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TMI Blog2019 (7) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... activity carried on in the godown being storage and repacking, which is severable from the other activities of the industrial establishment and held that the assessee is entitled to claim exemption of capital gains as per the provisions of Section 54G HELD THAT:- Assessing Officer failed to take note of the vital factor namely that the property, which was sold by the assessee in Bangalore, was a 'magazine'. Rule 2(31) of the Explosives Rules, 2008 defines the word 'magazine' to mean a building or structure (other than an explosives manufacturing building) intended for storage of explosives, specially constructed in accordance with the specification provided under these Rules or of a design and approved by the Chief Contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea other than an urban area, the assessee is entitled to the benefit of deduction under Section 54G of the Act. The scheme of the Explosives Act and the relevant Rules framed thereunder would clearly bring a 'magazine', which was referred to by the Assessing Officer as a godown to qualify to be a place used for the purpose of business of an industrial undertaking and in fact, going by the definition of the word 'manufacture' under the Explosives Act, the activity done by the assessee namely storage and repacking would also, in our opinion, fall within the definition of the word 'manufacture'. The Tribunal, in paragraph 4.6 of its order, has specifically recorded that the facts are not in dispute. In the light of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking ? ii. Whether the Appellate Tribunal was justified in directing the Assessing Officer to grant deduction under Section 54G of the Act with respect to the long term capital gain earned by the assessee on the sale of its godown situated in Bangalore, an urban area and which has been relocated in a non urban area, in the outskirts of Sivakasi town? iii. Whether the Appellate Tribunal was correct in not appreciating that the assessee had obtained LE-3 licence under the Explosives Rules, 2008 for its Bangalore property and in terms of this licence, no manufacturing activity could be conducted in the subject Bangalore property and is also not an 'industrial undertaking'? And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpreted to mean an 'industrial undertaking'. Accordingly, the claim for deduction under Section 54G was disallowed and an amount of ₹ 50,36,72,654/- was assessed under the head 'capital gains'. 7. As against the order of assessment dated 31.12.2016, the assessee carried the matter on appeal before the Commissioner of Income Tax (Appeals)-19, Chennai [for short, the CIT(A)], who, by order dated 04.5.2017, concurred with the findings of the Assessing Officer and while accepting the fact that the land in question was used for the purposes of the business of an industrial undertaking, denied the relief to the assessee on the ground that the sale of the store area land in Bangalore is one off transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne ' to mean a building or structure (other than an explosives manufacturing building) intended for storage of explosives, specially constructed in accordance with the specification provided under these Rules or of a design and approved by the Chief Controller. The expression 'Chief Controller' is defined under Rule 2(9) of the Explosives Rules, 2008 to mean the Chief Controller of Explosives. 10. Section 4(h) of the Explosives Act, 1884 defines the word 'manufacture' in relation to an explosive, which includes the process of (1) dividing the explosive into its component parts or otherwise breaking up or unmaking the explosive, or making fit for use any damaged explosive; and (2) re-making, alte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r plant or land or building used for the purposes of business of an industrial undertaking situated in an urban area effected in the course of or in consequence of the shifting of such industrial undertaking to any area other than an urban area, the assessee is entitled to the benefit of deduction under Section 54G of the Act. 12. The scheme of the Explosives Act and the relevant Rules framed thereunder would clearly bring a ' magazine', which was referred to by the Assessing Officer as a godown to qualify to be a place used for the purpose of business of an industrial undertaking and in fact, going by the definition of the word 'manufacture' under the Explosives Act, the activity done by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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