAK UP GIVEN AT PAGE 48 OF THE PAPER BOOK IS IN RESPECT OF THE ENTIRE WAREHOUSES. THE DEDUCTION CLAIMED BY THE ASSESSEE IS IN RESPECT OF INCOME FROM THE WAREHOUSING FACILITIES PROVIDED BY THE ASSES SEE IN THE ENTIRE STATE. THE LD. AR CONTENDED THAT AUDIT REPORT A T PAGE 15 OF THE PAPER BOOK IS ALSO IN RESPECT OF WAREHOUSES SET UP IN TH E ENTIRE STATE OF MAHARASHTRA AND UNDER THE CONTROL OF ASSESSEE. IT IS NOT POSSIBLE TO PREPARE AUDIT REPORT AND THE CAPACITY UTILIZATION OF INDIVIDU AL UNIT 6 ITA NOS. 819, 820, 968 & 969/PN/2013 UNDER THE CONTROL OF ASSESSEE. THE LD. AR FURTHER SUBMIT TED THAT PRIMARILY THE ASSESSEE IS ENGAGED IN PROVIDING WAREHOUSING FACILITIES FOR AGRICULTURAL PRODUCE. SINCE, HARVESTING IS SEASONAL AND T HE ENTIRE WAREHOUSING FACILITIES CANNOT BE UTILIZED FOR STORAGE OF FOOD GRAINS ROUND THE YEAR, THE STORAGE FACILITY IS UTILIZED FOR WAREHOUS ING OTHER PRODUCTS SUCH AS COTTON BALES, FERTILIZERS ETC. THE LD. AR CONTENDED THAT A PERUSAL OF SECTION 24 OF THE WAREHOUSING CORPORA TION ACT, 1962 UNDER WHICH THE ASSESSEE HAS BEEN ESTABLISHED WOULD MAK E IT ABUNDANTLY CLEAR THAT THE ASSESSEE IS ENGAGED IN THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS. 5.1 THE LD. AR MADE TWO FOLD SUBMISSIONS. THE PRIMARY SUBMI SSION OF LD. AR IS THAT THE ENTIRE CLAIM OF DEDUCTION U/S. 80IB(11A) SHOULD BE ALLOWED BY LIBERALLY INTERPRETING THE PROVISIONS OF THE STATU TE. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF BAJAJ TEMP O LIMITED VS. COMMISSIONER OF INCOME TAX REPORTED AS 196 ITR 188. IN AN ALTERNATE SUBMISSION, THE LD. AR CONTENDED THAT TH E MATTER CAN BE REMITTED BACK TO THE ASSESSING OFFICER FOR DETERMIN ING THE CLAIM OF DEDUCTION U/S. 80IB(11A) FOR GRANTING DEDUCTION ON THE B ASIS OF UTILIZATION OF WAREHOUSES FOR STORAGE OF FOOD GRAINS DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEARS UNDER APPEAL. IN SUP PORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF H YDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF A P STATE WAREHOUSING CORPOR ATION LTD. VS. DY. COMMISSIONER OF INCOME TAX IN ITA NO. 672/H/20 14 FOR THE ASSESSMENT YEAR 2008-09 DECIDED ON 28-08-2014. 7 ITA NOS. 819, 820, 968 & 969/PN/2013 5.2 IN RESPECT OF DISALLOWANCE OF CLAIM OF DEDUCTION U/S. 80IA (4) IN ASSESSMENT YEAR 2009-10, THE LD. AR SUBMITTED THAT THE WAREHOUSING FACILITIES PROVIDED BY THE ASSESSEE FALLS WITHIN THE DEFINITION OF INFRASTRUCTURE FACILITIES AS DEFINED IN EXPLANATION TO SECTION 8 0IA(4). THE LD. AR SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQ UARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN TH E CASE OF ACIT VS. JWC LOGISTICS PARK PVT. LTD. IN ITA NOS. 1121 AND 1122 /PN/2013 FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 DECIDED ON 21-08-2014. THE LD. AR FURTHER TO BUTTRESS HIS SUBMISSIONS PLACED RELIAN CE ON THE FOLLOWING JUDGMENTS : I. COMMISSIONER OF INCOME TAX VS. CONTINENTAL WAREHOUSING CORPORATION, 374 ITR 645 (BOM); II. COMMISSIONER OF INCOME TAX VS. A.L. LOGISTICS (P.) LTD., 55 TAXMANN.COM 283 (MAD). 6. ON THE OTHER HAND SHRI ACHAL SHARMA REPRESENTING TH E DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF THE C OMMISSIONER OF INCOME TAX (APPEALS) IN REJECTING THE CLAIM OF THE ASSESSEE U/S. 80IB(11A) OF THE ACT. THE LD. DR SUBMITTED THAT THE DEDUC TION U/S. 80IB(11A) IS GRANTED WHERE THE ASSESSEE IS ENGAGED IN TH E INTEGRATED BUSINESS OF HANDLING, TRANSPORTATION AND STORAGE OF FOOD G RAINS. THE RELIEF HAS BEEN GRANTED UNDER SUB-SECTION (11A) TO PROMOT E AND ENCOURAGE CREATION OF STORAGE FACILITIES FOR FOOD GRAINS. THE ASSESSEE APART FROM PROVIDING STORAGE FACILITIES FOR FOOD GRAINS IS ALSO ENGAGED IN PROVIDING STORAGE OF FERTILIZERS, COTTON BALES AND OTHER PR ODUCTS. THE ASSESSEE IS NOT MAINTAINING SEPARATE BOOKS FOR WAREHOUS ES FOR STORAGE OF FOOD GRAINS. THE ASSESSEE HAS ADMITTED THE FACT THAT IT IS NOT FEASIBLE FOR THE ASSESSEE TO MAINTAIN SEPARATE ACCOUNTS FOR EACH UNIT. THE 8 ITA NOS. 819, 820, 968 & 969/PN/2013 ASSESSEE IS MAINTAINING CONSOLIDATED BALANCE SHEET FOR ALL WA REHOUSES UNDER ITS CONTROL. FOR CLAIMING DEDUCTION U/S. 80IB(11A), THE ASSESSEE HAS TO FILE AUDIT REPORT IN THE PRESCRIBED FORM IN RESPECT OF UNITS ELIGIBLE FOR CLAIMING DEDUCTION. IN THE ABSENCE OF SEPARATE ACCOU NTS OF ELIGIBLE UNITS, THE DEDUCTION CANNOT BE GRANTED TO THE ASSESSEE . THE LD. DR PRAYED FOR DISMISSING THE APPEALS OF THE ASSESSEE. IN RESPECT OF CLAIM OF DEDUCTION U/S. 80IA(4) IN ASSESSMENT YEAR 2009-10 THE LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED THE NECESSARY DOCUMENTS TO SHOW THAT THE WAREHOUSES WER E BUILT UNDER BOT OR BOLT SCHEME. FURTHER, THE ASSESSEE HAS NOT BE EN ABLE TO SHOW FROM THE RECORDS THAT THE WAREHOUSE CONSTRUCTED BY T HE ASSESSEE FALLS WITHIN THE DEFINITION OF INFRASTRUCTURE FACILITIES WITHIN THE MEA NING OF SECTION 80IA(4) OF THE ACT. THE LD. DR CONTENDED THAT BO ARD VIDE CIRCULAR NO. 10/2005, DATED 16-12-2005 HAS DEFINED PORT FOR THE PURPOSE OF SECTIONS 10(23G) AND 80IA OF THE ACT. ACCORDIN G TO THE BOARD CIRCULAR PORT INCLUDES STRUCTURES FOR STORAGE, LO ADING AND UNLOADING ETC. IF THE FOLLOWING TWIN CONDITIONS ARE SATISFIED : I. THE PORT AUTHORITY SHOULD ISSUE CERTIFICATE THAT THE SAID STRUCTURE FORM PART OF THE PORT AND II. SUCH STRUCTURE SHOULD HAVE BEEN BUILT UNDER BOT OR BOL T SCHEME. THE ASSESSEE DOES NOT SATISFY ANY OF THESE TWO CONDITIO NS. THE LD. DR PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2009-10, AS WELL. 