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TMI Blog2014 (5) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had been carrying on similar business would not disentitle the assessee from claiming relief u/s 80IB(11A) - deduction under Chap VIA, in respect of new undertakings set up by the assessee by way of expansion of the existing undertakings – Relying upon as held by the Apex Court in the cases of Textile Machinery Corporation Ltd v CIT [1977 (1) TMI 3 - SUPREME Court] – thus, the assessee is entitled to deduction u/s 80IB(11A), in respect of income derived from the new undertakings, warehouses, set up and operated from 1.4.2001 for storage, handling and transportation of food grains – the order of the CIT(A) is set aside and the matter is remitted back to the AO for verifying the claim of the assessee - Decided in favour of Assessee. Disallowance of deduction u/s 37 of the Act - Contribution made to IAS Officers’ Association Building – Held that:- The assessee itself has added the amount of Rs.2 lakhs in the computation of income, and a separate addition hence is not called for - It is to verify this contention of the assessee and to delete the addition made by the Assessing Officer, if the same is found to be correct that the CIT(A) set aside the matter to the file of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation of integrated business of handling, storage and transportation of food-grains, c) The eligible undertaking has to begin such business form the initial year of claim of deduction. d) The units in respect of which it claimed exemption should have started operations on or after the 1st day of April, 2001. The Assessing Officer also referred to the functions listed in the Warehousing Corporation Act, 1962, duly extracting the relevant portion thereof from the said statute, and observed that the basic functions of the assessee as per the said Act are as follows- (I) Acquire and build godowns and warehouses (II) Run warehouses for the storage of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities. (III) Arrange facilities for the transport of the specified commodities in (II) to and from warehouses. 5. The Assessing Officer, on perusal of the above functions, noted that nowhere it is mentioned that handling and transportation are main functions of the assessee Corporation, and without any ambiguity, it is stated at sub-section (c) of S.24 of the Corporation Act, that the corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transportation of food-grains. The CIT(A) too, found no merit in the contentions of the assessee with regard to its entitlement to relief under S.80-IB(11) of the Act. He noted that the assessee was incorporated in the year 1958 and it has been enjoying the exemption under S.10(29) since then. The CIT(A) then, referred to the Board s Circular No.8 of 2002 dated 27.2.2002 which explained the omission of clause (29) of S.10. He further observed that deduction under S.80IB(11A) is available for five years commencing from the initial year commencing from 1.4.2001, i.e. the relief will be available w.e.f. 1.4.2002 for all undertakings which have begun operations or after 1st April, 2001 for any income from the integrated business of handling, storage, transportation of food grains. Then, he referred to the decision of the Delhi Bench of the Tribunal in the case of Dy.CIT V/s. Geo Empro Petroleum Ltd. (2007)15 SOT 419, wherein the expression initial year vis- -vis admissibility of deduction under S.80IB of the Act has been examined, and noted that in the present case, the operations of the assessee corporation have started in 1958 and there is no new activity which begun to operate on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shing new warehouses at different places in the State from time to time and that each new warehouse so established is a new undertaking of the assessee, eligible for exemption under S.80IB(11A) of the Act. It is also pointed out that the CIT(A) was not correct in holding that there was no activity which began to operate on or after 1.4.2001, since the assessee-corporation set up several new warehouse after 1.4.2001 in respect of which the see-corporation claimed exemption under S.80IB(11A) of the Act. 10. The Learned Departmental Representative, on the other hand, strongly relied on the orders of the lower authorities and submitted that the assessee, not being an integrated undertaking, is not entitled for the relief under S.80IB(11A) of the Act. He submitted that transport and handling activities claimed by the assessee are merely incidental and not integrated to its main activity. He also submitted that the assessee, in the course of its warehousing activity deals not only with foodgrains specified in sub-section (11A) but also with fertilizers. 11. We have considered the rival submissions and perused the material available on record. It is evident from the orders of the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, viz. 1958; and also observing that no new activity was taken up after 2001. Since each new godown is an undertaking in itself, assessee is entitled for such relief under S.80IB(11A) for five years in respect of each such undertaking from the initial year in which it was set up. 13. As for the eligibility of the activity of the assessee to the relief under S.80IB(11A), it is worthwhile to refer to the intention of the Legislature in introducing sec 80IB(11A), which is reproduced hereunder : Under the existing provisions of Sec. 80-IB of the Income-tax Act, a deduction is allowed, in computing the taxable income, in respect of profits derived from a new industrial undertaking or a ship or the business of a hotel. To address the country's basic concerns relating to enhanced food security and agricultural development, upgradation and modernization of infrastructure for storage, handling and transportation of food grains is a central concern in which introduction of modern technology would bring greater efficiency in the grain management system and minimize post harvest food grain losses. It is evident from the above, that the insertion of sub-section (11A) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er S.80IB(11A) of the Act. In our opinion therefore, the assessee is entitled to deduction u/s 80IB(11A), in respect of income derived from the new undertakings, warehouses, set up and operated from 1.4.2001 for storage, handling and transportation of food grains. We accordingly set aside the impugned orders of the CIT(A) on this issue for all the three years and set aside the matter to the file of the Assessing Officer, with a direction to verify the claim of the assessee for deduction under S.80IA(11A) of the Act in respect of new undertakings set up after 2001, and allow the same in accordance with law, and after giving due opportunity of hearing to the assessee. 14. Assessee s grounds on the issue of deduction under S.80IA(11A) are allowed for statistical purposes. 15. The only other issue, common only in the appeals for assessment year 2005-06 and 2006-07, viz. ITA Nos.834 and 835/Hyd/2012 relate to disallowance of the assessee claim for deduction of Rs.2 lakhs in respect of contribution to IAS Officers Association Building. 16. Facts of the case in brief in relation to this issue are that assessee paid an advance of Rs.10,00,000 to IAS Officers Quarters during the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is hereby confirmed. 18. Aggrieved by the orders of the CIT(A) on this issue, assessee preferred the present appeals for assessment year 2005-06 and 2006-07 before us. 19. The learned counsel for the assessee submitted that the assessee-corporation is always headed by an IAS Officer and the IAS Officers Association building is always useful to the Managing Director to convene departmental meetings. Therefore, it was explained that on the one hand the expenditure is incurred the on the directions from the Government and on the other hand, it relates to the business of the assessee, as the building can be and is used by the assessee-corporation for conducting the meetings of the departmental heads, and as such the expenditure is clearly allowable as business expenditure. It is further submitted that there was no such disallowance made in the earlier year assessments of the assessee-corporation, when similar amount was claimed in the Assessment Years 2003-04 and 2004-05. 20. The Learned Departmental Representative, on the other hand strongly supported the disallowance made by the Assessing Officer and sustained by the CIT(A). 21. We heard both sides and perused ..... X X X X Extracts X X X X X X X X Extracts X X X X
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