2012 (9) TMI 659 - AT - Income Tax

Disallowance of deduction u/s. 80IB(11A) - assessee did not have any storage of his own and no storage was taken by the assessee on rent - CIT(A) allowed the claim - Held that - Section 80-IB(11A) targets for relief for the business of processing preservation and packaging of fruits and vegetables as newly added from A.Y. 2005-06, while the relief has been available w.e.f. 1.4.2002 for all undertakings, which have begun to operate on or after 1st April, 2001 for any income from the integrated business of handling, storage and transportation of food grains - Literal interpretation of words integrated business of handling, storage and transportation of food grains will not lead to any absurdity or produce any manifestly unjust result. The Legislative intent is not to encourage transportation or handling of food grains but the Legislative intent is to encourage construction of go-downs and warehouses with a view to providing storage of food grains. If we consider the entire combat of the scheme relating to the tax holiday provided by the Legislature, we find that the deductions are available under various provisions when the assessee has contributed something towards the infrastructure development of the country In the instant case, no find of any contribution towards the infrastructure by the assessee. The assessee is simply handling and transporting the food grains and storing at the godowns of the FCI which means that the assessee is using the existing infrastructure of the State whereas the main purpose of bringing this provision is construction of godowns specifically for stocking food grains for greater efficiency in the grain management system and minimize post harvest foodgrain losses. The assessee has not done anything towards these facilities - Even the tender participated by the assessee show that the assessee has been awarded the contract for handling and transportation of food grains to the places mentioned therein. The contention of the assessee that Sec. 80IB being a Benevolent provision liberal construction should be applied cannot be accepted because beneficial interpretation applies only where two views are reasonably possible whereas in the instant case no find of any other possible view on the facts of the matter where the law is clear and unambiguous, we cannot act contrary to it with a view to give benefit to the assessee - the conditions precedent for making assessee eligible for deduction u/s. 80IB(11A) is not satisfied - against assessee.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IB(11A) of the Income Tax Act.
2. Interpretation of "integrated business of handling, storage, and transportation of food grains."

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(11A):
The primary issue revolved around whether the assessee was eligible for a deduction under Section 80IB(11A) of the Income Tax Act. The assessee claimed a deduction of Rs. 64,00,624/- for the assessment year 2005-06, asserting that they were engaged in the integrated business of handling, storage, and transportation of food grains. The Assessing Officer (AO) denied the claim, arguing that the assessee did not meet all the conditions stipulated under Section 80IB(11A), particularly the storage condition. The AO's investigation revealed that the storage facilities were owned by the Food Corporation of India (FCI) and not by the assessee. Furthermore, the AO's inquiries and the statement from the Deputy General Manager of FCI indicated that the storage activities were managed by FCI, and the assessee's role was limited to handling and transportation.

2. Interpretation of "Integrated Business of Handling, Storage, and Transportation of Food Grains":
The interpretation of the term "integrated business of handling, storage, and transportation of food grains" was central to the dispute. The AO argued that the assessee did not fulfill the storage requirement as they did not own or lease the storage facilities. The assessee contended that their activities, including handling, transportation, and certain storage-related tasks such as fumigation and pest control, qualified as integrated business operations under the provision. The CIT(A) sided with the assessee, relying on a certificate from FCI stating that the assessee was engaged in the integrated business of handling, storage, and transportation of food grains. However, the Tribunal found that the legislative intent behind Section 80IB(11A) was to encourage the construction of new storage infrastructure, which the assessee did not contribute to. The Tribunal emphasized that the provision aimed to enhance food security and agricultural development through modern infrastructure for storage, handling, and transportation of food grains. The Tribunal concluded that the assessee's activities did not align with this legislative intent, as they merely utilized existing FCI infrastructure without adding to the country's storage capacity.

Conclusion:
The Tribunal reversed the CIT(A)'s decision, holding that the assessee was not eligible for the deduction under Section 80IB(11A) as they did not fulfill the integrated business requirement, particularly the storage condition. The Tribunal highlighted that the provision's intent was to promote new infrastructure development, which the assessee did not contribute to. Consequently, the appeals filed by the Revenue were allowed for both assessment years 2005-06 and 2006-07.