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE 9 ITA NOS. 819, 820, 968 & 969/PN/2013 COMMON ISSUES FOR ADJUDICATION IN BOTH THE APPEALS OF THE ASSESSEE IS WITH RESPECT TO DISALLOWANCE U/S. 80IB(11A) OF THE ACT. T O BE ELIGIBLE TO CLAIM DEDUCTION U/S. 80IB(11A) UNDERTAKING SHOULD DERIVE PR OFIT FROM THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPOR TATION OF FOOD GRAINS. THE ASSESSEE IN THE PRESENT CASE IS A STATE WA REHOUSING CORPORATION SET UP UNDER THE PROVISIONS OF THE WAREHOUS ING CORPORATIONS ACT, 1962. SECTION 24 OF THE WAREHOUSING CO RPORATIONS ACT ENUMERATES THE FUNCTIONS OF THE STATE WAREHOUSING C ORPORATION. THE SAME IS REPRODUCED HERE-IN-UNDER: 24. SUBJECT TO THE PROVISIONS OF THIS ACT, A STATE WAREHOUSING CORPORATION MAY (A) ACQUIRE AND BUILD GODOWNS AND WAREHOUSES AT SUC H PLACES WITHIN THE STATE AS IT MAY WITH THE PREVIOUS APPROV AL OF THE CENTRAL WAREHOUSING CORPORATION, DETERMINE; (B) RUN WAREHOUSES IN THE STATE FOR THE STORAGE OF AGRICULTURAL PRODUCE, SEEDS, MANURES, FERTILIZERS, AGRICULTURAL, IMPLEMENTS AND NOTIFIED COMMODITIES; (C) ARRANGE FACILITIES FOR THE TRANSPORT OF AGRICUL TURAL PRODUCE, SEEDS, MANURES, FERTILIZERS, AGRICULTURAL IMPLEMENT S AND NOTIFIED COMMODITIES TO AND FROM WAREHOUSES; (D) ACT AS AN AGENT OF THE-CENTRAL WAREHOUSING CORP ORATION OR OF THE GOVERNMENT FOR THE PURPOSES OF THE PURCHASE, SA LE, STORAGE AND DISTRIBUTION, OF AGRICULTURAL PRODUCE, SEEDS, M ANURES, FERTILIZERS, AGRICULTURAL IMPLEMENTS AND NOTIFIED C OMMODITIES; AND E) CARRY OUT SUCH OTHER FUNCTIONS AS MAY BE PRESCRI BED. 8. THE ASSESSEE HAS SET UP 160 WAREHOUSES IN THE ENT IRE STATE OF MAHARASHTRA FOR PROVIDING WAREHOUSING FACILITIES FOR STORAGE OF FOOD GRAINS AND OTHER COMMODITIES. A PERUSAL OF SECTION 24 OF THE WAREHOUSING CORPORATIONS ACT WOULD SHOW THAT THE ASSE SSEE 10 ITA NOS. 819, 820, 968 & 969/PN/2013 CORPORATION HAS BEEN INCORPORATED WITH THE OBJECT OF ST ORAGE, TRANSPORTATION AND DISTRIBUTION OF FOOD GRAINS AND OTHER C OMMODITIES. THE LD. AR HAS REFERRED TO THE COMMODITIES WISE BREAKUP O F AVERAGE UTILIZATION OF WAREHOUSES. A PERUSAL OF THE SAME AT PAGE 4 8 OF THE PAPER BOOK SHOWS THAT THE WAREHOUSING FACILITIES TO THE EXTENT OF 56.22% IS UTILIZED FOR STORAGE OF FOOD GRAINS IN ASSESSMENT YEAR 2008- 09 AND 51.41% IN ASSESSMENT YEAR 2009-10. THE PROVISIO NS OF SUB- SECTION (11A) TO SECTION 80IB WERE INTRODUCED BY THE FINA NCE ACT, 2001 W.E.F. 01-04-2002 TO ADDRESS THE COUNTRYS BASIC CONCERN S RELATING TO ENHANCED FOOD SECURITY AND AGRICULTURAL DEVELOPMENT. DEVE LOPMENT, UPGRADATION AND MODERNIZATION OF INFRASTRUCTURE FOR EFFICIENT STORAGE, HANDLING AND TRANSPORTATION OF FOODGRAINS WITH MINIMUM POST HARVEST FOODGRAINS LOSS WAS MAJOR CONCERN OF THE GOVERNMENT. TH E SUB-SECTION WAS INTRODUCED TO ENCOURAGE BUILDING OF STORAGE CAPACITIES , BY PROVIDING DEDUCTION TO THE UNDERTAKINGS ENGAGED IN INTEGR ATED BULK HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS. THE ASSESSEE IS A STATE GOVERNMENT ENTERPRISE HAS SET UP WAREHOUSES IN LINE WITH THE POLICY OF CENTRAL GOVERNMENT TO ENHANCE WAREHOUSING CAPA CITY FOR STORAGE OF FOODGRAINS. IN VIEW OF THE FUNCTIONS OF STATE WAREHOUSING CORPORATION AS ENVISAGED U/S. 24 OF THE WAREHOUSING CORPORATIONS ACT A ND THE MATERIAL AVAILABLE ON RECORD, IT IS AMPLY CLEAR THAT THE ASS ESSEE IS ENGAGED IN INTEGRATED BUSINESS OF HANDLING, STORAGE AND TR ANSPORTATION OF FOODGRAINS AND THUS, IS ELIGIBLE TO CLAIM DEDUCTION U/S. 80I B(11A) OF THE ACT. NOW, THE QUESTION THAT ARISE IS THE QUANTUM O F DEDUCTION ADMISSIBLE TO THE ASSESSEE UNDER THE PROVISIONS OF SECTION 80IB(11A) OF THE ACT. 11 ITA NOS. 819, 820, 968 & 969/PN/2013 9. THE DEDUCTION U/S. 80IB(11A) IS ADMISSIBLE TO UNDERTAKIN G ENGAGED IN THE INTEGRATED BUSINESS OF HANDLING, TRANSPORTA TION AND STORAGE OF FOOD GRAINS AND STARTS OPERATING ON OR AFTER THE 1 ST DAY OF APRIL, 2001. UNDISPUTEDLY, THE ASSESSEE IS PROVIDING WAREHO USING FACILITIES FOR STORAGE OF FOODGRAINS APART FROM OTHER PRODUCT S VIZ. FERTILIZERS, COTTON BALES, ETC. THE LD. AR OF THE ASSESSEE HA S MADE TWO FOLD SUBMISSIONS. THE FIRST PRAYER OF THE ASSESSEE IS THAT THE ASSESSEE SHOULD BE ALLOWED 100% DEDUCTION ON THE WAREHOUSING BUSIN ESS BY LIBERALLY INTERPRETING THE PROVISIONS OF STATUTE. HOWEVER, W E DO NOT FIND MERIT IN THIS CONTENTION OF THE ASSESSEE. AS BY GRANTING DEDUCTION ON THE ENTIRE INCOME FROM WAREHOUSING BUSINESS WHICH INCLUDES RECEIPTS FOR WAREHOUSING PRODUCTS OTHER THAN FOOD GRAINS, THE SP IRIT OF SUB- SECTION (11A) WOULD BE VITIATED. THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION U/S. 80IB(11A) ON THE INCOME ARISING FROM INTEGRAT ED BUSINESS OF STORAGE, TRANSPORT AND HANDLING OF FOODGRAINS ALONE. HERE IT WOULD BE RELEVANT TO CLARIFY FURTHER THAT THE ASSESSEE W OULD BE ELIGIBLE TO CLAIM DEDUCTION U/S. 80IB(11A) ON THE UNITS (WAREHOUSE S) THAT HAVE STARTED OPERATING ON OR AFTER 01-04-2001. 