1977 (7) TMI 3 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee-corporation qualifies as an authority established for marketing of commodities under the Warehousing Corporations Act, 1962.
2. Whether the assessee-corporation is entitled to exemption under section 10(29) of the Income Tax Act in respect of its income from letting of godowns and warehousing.

Issue-wise Detailed Analysis:

Issue 1: Whether the assessee-corporation qualifies as an authority established for marketing of commodities under the Warehousing Corporations Act, 1962.
The Gujarat State Warehousing Corporation, originally established under the Agricultural Produce (Development and Warehousing) Corporations Act, 1956, is deemed to be constituted under the Warehousing Corporations Act, 1962, by virtue of section 43(2)(g) of the latter Act. The preamble of the 1962 Act specifies that it aims to provide for the incorporation and regulation of corporations for the warehousing of agricultural produce and other commodities.

Section 24 of the Warehousing Corporations Act outlines the functions of the State Warehousing Corporation, which include acquiring and building godowns and warehouses, running warehouses for storage, arranging transport facilities, acting as an agent for the purchase, sale, storage, and distribution of agricultural produce and notified commodities, and carrying out other prescribed functions. The Tribunal relied on the Allahabad High Court's decision in U.P. State Warehousing Corporation v. ITO, which held that such a corporation satisfies the requirements of section 10(29) of the Income Tax Act.

The term "authority" in section 10(29) is interpreted in a limited context, focusing on statutory authorities constituted under law for marketing. The historical context, including recommendations from various committees and the legislative history, supports the view that warehousing corporations were established to facilitate marketing, which includes storage and warehousing as essential elements of the marketing process.

Issue 2: Whether the assessee-corporation is entitled to exemption under section 10(29) of the Income Tax Act in respect of its income from letting of godowns and warehousing.
Section 10(29) of the Income Tax Act provides exemption for income derived from letting of godowns or warehouses for storage, processing, or facilitating the marketing of commodities, if the entity is an authority constituted under any law for the marketing of commodities. The Tribunal found that the assessee-corporation met all three conditions for this exemption: it is constituted under a law in force, it is constituted for the marketing of commodities, and the income in question is derived from letting of godowns or warehouses for storage, processing, or facilitating marketing.

The Tribunal emphasized that the term "marketing" should be interpreted broadly to include all activities that enhance the value of commodities, such as storage and warehousing, which are crucial in the marketing process. This interpretation aligns with modern marketing principles and the legislative intent to encourage warehousing activities by granting tax exemptions.

The Tribunal rejected the argument that the authority must engage in trading activities to qualify for the exemption, noting that such a narrow interpretation would defeat the legislative purpose. The Tribunal also dismissed the reliance on the Taxation Enquiry Committee Report, 1953-54, as outdated and not reflective of the current legislative framework.

In conclusion, the Tribunal held that the assessee-corporation fulfilled all the requisites for exemption under section 10(29) and answered the reference in the affirmative, in favor of the assessee and against the revenue. The revenue was directed to pay the costs of the assessee in each reference.