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2019 (7) TMI 1046 - MADRAS HIGH COURTGrant deduction u/s 54G with respect to the long term capital gain earned by the assessee on the sale of its godown situated in Bangalore, an urban area and which has been relocated in a non urban area - assessee sold an explosive godown/property at Bangalore and invested in a property located in a non urban area i.e in the outskirts of Sivakasi town - whether property sold at Bangalore was only a depot/godown/storage place and not an industrial undertaking - ITAT allowed the claim noted that the assessee shifted its godown storing hazardous products to a non urban area and that the activity carried on in the godown being storage and repacking, which is severable from the other activities of the industrial establishment and held that the assessee is entitled to claim exemption of capital gains as per the provisions of Section 54G HELD THAT:- Assessing Officer failed to take note of the vital factor namely that the property, which was sold by the assessee in Bangalore, was a 'magazine'. Rule 2(31) of the Explosives Rules, 2008 defines the word 'magazine' to mean a building or structure (other than an explosives manufacturing building) intended for storage of explosives, specially constructed in accordance with the specification provided under these Rules or of a design and approved by the Chief Controller. The expression 'Chief Controller' is defined under Rule 2(9) of the Explosives Rules, 2008 to mean the Chief Controller of Explosives. In terms of Rule 71 of the Explosives Rules, 2008, a person holding licence for possession of explosives granted under these Rules shall store the explosives only in the premises specified in the licence. Thus, possession, usage and sale of explosives are strictly regulated under the provisions of the Explosives Act and the relevant Rules framed thereunder. AO did not take note of this vital factor, but was guided by the common parlance test given to an industrial undertaking. One more factor, which the Assessing Officer lost sight of, was the manner, in which, the first limb of Section 54G(1) of the Act is worded wherein the transfer of a capital asset includes machinery or plant or building or land or any rights in the building or land used for the purpose of business of an industrial undertaking situated in an urban area. T The second limb of Section 54G(1) of the Act is what had weighed in the mind of the Assessing Officer while denying the deduction under Section 54G of the Act. However, what was important to note is that where the capital gains arising from transfer of capital asset, being machinery or plant or land or building used for the purposes of business of an industrial undertaking situated in an urban area effected in the course of or in consequence of the shifting of such industrial undertaking to any area other than an urban area, the assessee is entitled to the benefit of deduction under Section 54G of the Act. The scheme of the Explosives Act and the relevant Rules framed thereunder would clearly bring a 'magazine', which was referred to by the Assessing Officer as a godown to qualify to be a place used for the purpose of business of an industrial undertaking and in fact, going by the definition of the word 'manufacture' under the Explosives Act, the activity done by the assessee namely storage and repacking would also, in our opinion, fall within the definition of the word 'manufacture'. The Tribunal, in paragraph 4.6 of its order, has specifically recorded that the facts are not in dispute. In the light of the above, we find that the interpretation given by the Tribunal to the facts of the case of the assessee is perfectly legal and valid. For the above reasons, the Revenue has not made out any ground to interfere with the order passed by the Tribunal. - Decided against Revenue.
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