10. AS HAS BEEN POINTED OUT EARLIER THE ASSESSEE HAS S EVERAL WAREHOUSES IN THE STATE OF MAHARASHTRA. THE LD. AR OF THE ASSESSEE H AS SUBMITTED THAT STATISTICS OF THE INDIVIDUAL WAREHOUSES AR E NOT AVAILABLE. THE CONSOLIDATED AUDIT REPORT GIVING THE DETAILS OF COMMODIT IES WISE BREAKUP OF AVERAGE UTILIZATION OF WAREHOUSES IN THE STATE OF MAHARASHTRA IS AVAILABLE. THE ASSESSEE HAS EXPRESSED IT S INABILITY TO PREPARE AUDIT REPORT OF THE INDIVIDUAL WAREHOUSES KEEPING IN VIEW OF LARGE NUMBER OF WAREHOUSES AND VARIOUS PRODUCTS STORED THOUGHT OUT THE STATE. HOWEVER, THE LD. AR REFERRED TO THE COMMODITIE S WISE 12 ITA NOS. 819, 820, 968 & 969/PN/2013 BREAKUP OF THE UTILIZATION OF ALL WAREHOUSES ACCORDING TO WH ICH THE FOOD GRAINS CONSTITUTE 56.22% IN FINANCIAL YEAR 2007-08 AND 51.41 % IN FINANCIAL YEAR 2008-09. THE LD. AR HAS REFERRED TO THE DEC ISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF A P STATE WAREHOUSING CORPORATION LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) WHEREIN THE SIMILAR ISSUE WAS CONSIDERED. THE HYDERABAD BENCH OF THE TRIBUNAL REMITTED THE MATTER BACK TO THE ASSESSING OFFICE R FOR CONSIDERING THE CLAIM OF DEDUCTION U/S. 80IB(11A) BY OBSERVIN G AS UNDER : 6. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. A T THE VERY OUTSET, THE LEARNED AR SUBMITTED BEFORE US THAT THE ISSUE IN DI SPUTE IS SQUARELY COVERED BY THE ORDER OF THE ITAT, HYDERABAD BENCH I N ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEARS 2005-06, 20 06-07 AND 2007- 08. ON PERUSAL OF THE ORDER OF THE COORDINATE BENCH DATED 24/01/2014 IN ITA NO. 834, 835 & 836/HYD/2012, WE FIND THAT IDENT ICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE. THE COORDINATE BENCH AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES AND EXAMINING THE RELEVANT STATUTORY PROVISION HELD AS UNDER: 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.8 0IB(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, HAV ING 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 HANDLING AND TRANSPORTATION OF FOODGRAINS SUBSEQUEN T 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 CORRECTNES S OR OTHERWISE OF THESE REASONS GIVEN BY THE LOWER AUTHORITIES. 12. WE FIND THAT THE ASSESSEE-CORPORATION OWNS PREM ISES ACCOMMODATING GODOWNS AT DIFFERENT PLACES ALL OVER THE STATE. IN EACH AREA IT EITHER CONSTRUCTS OR OFFERS AN INVESTOR TO CONSTRUCT NEW GODOWNS, 13 ITA NOS. 819, 820, 968 & 969/PN/2013 WHICH THE CORPORATION TAKES ON LEASE. IT IS THE CLA IM OF THE ASSESSEE BEFORE THE CIT(A) THAT THE PLINTH AREA OF CONSTRUCT ION OF THE GODOWNS VARIES FROM MINIMUM AREA OF 10,000 SFT. UP TO A MAX IMUM AREA OF 50,000 SFT. AND THE SCHEME OF CONSTRUCTION OF GODOW NS 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 CAR RY ON THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION 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 I N 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 THE ASSESSEES 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 F ROM THE YEAR OF INCORPORATION OF THE ASSESSEE, VIZ. 1958; AND ALSO OBSERVING THAT NO NEW ACTIVITY WAS TAKEN UP AFTER 2001. SINCE EACH NEW GO DOWN IS AN UNDERTAKING IN ITSELF, ASSESSEE IS ENTITLED FOR SUC H 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 A SSESSEE TO THE RELIEF UNDER S.80IB(11A), IT IS WORTHWHILE TO REFER TO THE INTEN TION OF THE LEGISLATURE IN INTRODUCING SEC 80IB(11A), WHICH IS REPRODUCED HERE UNDER : UNDER THE EXISTING PROVISIONS OF SEC. 80-IB OF THE INCOME-TAX ACT, A DEDUCTION IS ALLOWED, IN COMPUTING THE TAXABLE IN COME, IN RESPECT OF PROFITS DERIVED FROM A NEW INDUSTRIAL UN DERTAKING OR A SHIP OR THE BUSINESS OF A HOTEL. TO ADDRESS THE COU NTRY'S BASIC CONCERNS RELATING TO ENHANCED FOOD SECURITY AND AGR ICULTURAL DEVELOPMENT, UPGRADATION AND MODERNIZATION OF INFRA STRUCTURE 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 A ND 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 CAPACITIE S, BY PROVIDING THAT ANY UNDERTAKING ENGAGED IN INTEGRATED BULK HANDLING , STORAGE AND TRANSPORTATION WOULD BE ALLOWED HUNDRED PER CENT DE DUCTION FOR THE FIRST FIVE YEARS AND THIRTY PER CENT DEDUCTION FOR THE NE XT 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 14 ITA NOS. 819, 820, 968 & 969/PN/2013 ACTIVITIES OF THE ASSESSEE IN ASSOCIATION WITH THE FOOD CORPORATION OF INDIA, AS DEMONSTRATED BY THE LEARNED COUNSEL FOR T HE ASSESSEE IN THE PAPER-BOOK FILED, CLEARLY INDICATES IT IS ENGAGED I N THE INTEGRATED BUSINESS OF HANDLING, STORAGE AND TRANSPORTATION OF FOOD GRAINS. THERE IS NO DISPUTE THE ASSESSEES MAIN BUSINESS IS TO PROVI DE WAREHOUSING FACILITY FOR FOODGRAINS. THE ASSESSEE HAS BEEN CONS TITUTED UNDER WITH THESE VERY OBJECTS IN VIEW. MERELY BECAUSE THE ASSE SSEE HAS ENGAGED OUTSIDERS FOR TRANSPORTATION OR LEASED OUT SOME OF THE GODOWNS FOR STORAGE DOES NOT MEAN THAT THE ASSESSEE IS NOT ENGA GED IN THE INTEGRATED BUSINESS OF HANDLING AND STORAGE OF FOOD GRAINS. IN THE COURSE OF THEIR INTEGRATED BUSINESS, THE ASSESSEE HAD COLL ECTED RENTALS FOR STORING FOODGRAINS AND HAD ENGAGED OUTSIDERS TO TRA NSPORT THE FOOD GRAINS. FURTHER, THE FACT THAT THE ASSESSEE HAD BEE N CARRYING ON SIMILAR BUSINESS WOULD NOT DISENTITLE THE ASSESSEE FROM CLA IMING RELIEF U/S 80IB(11A), IN RESPECT OF THE NEW WAREHOUSES PUT TO USE AFTER THE INTRODUCTION OF SEC 80IB(11A) I.E ON OR AFTER 1.4.2 001. THE ASSESSEE HAS FURNISHED IN THE PAPER-BOOK LIST OF NEW GODOWNS, WH ICH HAVE BEEN PUT TO USE BY THE ASSESSEE AFTER 1.4.2001. IT IS WELL