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TMI Blog1973 (3) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... ull account for the stocks received and returned twice every month for a commission of Rs. 5 per ton on the quantity of fertiliser issued by the assessee from the stock. The assessee received a sum of Rs. 31,316 on this account. Though this sum was originally included in its turnover, in the course of the assessment proceedings, the assessee claimed exemption in regard to the said sum under section 14(3)(iv) of the Indian Income-tax Act, 1922, hereinafter referred to as " the Act ". The Income-tax Officer held that the assessee was not entitled to the exemption on the ground that the amount had been received for services rendered. The assessee appealed to the Appellate Assistant Commissioner. He also agreed with the Income-tax Officer that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er an agreement for stocking and distribution of ammonium sulphate was exempt under section 14(3)(iv) of the Indian Income-tax Act, 1922 ? Whether, on the construction of the agreement between the assessee and the State Government, the Appellate Tribunal's finding that the receipts were mostly for letting out the godowns and that the servicing was an insignificant portion of the whole amount is reasonable and consistent with the material on record ? " Before we proceed to consider the scope of section 14(3)(iv) under which exemption is claimed, it is necessary to see the terms of the agreement entered into by the assessee with the Government of Madras. Under the agreement the assessee as a stock-holder has agreed to hold ammonium sulphate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost of all loss, deterioration and damage due to its negligence in carrying out the instructions of the Government or their officers. The assessee will get a commission of Rs. 5 per ton of the quantity of fertiliser issued from the stocks on the instructions of the Government. It is clear from the terms of the said agreement that the assessee has acted as a stockholder to take custody and store the fertiliser in proper places and distribute the same in accordance with the instructions of the Government. The Tribunal took the view that the sum of Rs. 5 per ton shown as commission from the Government was mostly for letting of the godowns of the assessee and that though some servicing has been done, that would be an insignificant portion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instructions of the Government. It is stated that though the amount received under the agreement has been called a commission, it is really in the nature of payment for the user of the godowns and distribution depots maintained by the assessee for storage, that the word " letting " occurring in section 14(3)(iv) cannot be understood in a strict sense of letting out to another and that in the context of the words " any income derived " occurring in the same clause the word " letting " has to be understood as having a wider connotation such as " permitting ", etc. It is pointed out that if the word " letting " is to be understood in a strict and narrow sense, the legislature would have used the words " in respect of any rent received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is very rare. Normally, co-operative societies who have got storage facilities receive goods from its members, agriculturists or others for storage and charge certain fee depending upon the quantity of the goods delivered for storage. In such cases the godowns are not let out to the others but possession of the godowns is retained by the society and the society merely takes charge of the goods brought by the members, agriculturists or others and stores the same. Thus, most of the activity of the society consists in taking custody of the goods of others and storing the same in their godowns or ware-houses. It must be taken that the legislature when it introduced the above provision was quite aware of the usual activities of the co-operative ..... X X X X Extracts X X X X X X X X Extracts X X X X
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