2011 (4) TMI 779 - HC - Income Tax

Deduction u/s 80P(2)(e) - The appellant relied upon order of this Court dated 8.9.2010 in ITA No.157 of 2005 The Commissioner of Income Tax Panchkula Vs. M/s Haryana State Coop. Supply and Marketing Federation Limited Panchkula holding that deduction under Section 80P(2)(e) is available only in respect of income from letting out for storage and if the assessee used the storage only for marketing the deduction is not permissible - Hald that the assessing officer was clearly erroneous and prejudicial to the interest of the revenue which justified invocation of powers under Section 263 of the Act - The view taken by the Tribunal cannot thus be sustained - The appeal is allowed in favour of revenue.

Summary

Issues:
1. Interpretation of Section 80P(2)(a)(iii) and Section 80P(2)(e) of the Income Tax Act, 1961.
2. Validity of the order passed by the Assessing Officer and Commissioner of Income Tax under Section 263.
3. Applicability of relevant case laws in determining income qualification for deduction under Section 80P(2)(e).

Analysis:

Issue 1: Interpretation of Section 80P(2)(a)(iii) and Section 80P(2)(e) of the Income Tax Act, 1961:
The appellant, a federation of cooperative societies engaged in marketing agricultural produce, claimed exemption under Section 80P(2)(a)(iii) for income derived from marketing its members' produce. Initially, the assessing officer disallowed the exemption but later allowed it under Section 80P(2)(e) after remand. The Commissioner under Section 263 set aside this decision, stating the income was from business, not from letting out storage space. The Tribunal observed that the appellant was entitled to the deduction under Section 80P(2)(e) for storage charges, as supported by relevant case laws and the purpose of promoting rural economy. The Tribunal found no error in the Assessing Officer's decision, leading to the cancellation of the Commissioner's order.

Issue 2: Validity of the order passed by the Assessing Officer and Commissioner of Income Tax under Section 263:
The Tribunal held that the Assessing Officer's decision was not erroneous or prejudicial to revenue interests, as the appellant's claim for deduction under Section 80P(2)(e) was valid. The Tribunal emphasized that the Assessing Officer had made the decision based on facts, evidence, and applicable laws, and had not rushed the process. The Tribunal concluded that the twin conditions for invoking Section 263 were not met, leading to the cancellation of the Commissioner's order.

Issue 3: Applicability of relevant case laws in determining income qualification for deduction under Section 80P(2)(e):
The Tribunal referred to various judgments, including those from the Rajasthan High Court and the Supreme Court, supporting the appellant's claim for deduction under Section 80P(2)(e) for income derived from letting of godowns and warehouses. The Tribunal highlighted that the Assessing Officer had properly considered the facts and law before allowing the deduction, making the order non-prejudicial to revenue interests. The Tribunal upheld the appellant's entitlement to the deduction, emphasizing the purpose of promoting rural economy through such deductions.

In conclusion, the High Court upheld the appeal, emphasizing the validity of the Assessing Officer's decision and the appellant's entitlement to deduction under Section 80P(2)(e) for income derived from letting of storage space, as supported by relevant case laws and the promotion of rural economy.