SETT LED THAT DEDUCTION UNDER CHAP VIA, IN RESPECT OF NEW UNDERTAKINGS SET UP BY THE ASSESSEE BY WAY OF EXPANSION OF THE EXISTING UNDERTAKINGS, A S HELD BY THE APEX COURT IN THE CASES OF TEXTILE MACHINERY CORPORATION LTD V CIT 107 ITR 195 SC AND CIT V INDIAN ALUMINIUM COMPANY LTD (108 ITR 367). THE NUMBER OF NEW GODOWNS OPERATED BY THE ASSESSEE AFTE R 1.4.2001 CLEARLY SHOWS THAT THERE WAS SUBSTANTIAL EXPANSION OF THE A SSESSEES BUSINESS OF HANDLING, STORING AND TRANSPORTATION OF FOOD GRA INS, WHICH OBVIOUSLY COULD HAVE BEEN DONE ONLY BE UNDERTAKING NEW WAREHO USING FACILITIES YEAR AFTER YEAR EVEN AFTER 2001. IN RESPECT OF THES E 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, WAREHO USES, SET UP AND OPERATED FROM 1.4.2001 FOR STORAGE, HANDLING AND TR ANSPORTATION OF FOOD GRAINS. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDER S OF THE CIT(A) ON THIS ISSUE FOR ALL THE THREE YEARS AND SET ASIDE TH E MATTER TO THE FILE OF THE ASSESSING OFFICER, WITH A DIRECTION TO VERIFY THE C LAIM OF THE ASSESSEE FOR DEDUCTION UNDER S.80IA(11A) OF THE ACT IN RESPECT O F NEW UNDERTAKINGS SET UP AFTER 2001, AND ALLOW THE SAME IN ACCORDANCE WITH LAW, AND AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. THE LEARNED DR HAS NEITHER CONTROVERTED THE FACT THAT THE ISSUE IS COVERED BY THE AFORESAID DECISION OF THE COORDINATE BENCH NOR COULD BRING ANY CONTRARY DECISION TO OUR NOTICE. FACTS BEING ID ENTICAL AND ISSUE IN DISPUTE BEING THE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT IN ASSESSEES OWN CASE (SUPRA), WE SET ASIDE THE IMPUG NED ORDER OF LD. CIT(A) AND DIRECT THE AO TO VERIFY THE CLAIM OF THE ASSESSEE FOR DEDUCTION 15 ITA NOS. 819, 820, 968 & 969/PN/2013 U/S 80IB(11A) IN RESPECT OF NEW UNDERTAKINGS/WAREHO USES SETUP AFTER 01/04/2001 AND ALLOW DEDUCTION ACCORDINGLY. THE AO MUST AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE BEFORE DECIDING THE ISSUE. RESPECTFULLY FOLLOWING THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL, WE DEEM IT APPROPRIATE TO REMIT THE FILE BACK TO THE ASSESSING OFFICER TO CONSIDER THE CLAIM OF THE ASSESSEE. THE ASSESSE E WOULD BE ELIGIBLE TO CLAIM DEDUCTION U/S. 80IB(11A) ON THE SHARE OF INC OME FROM THE BUSINESS OF WAREHOUSING, TRANSPORTATION AND HANDLING O F FOODGRAINS OF THE UNITS (WAREHOUSES) WHICH HAVE STARTED OPERATING O N OR AFTER 01-04-2001. 11. WE ACCEPT THE ALTERNATIVE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AND ACCORDINGLY PARTLY ALLOW THE GROUND NO. 1 RAISED IN THE APPEALS BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2008 -09 AND 2009-10 FOR STATISTICAL PURPOSE. 12. THE GROUND NO. 2 IN THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 RELATES TO DISALLOWANCE OF CLAIM OF ` 79,62,582/- TOWARDS LEAVE ENCASHMENT PAID DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2008-09. THE LD. AR OF THE ASSESSEE STATED AT THE BAR THAT HE IS NOT PRESSING GROUND NO. 2. ACCORDINGLY, SAME IS DISMISSED AS NOT PRESSED. 13. THE GROUND NO. 2 IN THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEAR 2009-10 RELATES TO DISALLOWANCE OF DEDUCTION ` 4,50,17,204/- U/S. 80IA(4) OF THE ACT. THE ASSESSEE HAS SET UP INLAND CONT AINER DEPOT (ICD) AND CONTAINER FREIGHT STATION (CFS) FOR HANDLING BONDED WAREHOUSING FACILITIES ON LEASEHOLD LAND OF SIDCO. THE ICD ESTAB LISHED 16 ITA NOS. 819, 820, 968 & 969/PN/2013 BY THE ASSESSEE IS LOCATED AT ABOUT 3-4 KMS. AWAY FROM THE BOUNDARY WALL OF JAWAHARLAL NEHRU PORT TRUST AND THE UNIT COMMENCE D ITS ACTIVITIES IN DECEMBER, 2004. THE UNIT IS SAID TO BE MODIFIED UNDER CUSTOMS ACT AS CUSTOMS AREA FOR THE PURPOSE OF STOR AGE, STUFFING, DESTUFFING AND CLEARANCE OF EXPORT AND IMPORT. THE ASSESS EE CLAIMED DEDUCTION U/S. 80IA(4) IN VIEW OF BOARDS NOTIFICATION NO. F.NO.205/17/2000/ITA-2 DATED 23-06-2000. THE ASSESSIN G OFFICER DENIED THE CLAIM OF THE ASSESSEE U/S. 80IA(4) ON THE GROU ND THAT CBDT CIRCULAR DATED 23-06-2000 (SUPRA) HAS BEEN WITHDRAWN W.E.F . 16-12-2005 AND THE BOARD PORT TRUST HAS STATED THAT THE AREA FROM WHERE ASSESSEE IS OPERATING DOES NOT FORM PART OF THE PORT. IN FIRST APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF ASSESSING OFFICER AND DENIED THE BENEFIT OF DEDUCTION U/S. 80IA(4) TO THE ASSESSEE. 14. THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE CASE O F THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF CO-ORDIN ATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. JWC LOGISTICS PARK P VT. LTD. (SUPRA). IN THE SAID CASE THE ASSESSEE WAS ENGAGED IN T HE BUSINESS OF RUNNING CONTAINER YARD, INLAND CONTAINER DEPOT (ICD), CON TAINER FREIGHT STATION (CFS), BONDED WAREHOUSE ETC. THE ICD/CF S OF THE ASSESSEE COMPANY STARTED ITS OPERATIONS IN YEAR 2004. THE ASSESSEE CLAIMED DEDUCTION U/S. 80IA(4) IN RESPECT OF ICD/CFS FACILITIE S SET UP BY THE ASSESSEE. THE ASSESSING OFFICER REJECTED THE CL AIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE DID NOT FULFILL T HE REQUIRED CONDITIONS AS PRESCRIBED FOR CLAIMING DEDUCTION U/S. 80IA(4) OF THE ACT. