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TMI Blog2000 (10) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... g rise to these appeals are that the assessee engaged in running a consumer co-operative store having 30 branches in the city of Udaipur filed its original return of income for asst. yrs. 1989-90 and 190-91 declaring gross total income of Rs. 2,57,500 and Rs. 18,781 and claiming therefrom a deduction under s. 80P(2)(c) amounting to Rs. 70,000 and Rs. 18,781 respectively. Subsequently, a revised return for asst. yr. 1989-90 was filed by the assessee claiming a further deduction of Rs. 1,87,500 under s. 80P(2)(e). In the said revised return the assessee did quantify the deduction allowable to it under s. 80P(2)(e) but only restricted it to Rs. 1,87,500 meaning thereby that it was entitled for further deduction under s. 80P(2)(e). Along with these revised return the assessee also filed a letter justifying its claim for deduction under s. 80P(2)(e) on the following grounds: 1. During the year under assessment the assessee has entered into an agreement with the State Government for holding stocks of (i) foodgrains (wheat and rice) and (ii) sugar on behalf of the State Government in its own godown. 2. The State Government has paid a sum of Rs. 11,15,388 as storage charges for the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety Ltd. were altogether different from the facts of the instant case and contended that this issue has been elaborately dealt with by the AO in his assessment order. He further contended that the CIT(A) in this case has given a relief on the basis of irrelevant judgment and therefore urged that the order of the AO be restored. He also submitted that for claiming the deduction under s. 80P(2)(e) the income should be derived from letting out of godown or warehouses wherein relationship of landlord and tenant must be established. He further submitted that such arrangement should specify the space as well as the period and the amount of rent should be fixed with reference to the space allotted by the owner to the tenant. According to him, these basic and essential ingredients are absent in the arrangement under reference. He further submitted that the assessee has shown the commission income earned on these transactions in its trading accounts and the Revenue has accordingly taxed such income as business income. 6. The learned counsel for the assessee submitted that the assessee entered into agreements with the State Government for holding stock of foodgrains and sugar on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A) and submitted that the first appellate authority after examining and scrutinizing the assessment record has dealt with this issue elaborately in paras 1 to 5 of the appellate order while arriving at the conclusion that the instant case is covered by the decision of the Hon'ble Supreme Court in the case of South Arcot Dist. Co-op. Marketing Society. He therefore, contended that the order of the learned CIT(A) on this issue deserves to be upheld. 7. We have considered the rival submissions and also perused the relevant material on record including the cited decisions to which our attention was drawn during the course of hearing. 8. It is observed that the assessee claimed the deduction under s. 80P(2)(e) after becoming aware of the decision of the Hon'ble Supreme Court in the case of CIT vs. South Arcot Dist. Co-op. Marketing Society Ltd. as the facts of the said case were found by the assessee to be identical one with its own case. It is also observed that the AO disallowed the claim of the assessee for deduction under s. 80P(2)(e) mainly on the following three grounds which according to him were distinguishable from the aforesaid case before the Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative of Revenue that the income from letting of godown or warehouses should be just like rental receipt on letting of premises would have carried some force. However, the judgment of the Hon'ble Supreme Court delivered subsequently in the year 1989 in the case of CIT vs. South Arcot Dist. Co-op. Marketing Society Ltd. has brought about sea changes in the concept of "letting" contemplated in s. 80P(2)(e). Having regard to the object with which the said provisions has been enacted, the Hon'ble Supreme Court felt that a liberal construction should be given to the language of the said provision. Considering the facts of the case before it the Hon'ble Supreme Court observed that what the assessee did was to let out its godown for the purpose of storing the goods handed over to it by the State Government and the remaining services performed by the assessee were merely incidental to the essential responsibility of using the godown for the storage of the goods. Elaborating further, the Hon'ble Supreme Court observed that even though a certain sum was paid to the assessee and described as commission for the services performed by it, but having regard to the totality of the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Government are retained by the assessee till these are to be issued to the retailers as per authorisation issued by the district supply officer. (xi) The goods are not issued prior to their reaching in the godown of the assessee. 12. From the perusal of the above-mentioned terms and conditions given in the aforesaid order of the State Government, it is evident that although there was no separate agreement entered into between the assessee and the State Government, the terms and conditions of the distribution arrangement between the assessee and the State Government were specifically prescribed and the arrangement for wholesale distribution was regulated by the said order. As such, we are of the view that even in the absence of the separate agreement between the assessee and the State Government, the purpose of having such an agreement specifying the terms and conditions of the arrangement of wholesale distribution work is very well served by the aforesaid order issued by the State Government rendering the distinction pointed out by the AO touching this point meaningless. 13. Secondly, the AO has noticed that the commission received by the assessee from the State Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the Government. The controlled commodities were retained by the assessee on behalf of the Government and subsequently sold or distributed to the retail shops as per the direction of the Government agency. It is also observed that the assessee was not authorised to store any other goods along with the controlled goods in its godown, and as such, the concerned godowns were entirely earmarked for storage of the controlled commodities. It is also observed that all these godowns were under the vigil of the State Government and subjected to checking and inspection by the Government agency during the relevant time. As per terms of the arrangement, the assessee was also required to maintain and furnish complete particulars of the commodities received/distributed and lying in stock periodically to the Government agency which was again subjected to checking and verification. It is also observed that the assessee was entitled for the commission or margin amount at fixed rate and any variation in the price of the controlled commodities was to be transferred to the Government account. After going through all these factual details arising out of terms and conditions of the distribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f commission/margin amount is entitled to deduction under s. 80P(2)(e). 16. Before us the learned counsel for the assessee has referred the following decisions: 1. CIT vs. Gujarat State Warehousing Corpn. (1980) 124 ITR 282 (Guj); 2. Broach Dist. Co-op. Cotton Sales Ginning Pressing Society vs. CIT (1989) 77 CTR (SC) 70 : (1989) 177 ITR 418 (SC); 3. Asstt. CIT vs. Agricultural Procedure Co-op. Marketing Society Ltd. (1978) 115 ITR 709 (Kar); 4. Union of India vs. U.P. State Warehousing Corpn.; and 5. U.P. State Warehousing Corporation vs. ITO. After carefully going through all these above decisions, it is observed that the same are rendered with reference to s. 10(29) and the then prevailing s. 81(i)(c). To consider the relevance of these decisions in the instant case, we feel it appropriate to reproduce the relevant provisions: "10(29) in the case of an authority constituted under any law for the time being in force for the marketing of commodities, any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities." "81. Income of co-operative societies- Income-tax shall not be payable by a co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real and substantive justice, the law has vested ample jurisdiction in the Tribunal under s. 254(1) having wide embracement for the purpose. Keeping conscious awareness with the above legislative spirit, and considering the nature and effect of this issue being consequential to the main issue so also to avoid multiplicity of litigation, we consider it appropriate and in the interest of justice to direct the AO to consider this issue on merit, in the light of following principles laid-down by the Hon'ble Supreme Court in the case of Rajasthan State Warehousing Corporation: (i) If income of an assessee is derived from various heads of income, he is entitled to claim deduction permissible under the respective head whether or not computation under each head results in taxable income; (ii) If income of an assessee arises under any of the heads of income but from different items, e.g. different house properties or different securities etc., and income from one or more items alone is taxable whereas income from the other item is exempt under the Act, the entire permissible expenditure in earning the income from that head is deductible; and (iii) In computing "profits and gain of bu ..... 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