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Issues Involved:
1. Liability of the assessee to tax under section 10(29) of the Income-tax Act, 1961. 2. Taxability of income from sources other than warehousing charges. 3. Disallowance of certain expenditures by the Revenue authorities. 4. Claim for depreciation. 5. Levy of interest under sections 139(8) and 217 of the Income-tax Act. Issue-wise Detailed Analysis: 1. Liability of the Assessee to Tax Under Section 10(29): The primary issue was whether the assessee, a Warehousing Corporation constituted under section 18(1) of the Warehousing Corporation Act, 1962, was liable to tax under section 10(29) of the Income-tax Act, 1961. The assessee claimed total exemption for its entire income, arguing that it met all conditions under section 10(29). The Assessing Officer allowed exemption only for income derived from warehousing charges amounting to Rs. 3,44,57,147 but disallowed Rs. 13,25,171 from other sources. The Tribunal upheld the Revenue's view, emphasizing that section 10(29) only exempts income derived from letting of godowns or warehouses for storage, processing, or facilitating the marketing of commodities. The Tribunal referenced the Supreme Court decision in Union of India v. U.P. State Warehousing Corpn., which affirmed that only income from letting of godowns or warehouses qualifies for exemption under section 10(29). 2. Taxability of Income from Other Sources: The assessee argued that all its activities were related to marketing and thus should be exempt under section 10(29). However, the Tribunal held that income from bank interest, hire charges of stitching machines and platform scales, GPF forfeiture, application fees, and other miscellaneous income did not qualify for exemption. The Tribunal cited decisions from various High Courts, including the Madhya Pradesh High Court in M.P. Warehousing Corpn. v. CIT and the Gujarat High Court in CIT v. Gujarat State Warehousing Corpn., which supported the view that only income from letting of godowns or warehouses is exempt under section 10(29). 3. Disallowance of Certain Expenditures: The assessee contended that no distinction should be drawn between expenditures related to taxable and non-taxable income. The Tribunal agreed with the assessee, citing the Supreme Court decision in CIT v. Maharashtra Sugar Mills Ltd., which held that if business activities are inseparable, the entire expenditure should be allowed. The Tribunal also referenced the Punjab and Haryana High Court decision in Punjab State Co-operative Supply & Marketing Federation Ltd. v. CIT, which supported the view that indivisible business expenses should be fully allowable. Consequently, the Tribunal allowed the entire expenditure claimed by the assessee. 4. Claim for Depreciation: The assessee argued that the CIT (Appeals) failed to direct the Assessing Officer to allow depreciation. The Tribunal noted that the assessee did not raise this issue before the CIT (Appeals) or the Assessing Officer, and there was no evidence that a claim for depreciation was made and refused. Therefore, the Tribunal rejected this ground, stating that it did not arise from the CIT (Appeals)'s order. 5. Levy of Interest under Sections 139(8) and 217: The assessee contended that interest under sections 139(8) and 217 should not be levied, as it claimed exemption for its entire income under section 10(29). The Tribunal noted that the CIT (Appeals) had restored the matter to the Assessing Officer for passing a speaking order after giving the assessee an opportunity to present its case. Therefore, the Tribunal rejected this ground, allowing the assessee to raise the plea before the Assessing Officer. Conclusion: The appeal was partly allowed. The Tribunal upheld the Revenue's decision to tax income from sources other than warehousing charges and disallowed the claim for depreciation. However, it allowed the entire expenditure claimed by the assessee, considering the inseparability of its business activities. The matter of interest under sections 139(8) and 217 was left to be decided by the Assessing Officer.
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