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW ANY AGREEMENT WITH THE CENTRAL GOVT./STATE GOVT./LOCAL 17 ITA NOS. 819, 820, 968 & 969/PN/2013 AUTHORITY OR ANY OTHER STATUTORY BODY FOR DEVELOPING OR DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE A UTHORITY. THE COMMISSIONER OF INCOME TAX (APPEALS) BY FOLLOWING THE DECISION OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. AL L CARGO GLOBAL LOGISTICS LTD. VS. DCIT IN ITA NOS. 5018 TO 5022 & 5 059 FOR ASSESSMENT YEARS 2004-05 TO 2009-10 DECIDED ON 06-07 -2012 AND THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE O F CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) VS. ACI T IN ITA NO. 7055/MUM/2011 FOR THE ASSESSMENT YEAR 2008-09 DEC IDED ON 31- 08-2012 ALLOWED THE CLAIM OF THE ASSESSEE. AGAINST THE O RDER OF COMMISSIONER OF INCOME TAX (APPEALS) THE DEPARTMENT FILED A PPEAL BEFORE THE TRIBUNAL. THE GROUND BEFORE THE TRIBUNAL FOR A DJUDICATION WAS : 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER : WHETHER THE CIT(A)-I, THANE IS RIGHT IN LAW IN HOL DING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S. 80IA OF THE INCOME TAX ACT, 1961 EVEN THOUGH ACTIVITIES UNDERTA KEN BY THE ASSESSEE DO NOT FALL WITHIN CLAUSE (D) OF THE EXPLANATION TO 80IA(4) DEFINING THE TERM INFRASTRUC TURE FACILITIES? THE TRIBUNAL DISMISSED THE APPEAL OF THE DEPARTMENT BY H OLDING AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. FROM THE STATEME NT OF FACTS FILED BY THE REVENUE, WE FIND THE ONLY GRIEVANCE OF THE REVENUE AGAINST THE ORDER OF THE CIT(A) IS THAT THE ORDER RELIED ON BY THE CIT(A ) IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION (NHAVE SHEVA) L TD. (SUPRA) HAS BEEN CHALLENGED BY THE REVENUE BEFORE THE HONBLE H IGH COURT AND THE SAME IS PENDING. THE LD. DEPARTMENTAL REPRESENTATIV E FAIRLY CONCEDED 18 ITA NOS. 819, 820, 968 & 969/PN/2013 THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE AS SESSEE BY THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL AND TO KEEP THE MATTER ALIVE THE REVENUE HAS FILED THIS APPEAL SINCE THE DECISION OF THE TRIBUNAL IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION (NHAVE SHEVA) LTD. (SUPRA) HAS BEEN CHALLENGED BY THE REVENUE BEFORE THE HONB LE HIGH COURT. 4.1 THE LD. COUNSEL FOR THE ASSESSEE FILED THE DECI SION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CONTAINER CORPORATI ON OF INDIA LTD. VS. ACIT REPORTED IN 346 ITR 140 AND SUBMITTED THAT THE HONBLE HIGH COURT IN THE ABOVE DECISION HAS HELD THAT THE INCOME OF I CDS IS ELIGIBLE FOR DEDUCTION U/S.80IA(4)(I) OF THE I.T. ACT. HE ALSO R ELIED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF UNI TED LINER AGENCIES OF INDIA (PVT.) LTD. VS. JCIT AND VICE VERSA ORDER DAT ED 28-06-2013 FOR A.YRS 2006-07 AND 2009-10 RESPECTIVELY. HE SUBMITTED THAT SINCE THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY VARIO US DECISIONS OF THE TRIBUNAL AND THE HONBLE DELHI HIGH COURT, THEREFOR E, THE GROUND RAISED BY THE REVENUE SHOULD BE DISMISSED. SINCE THE LD.CI T(A) WHILE ALLOWING THE CLAIM OF DEDUCTION U/S.80IA(4) HAS FOLLOWED THE DECISION OF THE TRIBUNAL, THEREFORE, MERELY BECAUSE THE REVENUE HAS CHALLENGED THE DECISION OF THE TRIBUNAL BEFORE THE HONBLE HIGH CO URT, THE SAME IN OUR OPINION CANNOT BE A GROUND TO TAKE A CONTRARY DECIS ION THAN THE VIEW TAKEN BY THE TRIBUNAL CITED (SUPRA). IN THIS VIEW O F THE MATTER, WE UPHOLD THE ORDER OF THE CIT(A) AND THE GROUND RAISED BY TH E REVENUE IS DISMISSED. 15. WE FIND THAT THE FACTS OF THE CASE OF THE ASSESSEE IS SIMILAR TO THAT OF THE CASE DECIDED BY THE CO-ORDINATE BENCH OF THE TRIB UNAL IN THE CASE OF ACIT VS. JWC LOGISTICS PARK PVT. LTD. (SUPRA). WE OBSERVE THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. CONTINENTAL WAREHOUSING CORPORATION (SUPRA) HAS UPHELD THE ORDER OF TRIBUNAL. THE HON'BLE COURT AFTER CONSIDERING THE PROVISIONS OF SECTION 80IA(4) OBSERVED : 39. ..WE ARE CONCERNED WITH SUB-SECTION (4) AN D AS IT READ AT THE RELEVANT TIME. IT SAYS THAT THIS SECTION APPLIE S TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPING OR OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILLS ALL THE COND ITIONS, NAMELY, IT IS OWNED 19 ITA NOS. 819, 820, 968 & 969/PN/2013 BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES OR BY AN AUTHORITY OR A BOARD OR A CORPORATION OR A NY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STA TE ACT, IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR DEVELOPING OR OPERATIN G AND MAINTAINING OR DEVELOPING, OPERATING AND MAINTAINING A NEW INFRAST RUCTURE FACILITY AND IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1ST DAY OF APRIL, 1995. THE EXPLANATIO N DEFINES THE INFRASTRUCTURE FACILITY TO MEAN, INTER ALIA, A PORT , AIRPORT, INLAND WATERWAY, INLAND PORT OR NAVIGATIONAL CHANNEL IN TH E SEA. THE WORD 'INLAND PORT' WAS ALWAYS THERE IN CLAUSE (D). WHAT WAS THERE PRIOR TO ITS SUBSTITUTION BY FINANCE ACT OF 2007 WITH EFFECT FRO M 1ST APRIL, 2008, WERE THE WORDS 'OR INLAND PORT'. NOW THE WORD 'OR' IS DELETED, BUT THE WORDS ARE 'INLAND PORT OR NAVIGATIONAL CHANNEL IN T HE SEA'. THUS, AN 'INLAND PORT' WAS ALWAYS WITHIN THE CONTEMPLATION O F THE LEGISLATURE AND IT IS TREATED SPECIFICALLY AS A INFRASTRUCTURAL FAC ILITY. THEREFORE, TO THAT EXTENT MR. DASTUR IS RIGHT IN HIS SUBMISSION. THE HON'BLE COURT FURTHER AFTER CONSIDERING THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CONTAINER CORPORA TION OF INDIA LTD. VS. ASSTT. COMMISSIONER OF INCOME TAX REPORTED AS 34 6 ITR 140 (DELHI) CONCLUDED AS UNDER : 46. WE HAVE FOUND THAT