1999 (4) TMI 3 - SC - Income Tax

Orissa State Warehousing Corporation being the assessee herein received a sum of ₹ 1,74,383 as interest on fixed deposits - interest received by the assessee from the banks on fixed deposits was not exempt under section 10(29)

Summary

Issues Involved:
1. Interpretation of Section 10(29) of the Income-tax Act, 1961.
2. Whether interest received on fixed deposits is exempt under Section 10(29).
3. Whether income from activities incidental to the business of warehousing is exempt under Section 10(29).

Detailed Analysis:

1. Interpretation of Section 10(29) of the Income-tax Act, 1961:
The core question in these appeals revolves around the interpretation of Section 10(29) of the Income-tax Act, 1961. The provision states that income derived from the letting of godowns or warehouses for storage, processing, or facilitating the marketing of commodities is exempt from tax. The Supreme Court emphasized that the language of Section 10(29) is clear and unambiguous, restricting the exemption to income derived specifically from the letting of godowns or warehouses for the purposes mentioned.

2. Whether interest received on fixed deposits is exempt under Section 10(29):
The Orissa State Warehousing Corporation received interest on fixed deposits and claimed it to be exempt under Section 10(29). The Income-tax Officer added the interest income to the total income, which was upheld by the Commissioner of Income-tax (Appeals). However, the Tribunal held that the interest income was exempt. The High Court, however, negated this view, stating that interest income does not fall within the purview of Section 10(29). The Supreme Court concurred with the High Court, stating that the interest income is not derived from the letting of godowns or warehouses and thus is not exempt under Section 10(29).

3. Whether income from activities incidental to the business of warehousing is exempt under Section 10(29):
The Tribunal had considered various incomes such as administrative overheads, fumigation service charges, and miscellaneous income to be exempt under Section 10(29) by treating the warehousing activities as an integrated one. However, the High Court and subsequently the Supreme Court rejected this view. The Supreme Court clarified that only income derived directly from the letting of godowns or warehouses for storage, processing, or facilitating the marketing of commodities is exempt. Income from other activities, even if incidental to the business of warehousing, does not qualify for exemption under Section 10(29).

Conclusion:
The Supreme Court dismissed the appeals, affirming that the exemption under Section 10(29) is strictly limited to income derived from the letting of godowns or warehouses for the specified purposes. Interest income and income from other incidental activities do not qualify for exemption under this provision. The Court emphasized the need for a strict interpretation of fiscal statutes, adhering to the clear language used by the Legislature.