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2021 (6) TMI 501 - AT - Income TaxDeduction u/s 80IB(11A) - income is derived from warehouse business operation and it is deriving profit from integrated business of handling storage and transportation of food grains - HELD THAT - Assessee has constructed various godowns and some of them were also taken on rent. Assessee has more than 250 rented warehouses and most of them were NCDEX accredited which is strict standard for use of modern technology for storage of food grains and prevention of post harvest loss to the agriculture commodities. From the plain reading of the provision for eligibility for claim of deduction nowhere it is provided that assessee has to own the warehouse or if the warehouses are taken on rent for providing integrated handling storage and transportation services, it would disentitle the assessee for claiming any deduction u/s 80IB (11A). The contribution of the assessee towards infrastructure development cannot be undermined, because the construction of the warehouses will be dependent on the requirement of business of handling, storage and transportation of the food grains. There is no fetter in the law; whether the warehouses are constructed by the assessee itself, or warehouses are taken on rent from others. What is relevant is that, profit and gains have to be derived from eligible business from the integrated business of handling, transportation of food grains. Thus, the reasoning and the grounds given by the Ld. AO to reject the claim of deduction cannot be sustained. Whether the undertaking of the assessee had commenced its operation on or after 1st April, 2001 or not ? - It has already been clarified by the Ld. Counsel by placing the audited balance sheet as on 31.03.2007 to substantiate that Assessee Company has commenced its operation after 31st March 2007 only which is much after the year 2001. The balance sheet for 31st March 2008 and 2009 clearly shows the business of storage, handling and transportation has started from assessment year post 31st March 2008. Thus, the construction of storage godowns and on rent had started much after the Asstt. Year 2007-08. On these facts it cannot be held that assessee had not commenced its business of operation after the year 2001 which is one of the conditions prescribed u/s 80IB (11A). Accordingly, we hold that assessee fulfils all the mandatory conditions prescribed u/s 80IB (11A), as all its income is derived from warehouse business operation and it is deriving profit from integrated business of handling storage and transportation of food grains. The assessee is entitled for claim of deduction u/s. 80IB (11A). Accordingly, the order of the Ld. CIT (A) is confirmed and the Revenue s appeal is dismissed.
Issues Involved:
1. Deletion of addition based on the case of M/s AP State Warehousing Corporation vs. DCIT. 2. Fulfillment of conditions for claiming deduction under section 80IB (11A). 3. Classification of business activities as integrated handling, storage, and transportation of food grains. 4. Applicability of the case law ITO vs. Shankar K. Bhanage ITAT Mumbai. Detailed Analysis: 1. Deletion of Addition Based on M/s AP State Warehousing Corporation vs. DCIT: The Revenue argued that the Ld. CIT (A) erred in deleting the addition by relying on the AP State Warehousing Corporation case, ignoring the legislative intent of section 80IB (11A) to promote infrastructure development of warehouses. The CIT (A) held that the warehouse need not be owned by the appellant and that the business of integrated handling, storage, and transportation of food grains qualifies for deduction under section 80IB (11A). This was supported by the ITAT Hyderabad decision in the AP State Warehousing Corporation case, which was found applicable to the present case. 2. Fulfillment of Conditions for Claiming Deduction Under Section 80IB (11A): The Revenue contended that the assessee did not fulfill the conditions for claiming deduction under section 80IB (11A) as it did not own the godowns. The AO disallowed the deduction on the grounds that the assessee was not wholly engaged in the integrated business of handling, storage, and transportation of food grains and was earning income from sub-letting existing godowns. The CIT (A) found that the plain reading of the provision does not necessitate ownership of the warehouses and that the assessee's activities qualify for the deduction. The ITAT upheld this view, stating that the law does not require the assessee to own the warehouses and that the assessee's integrated business activities meet the conditions for deduction. 3. Classification of Business Activities: The AO argued that the assessee's revenue from transportation and handling charges was minimal and incidental to its business, thus not qualifying for the deduction. The CIT (A) and ITAT found that the assessee's business of handling, storage, and transportation of food grains is integrated and that the revenue from these activities, even if one leg yields more revenue, qualifies for the deduction. The ITAT emphasized that the contribution to infrastructure development and the use of modern technology for storage are relevant factors, not the ownership of the warehouses. 4. Applicability of the Case Law ITO vs. Shankar K. Bhanage ITAT Mumbai: The AO relied on the ITAT Mumbai decision in ITO vs. Shankar K. Bhanage, where the assessee was a contractor handling transportation without owning or leasing storage facilities. The CIT (A) and ITAT distinguished this case from the present one, noting that the assessee in the current case is engaged in the integrated business of storage, handling, and transportation with constructed and rented godowns. The ITAT concluded that the decision in Shankar K. Bhanage does not apply to the present case, and the decision in AP State Warehousing Corporation is more relevant. Conclusion: The ITAT upheld the CIT (A)'s decision to allow the deduction under section 80IB (11A) to the assessee, confirming that the assessee's integrated business activities of handling, storage, and transportation of food grains qualify for the deduction. The ITAT dismissed the Revenue's appeal, affirming that the conditions prescribed under section 80IB (11A) were fulfilled by the assessee. The order was pronounced in the Open Court on 10th June, 2021.
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