THERE IS A SPECIFIC REFEREN CE MADE BY THE DELHI HIGH COURT TO THE COMMUNICATION DATED 24 TH APRIL, 2007, FROM THE GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMEN T OF REVENUE. THESE ARE THEN CLASSIFIED AS INLAND PORTS AND CATEGORISED ACCORDINGLY. THERE IS A FURTHER COMMUNICATION FROM THE MINISTRY OF COMMER CE AND INDUSTRY AS WELL. WE DO NOT FIND THAT A VIEW DIFFERENT THAN THE ONE TAKEN BY THE DELHI HIGH COURT IS POSSIBLE. BEARING IN MIND THE FACILIT IES THAT ARE EXTENDED AND FOR PURPOSES OF LOADING, UNLOADING, STORAGE AND WAREHOUSING OF THE GOODS THAT THE FACILITY IS A INFRASTRUCTURE FACILIT Y. THAT IT HAS EASY ACCESSIBILITY TO THE PORT AND PARTICULARLY THE SEA- PORT GIVES IT CERTAIN ADVANTAGES AND BENEFITS AND WHICH CLEARLY ACCRUE TO THOSE USING THE PORT FOR IMPORT AND EXPORT OF CARGO. FURTHER, THE LOCATI ON THEREOF IS ALSO A RELEVANT FACTOR AS NOTED. IN SUCH CIRCUMSTANCES, T HE RELIANCE BY THE SPECIAL BENCH AND EQUALLY BY THE BENCH OF THE TRIBU NAL IN THE IMPUGNED ORDERS ON THE DIVISION BENCH JUDGMENT OF THE DELHI HIGH COURT IS THUS WELL PLACED. 20 ITA NOS. 819, 820, 968 & 969/PN/2013 47. WE DO NOT FIND THAT ANYTHING OTHER AND FURTHER THAN THIS MATERIAL IS RELIED. HOWEVER, EVEN THE HIGH COURT OF JUDICATURE AT MADRAS HAS REFERRED IN ITS DIVISION BENCH DECISION TO THE VIEW TAKEN BY THE DELHI HIGH COURT. THE DIVISION BENCH IN PARAGRAPHS 10 AND 12 OF ITS JUDGMENT EXTENSIVELY REFERRED TO THE TRIBUNAL'S CONCLUSIONS. IT ALSO REFERRED TO THE SPECIAL BENCH DECISION OF THE TRIBUNAL. THUS, WHEN THE PROPOSAL TO SET UP A CFS HAS BEEN ACCEPTED BY THE GOVERNMENT, THERE IS NO REQUIREMENT OF EITHER A SPECIFIC AGREEMENT AS CONTENDED BY MR. SUR ESH KUMAR. NOR CAN IT BE SAID THAT BY VIRTUE OF ANY CERTIFICATION OF T HE JNPT AND ITS SUBSEQUENT WITHDRAWAL THE POSITION UNDERGOES ANY CH ANGE. ONCE THE FACILITY IS NOTHING BUT A INFRASTRUCTURAL FACILITY SET UP AND WITHIN THE PRECINCTS OF THE PORT, THEN, CONSIDERING AND EVEN O THERWISE HAVING CONSIDERED ITS PROXIMITY TO THE SEA PORT AND ITS AC TIVITIES THAT WE HAVE NO DOUBT AND IT CAN BE SAFELY CONCLUDED THAT THE DEDUC TION ADMISSIBLE UNDER SUB-SECTION (4) OF SECTION 80-IA CAN BE CLAIM ED BY BOTH THE ICDS AND CFSS. 16. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME TAX VS. A.L. LOGISTICS (P.) LTD. (SUPRA) HAS HELD THAT C FS IS PART OF INLAND PORT AND THEREFORE, IS AN INFRASTRUCTURE FACILITY AS DEFINED IN EXPLANATION TO SECTION 80IA(4)(I) OF THE ACT. 17. IN VIEW OF THE VARIOUS DECISIONS DISCUSSED ABOVE AND THE FACTS OF THE INSTANT CASE WE ACCEPT GROUND NO. 2 RAISED IN THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2009-10. THUS, WE HOLD T HAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION U/S. 80IA(4) IN RESPECT OF THE ICD/CFS SET UP BY THE ASSESSEE. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 8 19/PN/2013 FOR THE ASSESSMENT YEAR 2008-09 IS PARTLY ALLOWED FOR ST ATISTICAL PURPOSE AND THE APPEAL OF THE ASSESSEE IN ITA NO. 820/ PN/2013 FOR ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED. 21 ITA NOS. 819, 820, 968 & 969/PN/2013 ITA NOS. 968 & 969/PN/2013 (REVENUES APPEALS) 19. THE REVENUE IN ITS APPEAL FOR ASSESSMENT YEAR 2008-0 9 HAS RAISED 11 GROUNDS. THE GROUND NOS. 1, 10 AND 11 ARE GE NERAL IN NATURE HENCE, REQUIRE NO ADJUDICATION. 20. THE GROUND NOS. 2 AND 3 RAISED IN THE APPEAL OF THE REVENUE ARE AGAINST THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION OF ` 20,08,350/- IN RESPECT OF PAYMENT MADE BY THE ASSESSEE TO THE MAHARASHTRA STATE WAREHOUSING CO RPORATION KARMACHARI WELFARE FUND (HEREINAFTER REFERRED TO AS THE M SWCKWF). THE ASSESSING OFFICER DISALLOWED THE CONTRIBUTION TOWARDS MS WCKWF BY FOLLOWING HIS OWN ORDER IN THE EARLIER ASSESSMENT YEAR. IN THE FIRST APPEAL THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED T HE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN AS SESSEES OWN CASE IN THE ASSESSMENT YEARS 2003-04 TO 2005-06. WE FIND THAT SIMILAR ISSUE WAS RAISED BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2003-04 TO 2 005-06 IN ITA NOS. 382, 794 & 1372/PN/2007 FOR RESPECTIVE ASSESSMENT YEARS. THE CO-ORDINATE BENCH AFTER FOLLOWING THE DECISION OF HON'BLE SUP REME COURT OF INDIA IN THE CASE OF MANAGING DIRECTOR, UTTAR PR ADESH VS. VINAY NARAYAN VAJPAYEE REPORTED AS (1980) 3 SCC 459 HE LD THAT THE CONTRIBUTION MADE BY THE ASSESSEE TOWARDS KARAMCHARI W ELFARE FUND FALLS WITHIN THE EXPRESSION AS REQUIRED BY OR UNDER ANY O THER LAW FOR THE PURPOSE OF SECTION 40A(A) OF THE ACT. WE DO NOT FIND ANY ERROR IN THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS IS SUE. NEITHER, THE LD. DR HAS BEEN ABLE TO CONTROVERT THE SAID FINDINGS NOR THE LD. DR HAS PLACED ON RECORD ANY JUDGMENT CONTRARY TO THE VIEW TAKE N BY 22 ITA NOS. 819, 820, 968 & 969/PN/2013 THE CO-ORDINATE BENCH OF THE TRIBUNAL. HENCE, THE GROUND NOS. 2 AND 3 RAISED IN THE APPEAL OF DEPARTMENT ARE DISMISSED BEING DE VOID OF ANY MERIT. 