2015 (2) TMI 859 - HC - Income Tax

Exemption under Section 10(29) denied - letting of godowns or warehouses - incomes from supervision charges, fumigation activities and weigh bridge receipts - Held that - When once goods are stored in the warehouses, it is the duty of the warehousing authorities to ensure that no damage or loss is caused to the same. Therefore, the warehousing authorities maintain security for supervision of the warehouses and the goods therein. Similarly, maintaining weigh bridge is essential for the purpose of carrying on warehousing business. Likewise, for proper maintenance of the goods from pests, fumigation is also essential. Therefore, all the three activities, referred supra, are integral part of the business of warehousing and hence, they would squarely fall within the ambit of Section 10(29) of the Act and are eligible for grant of exemption. Tribunal without understanding the nature of the warehousing business, on an erroneous interpretation of the decision of the Supreme Court in Orissa State Warehousing Corporation / Rajasthan State Warehousing Corporation v. CIT 1999 (4) TMI 3 - SUPREME Court has come to the conclusion that the above said three activities are not in relation to warehousing business. - Decided in favour of the assessee

Summary

Issues:
1. Interpretation of exemption under Section 10(29) of the Income Tax Act.
2. Eligibility of supervision charges, fumigation charges, and weigh bridge receipts for exemption.
3. Applicability of previous Tribunal decisions.
4. Justification of exemption under Section 10(29) for specific activities.

Analysis:
1. The appeal challenged the Income Tax Appellate Tribunal's order regarding exemption under Section 10(29) of the Income Tax Act for the assessment year 1998-1999. The main contention was whether the appellant, a government-sponsored undertaking, was entitled to exemption for various income sources related to warehousing activities.

2. The appellant derived income from warehousing charges, supervision charges, weigh bridge charges, and other receipts. The Assessing Officer allowed exemption only for storage charges, while disallowing other receipts. The Commissioner of Income Tax partially allowed the appeal, granting exemption for supervision charges, weigh bridge receipts, and fumigation charges. However, some claims were disallowed as not connected to warehouse maintenance.

3. The Revenue appealed to the Tribunal, which relied on a previous decision in the appellant's case and disallowed exemption for supervision charges, fumigation charges, and weigh bridge receipts. The Tribunal held that only warehousing storage rent was eligible for deduction under Section 10(29) of the Act.

4. The appellant argued that supervision charges, fumigation charges, and weigh bridge receipts were integral to warehousing business and thus eligible for exemption under Section 10(29). The Court analyzed the nature of these activities and concluded that they fell within the ambit of the exemption provision.

5. The Court highlighted that the Tribunal's decision was based on an erroneous interpretation of a Supreme Court judgment and failed to consider the nature of the appellant's claims. Referring to a previous decision in a similar case, the Court held that activities like supervision charges and fumigation services were directly related to warehousing activities and thus eligible for exemption under Section 10(29).

6. Ultimately, the Court ruled in favor of the appellant, setting aside the Tribunal's order and allowing the appeal. The Court emphasized the direct nexus of the disputed activities to warehousing operations, affirming their eligibility for exemption under Section 10(29) of the Income Tax Act.