21. IN GROUND NOS. 4 AND 5, THE REVENUE HAS ASSAILED TH E FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION OF ` 31,34,000/- ON ACCOUNT OF UNDERSTATEMENT OF WAREHOUSING CHARGES. THE ASSESSING OFFICER MADE ADDITION OF ` 31,34,000/- ON THE BASIS OF REMARKS MADE IN THE AUDIT REPORT. IN APPEAL THE COMMISS IONER OF INCOME TAX (APPEALS) DELETED THE ADDITION AFTER CONSIDERING THE CLARIFICATION SUBMITTED BY THE ASSESSEE WITH REGARD TO THE REMARKS MADE BY THE AUDITORS IN THE AUDIT REPORT. THE RELEVANT EXTRACT OF THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ARE REPR ODUCED HERE-IN-UNDER : 7.2 I HAVE CONSIDERED THE SUBMISSIONS AND NOTE THA T THE INSURANCE CLAIM WAS MADE BY THE APPELLANT FOR THE F.Y. 2005-0 6 RELEVANT TO A.Y. 2006-07, SINCE THE FIRE TOOK PLACE ON 19.9.2005. T HE APPELLANT HAS STATED THAT AS AND WHEN INSURANCE CLAIMS HAVE BEEN RECEIVED, THE SAME HAVE BEEN REFLECTED IN THE BONDED WAREHOUSING RECEI PTS ON CASH BASIS AND ON ACCRUAL BASIS IN THE COMPUTATION STATEMENT. ACCORDINGLY, THE ENTIRE INCOME FROM WAREHOUSING CHARGES HAS BEEN ACC OUNTED FOR ON MERCANTILE BASIS BY THE APPELLANT. THE COMPUTATION STATEMENT FOR ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10 ARE F ILED IN SUPPORT OF THESE ARGUMENTS. IT IS THEREFORE, SEEN THAT ETH AS SESSING OFFICER HAS ERRONEOUSLY INTERPRETED THE REMARKS OF THE AUDITORS . IN ACTUAL FACT, THE APPELLANT HAS CONSISTENTLY FOLLOWED THE METHOD OF A CCOUNTING OF WAREHOUSING INCOME FOR BONDED WAREHOUSES ON CASH BA SIS IN THE BOOKS OF ACCOUNTS AND ACCRUAL BASIS IN THE COMPUTATION OF INCOME. CONSIDERING THE ABOVE, GROUND NO. 5 IS ALLOWED IN FAVOUR OF THE APPELLANT. THE AMOUNT OF ` 31,34,000/- IS RECEIVED BY ASSESSEE AS INSURANCE CLAIM. A PERUSAL OF THE IMPUGNED FINDINGS BY COMMISSIONER OF INCOME TAX (APPEALS) SHOWS THAT THE ASSESSEE HAS FURNISHED EXP LANATION IN 23 ITA NOS. 819, 820, 968 & 969/PN/2013 RESPECT OF ALLEGED UNDERSTATEMENT OF WAREHOUSING CHARGES . THE ASSESSEE HAS PURPORTEDLY OFFERED THE AMOUNT OF INSURANC E CLAIM FOR TAX IN THE YEAR OF RECEIPT. IN SUPPORT OF HIS SUBMISSIONS THE ASSESSEE HAS FURNISHED COMPUTATION STATEMENTS FOR ASSESSMENT YEARS 2 007-08, 2008-09 AND 2009-10. THE COMMISSIONER OF INCOME TAX (AP PEALS) HAS DELETED THE ADDITION AFTER CONSIDERING THE SAME. WE DO NO T SEE ANY INFIRMITY IN THE ACTION OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION. ONCE THE ASSESSEE HAS OFFERED THE AMOUNT TO TAX IN THE YEAR OF RECEIPT OF CLAIM, THE SAME AMOUNT CANNOT B E TAXED TWICE. THE GROUND NOS. 4 AND 5 RAISED IN THE GROUNDS OF APPEAL BY DEPARTMENT ARE DEVOID OF MERIT AND HENCE, DISMISSED. 22. IN GROUND NO. 6 THE REVENUE HAS IMPUGNED THE FINDING S OF COMMISSIONER OF INCOME TAX (APPEALS) IN DIRECTING THE ASSESS ING OFFICER TO ALLOW THE FIXED DEPOSIT CLOSING BALANCE DIFFERENCES OF ` 6,83,000/- AND ` 3,38,000/- FOR THE ASSESSMENT YEARS 2009-10 AND 2012-13, RESPECTIVELY WITHOUT VERIFYING WHETHER OR NOT T HE ASSESSEE HAS OFFERED THE DIFFERENCES AS ITS INCOME FOR THE RESPECTIVE ASS ESSMENT YEARS. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS REJECTED THE CLAIM OF THE ASSE SSEE AND SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. SINC E, THE CLAIM OF THE ASSESSEE IN RESPECT OF AFORESAID GROUND HAS BEEN REJECTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) THERE SHOULD BE NO GR OUSE FOR THE REVENUE AGAINST THE SAID FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). 23. IN GROUND NOS. 7 TO 9 THE REVENUE HAS ASSAILED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION OF 24 ITA NOS. 819, 820, 968 & 969/PN/2013 ` 16.85 LAKHS ( ` 8.78 LAKHS + ` 8.07 LAKHS) IN RESPECT OF UNDERSTATEMENT OF INCOME RESULTING FROM OVERSTATEMENT OF OTHER LIABILITY UN DER THE HEADS : (A) FIRE AT KALAMBOLI WAREHOUSE AND (B) FIRE AT KOPARG AON WAREHOUSE. THE ASSESSING OFFICER HAD MADE ADDITION OF ` 8.78 LAKHS + ` 8.07 LAKHS ON ACCOUNT OF REIMBURSEMENT OF FIRE EXPENDITURE FROM GOVT. INSURANCE COMPANY IN RESPECT OF THE FIRE AT KALAMBOLI WARE HOUSE AND KOPARGAON WAREHOUSE, RESPECTIVELY. THE AUDITOR HAS MAD E OBSERVATION IN RESPECT OF THE AFORESAID AMOUNTS IN PARA 16 (III) OF THE A UDITORS REPORT. ON THE BASIS OF THE OBSERVATION MADE IN THE AUDITORS REPOR T THE ASSESSING OFFICER MADE ADDITION. THE ASSESSEE FURNISHED DET AILED SUBMISSIONS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) IN RESPECT OF OBSERVATIONS MADE BY THE AUDITORS AS WELL AS THE DETAILS OF AMOUNT RECEIVED FROM THE GOVT. INSURANCE COMPANY. THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE CONTEN TIONS OF THE ASSESSEE BY HOLDING AS UNDER : 8.1. I HAVE CONSIDERED THE FACTS OF THE CASE WITH REFERENCE TO THE SUBMISSIONS MADE BY THE APPELLANT. THIS GROUND CONS ISTS OF AN ADDITION IN TWO PARTS. THE FIRST PART RELATES TO ALLEGED OVE R STATEMENT OF LIABILITY OF RS.8.07 LAKHS PERTAINING TO KOPARGAON WAREHOUSE AND THE SECOND PART CONSISTS OF FIRE FIGHTING EXPENSES OF RS.8.78 LAKHS PERTAINING TO KALAMBOLI WAREHOUSE. SO FAR AS THE KOPARGAON WAREHOUSE BUILDI NG IS CONCERNED, THE AMOUNT OF RS.8.07 LAKHS RECEIVED FROM GOVT. INS URANCE COMPANY WAS SHOWN UNDER THE HEAD OTHER LIABILITY AND WAS DEBITE D TO THE KOPARGAON WAREHOUSE CONSTRUCTION ACCOUNT IN THE A.Y. 2010-11. HOWEVER THE APPELLANT HAD INCURRED AN AMOUNT OF RS.15,33,092 ON THE RE-CONSTRUCTION OF THE KOPARGAON WAREHOUSE DURING THE RELEVANT ASSE SSMENT YEAR AS IS DEMONSTRATED IN THE LEDGER ACCOUNT OF KOPARGAON WAR EHOUSE FILED VIDE PAGE NO. 33 OF THE PAPER BOOK. THE APPELLANT'S SUB MISSION THAT THE LOSS SUFFERED IS ON ACCOUNT OF CAPITAL ASSET THEREFORE, THE INSURANCE CLAIM HAS BEEN DEBITED TO CAPITAL ACCOUNT IS PERFECTLY REASON ABLE. FURTHER, IT IS SEEN THAT NEITHER THE RECEIPT OF INSURANCE CLAIMED NOR T HE ACTUAL CLAIM FOR INSURANCE PERTAINS TO AY. 2008-09 HENCE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.8.07 LAKHS. SO FAR AS THE SECOND PART IS CONCERNED, THE ADDITION IS NOT WARRANTED SI NCE NO SEPARATE 25 ITA NOS. 819, 820, 968 & 969/PN/2013 SANCTION WAS RECEIVED FROM THE INSURANCE COMPANY WI TH REFERENCE TO FIRE FIGHTING EXPENSES. THEREFORE, THE APPELLANT WAS COR RECT IN NOT QUOTING RS. 8.78 LAKHS AS REIMBURSEMENT OF SUCH EXPENSES AND SH OWING THIS AMOUNT AS OTHER LIABILITY. BEFORE ME, DOCUMENTS HAVE BEEN FILED TO SHOW THAT SUBSEQUENTLY THE APPELLANT HAD TO INCUR EXPENDITURE WITH REFERENCE TO CLAIMS MADE BY SOME OF THE CLIENTS OF THE APPELLANT AND EVEN HAD TO PAY INTEREST ON THE AMOUNTS SANCTIONED BY THE COURT. A CCORDINGLY, GROUND NO. 6 IS ALLOWED IN FAVOUR OF THE APPELLANT. THE LD. DR HAS NOT BEEN ABLE TO SHOW FROM RECORDS THAT THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE ARE ERRONEOUS. THE ASSESSEE HAS RECEIVED INSURANCE CLAIM O N ACCOUNT OF LOSS OF CAPITAL ASSET, THEREFORE, THERE IS NO INFIRMITY IN TREA TING THE CLAIM AMOUNT AS CAPITAL RECEIPT. THE LD. DR HAS NOT BEEN ABLE T O CONTROVERT THE FINDING OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISS UE. THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ARE UPHELD A ND THE GROUNDS OF APPEAL NO. 7 TO 9 ARE DISMISSED AS THEY LACK MERIT. 24. IN THE RESULT, THE APPEAL OF THE DEPARTMENT FOR ASSE SSMENT YEAR 2008-09 IS DISMISSED. 25. IN APPEAL FOR ASSESSMENT YEAR 2009-10, THE REVENU E HAS RAISED SIX GROUNDS. ALL THE GROUNDS RAISED IN THE APPEAL RELATE TO SINGLE ISSUE AND ARE DIRECTED AGAINST THE ACTION OF COMMISSIONER OF IN COME TAX (APPEALS) IN ALLOWING DEDUCTION OF ` 19,27,386/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. IN SCRUTINY ASSESSMENT THE ASSESSING OFFICER MADE ADDITION OF ` 24,99,713/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. DURING FIRST APPELLATE PROCEEDINGS, THE ASSESSEE FILED CERTAIN DOCU MENTS AS EVIDENCE IN SUPPORT OF HIS SUBMISSIONS. THE COMMISSIONER O F INCOME TAX (APPEALS) AFTER CONSIDERING THE SUBMISSIONS AND THE DOC UMENTS FURNISHED BY THE ASSESSEE, PARTLY DELETED THE ADDITION. T HE 26 ITA NOS. 819, 820, 968 & 969/PN/2013 COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION OF ` 19,27,386/- BY OBSERVING AS UNDER : 6.2 I HAVE CONSIDERED THE SUBMISSIONS MADE. THE F IRST ITEM RELATES TO PROFESSIONAL TAX OF RS.2,400. THE SAME IS ALLOWABL E AS ACTUAL PAYMENT BASIS. THE SECOND ITEM RELATES TO ESTABLISHMENT CH ARGES OF CUSTOM STAFF AMOUNTING TO RS.2,71,095. IT HAS BEEN STATED THAT THE PAYMENT OF FEES OF CUSTOM STAFF SITTING AT CFS DRONAGIRI IS MADE ON TH E BASIS OF THE DEMAND BY WAY OF CHALLAN RAISED BY THE OFFICE OF COMMISSIO NER, CUSTOMS MUMBAI AND THE ASSTT. COMMISSIONER OF CUSTOMS PREVE NTIVE SERVICE FOR THE DEPUTATION OF PREVENTIVE OFFICERS AT IN THE APP ELLANT'S WAREHOUSE AT VASHI. SINCE THE DEMAND WAS MADE VIDE SUCH CLAIM DA TED 22.7.2008 AND 11.4.2008 THE AMOUNTS IN QUESTION RELATE TO THE CURRENT YEAR AND ARE TO BE ALLOWED. THE THIRD ITEM RELATES TO THE DIFFER ENTIAL IN DA RELATING TO THE PERIOD 1.1.2008 TO 31.3.2008 AND AMOUNTS TO RS. 10,52,060. IT HAS BEEN BROUGHT TO MY NOTICE THAT THE DIFFERENTIAL DA HAS BEEN PAID AS PER GOVT. OF MAHARASHTRA ORDER DATED 20.5.2008. ACCORDI NGLY, THIS AMOUNT IS ALSO ALLOWABLE. THE FOURTH ITEM OF RS.5,00,954 RELA TES TO BACK WAGES, ARREARS OF PAY AND DIFFERENTIAL GRATUITY PAID TO SH RI S.V. BAPAT, EX ASST. MANAGER, HEAD OFFICE PURSUANT TO COURT ORDER DATED 27.3.2008 WHICH THE APPELLANT RECEIVED DURING THE CURRENT YEAR. THE PAYMENTS MADE IN PURSUANCE TO THE COURT'S ORDER RECEIVED DUR ING THE YEAR ARE CONSIDERED ALLOWABLE EXPENDITURE. THE FIFTH ITEM OF RS.1,00,877 PERTAINS TO THE CONSTRUCTION OF COMPOUND WALL AT GULTEKADI W AREHOUSE COMPLEX. THOUGH THE BILL IN RESPECT OF SUCH REPAIRS WAS RAIS ED AND APPROVED DURING THE F.Y. 2008-09, THE PRICE VARIATION CHARGE S WERE RAISED BY THE CONTRACTOR DURING THE YEAR AND THEREFORE, THE EXPEN DITURE STANDS CRYSTALIZED DURING THE YEAR. ACCORDINGLY, THE ASSES SING OFFICER IS DIRECTED TO ALLOW RELIEF TO THE APPELLANT ON THE ABOVE STATE D AMOUNTS WHICH TOTAL RS.19,27,386. CONSEQUENTLY, GROUND NO. 3 IS TREATE D AS PARTLY ALLOWED. AFTER HEARING SUBMISSIONS OF THE RIVAL SIDES AND PERUSING TH E ORDERS OF THE AUTHORITIES BELOW, WE ARE OF THE CONSIDERED VIEW THAT THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION IS WELL REASONED AND JUSTIFIED. THE COMMISSIONER OF INCOME T AX (APPEALS) HAS DELETED THE ADDITION OF EXPENDITURE WHICH HAVE CRYSTALLIZED DURING THE PERIOD RELEVANT TO ASSESSMENT YEA R UNDER APPEAL. THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE WELL REASONED 27 ITA NOS. 819, 820, 968 & 969/PN/2013 FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). WE DO NOT FIN D ANY MERIT IN THE GROUNDS RAISED BY THE DEPARTMENT IN APPEAL, ACCORDINGLY, THE SAME ARE DISMISSED BEING DEVOID OF MERIT. 26. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 09 TH DAY OF MAY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 09 TH MAY, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-I, PUNE 4. ' / THE CIT-I, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE