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TMI Blog2021 (9) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... ship firm carrying on the business of cold storage services, filed its return of income for the AY 2012-13 admitting total income at Rs. Nil, after claiming deduction of Rs. 70,14,288/- u/s 80IB(11A) of the Act. The AO observed that the assessee is involved in running cold storage for rental purposes and that it did not carry on integrated activities of handling, storage and transportation of goods, as per the audit report furnished by the assessee in Form No. 10CCB. He, therefore, denied the assessee's claim of exemption u/s 80IB(11A) of the Act. 4. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and contended before the CIT(A) that the assessee is entitled for deduction u/s 80IB(11A) as it is in the business of processing, preservation and packaging of fruits or vegetables and the assessee received agricultural produce. The same is preserved and the are packed into the cold storage plant. 5. After considering the submissions of the assessee and referring the provisions of section 80IB(11A), the CIT(A) confirmed the order of AO by holding as under: "5.1 Nature of business of the assessee: the assessee has claimed deduction u/s 80IB(11A) amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits and gains derived from the operation of such business in a manner that the total period of deduction does, not exceed ten consecutive assessment years and subject to fulfillment of the condition that it begins to operate such business on or after the 1st day of april,2001] [Provided that the provisions of this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it begins to operate such business before the 1st day of April, 2009] A bare perusal of the provisions of section show that deduction ul s. 80IB(11A) is available in the case of an undertaking deriving profit from the 'integrated' business of handling, storage and transportation of food grains. The vital word used in the section is 'integrated'. The word integrated used in the section connotes, that the business of handling, storage and transportation of food grains should be carried out in a combined manner. [ITA No. 829jPNj2012 Assessment Year: 2008-09 Anurag Radhesham Attal followed). Thus, going by the above provisions, deduction u/s 80IB(11A) is allowable only to an unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quoting 3rd activity. With respect to the third business activity the provision is as under: " The amount of deduction in a case of an undertaking deriving profit from the integrated business of handling, storage and transportation of food grains shall be .............. Three conditions have to be fulfilled as it appears from a plain reading of the aforesaid provision. First handling, second storage and third transportation of food grains. All the three conditions should be integrated with each other. The present case only relates to the second condition i.e. storage. Let us now see how important is this condition. The memorandum appended to the Financial Bill by which Sec. 80lB(11A) was amended show the Legislative intent is as under: Tax holiday for undertakings engaged in the integrated handling, storage and transportation of food grains. Under the existing provisions of se cion 80IB 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 ship or the business of a hotel. To address the country's basic concerns relating to enhanced food security and agricultural development, upgra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost to the cold storage facility of the assessee and the assessee is only liable for unloading the goods by collecting Hamali charges from syngenta and storing the contents/seeds. The third activity of transportation also is not carried out by the assessee. Apart from the contents of the agreement, the Profit & Loss Account does not indicate that the assessee incurred expenditure towards handling and transportation. Further, the AO noticed that the assessee is liable for loading and unloading of the goods to be stored, the basic expenditure to be incurred towards Hamali/labour charges is not explicitly debited, except an expenditure of Rs. 6,32,239/- towards salaries. Apart from this head of expenditure, no other expenditure worth mentioning was debited towards the activities of handling and transportation. From above details and discussion, it is observed that the assessee was involved in running a cold storage for rent purpose and did not carry out the integrated activities of handling, storage and transportation of goods to make its profit eligible for deduction u/s 80IB(11A) (ITA No. 829/PN/2012 Anurag Radhesham Attal followed]. 5.9. But, during the appellate proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of assessee's case., which are placed on record. In the written submissions, the ld. counsel for the assessee stated as under: "The appellant brings to the kind notice of the Hon 'ble Bench that while arguing the matter, the counsel of the assessee mentioned that goods stored in the Cold store are "vegetables". It is submitted that the goods stored are "seeds" of various agricultural produce. I express sorry for the same. Copies of the agreements submitted at page No. 34 to 42 of the assessee's paper book. for the Asst. year 2012-13 in ITA No.1618jHydj2016 which clearly indicates that the goods stored are "seeds". The process involved in accepting the goods for storage, their preservation in cold store is explained hereunder: a) The goods are received at the gate through transport vehicles .and from there they are brought inside the premises, b) The Hamali labours manually unload the goods on the platform. . The goods are kept for some time on the said platform to bring down goods to normal temperature. It also enables any. other ingredients to be removed. c) The goods are segregated quality-wise and item-wise on the platform itself. At that stage the goods are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that it fulfilled the conditions mentioned in Section 80IB(11A) of the LT. Act and is entitled for deduction u/s 80IB(11A) of the LT. Act. The assessee is relying on the following decisions: i) The decision of the Hon'ble ITAT, Hyderabad Bench-A in ITA No.1533 to 1535jHydj2011 in the case of ACIT Vs Sarang Hi Tech Cold Storage Pvt. Ltd .. ii) The decision of the Hon'ble ITAT, Hyderabad Bench-B in ITA No.1045 jHydj2010 in the case of DCIT Vs Sarang Hi Tech Cold Storage Pvt . . Ltd .. (copies of the above said two decisions are part of the paper book filed by the assessee for theAY 2012-13 in ITA No.1618jHydj2016 at pages No.15 to 24) iii) 'Order of High Court of Judicature for Rajasthan in the case of CIT Vs Mefco Enterprises Pvt. Ltd, iv) Order of the Hon'ble ITAT, Hyderabad Bench-A in ITA No.57 jHydj2011 in the case ofT. Devender Reddy. v) The order of the Hon'ble ITAT, Hyderabad in the case of A.P. State Warehousing Corporation reported in 150 lTD 485). (copies of the above said three decisions are part of the paper book filed by the assesse for the decisions relied upon in ITA No.1618jHydj2016 & 340jHydj2018 at pages No.1 to 20) In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly relates to the second condition i.e. storage. Let us now see how important is this condition. The memorandum appended to the Financial Bill by which Sec. 80IB(11A) was amended show the Legislative intent is as under: Tax holiday for undertakings engaged in the integrated handling, storage and transportation of food grains. 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 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. The Bill proposes to encourage building of storage capacities, by providing that any undertaking engaged in integrated bulk handling, storage and transportation would be allowed hundred per cent deduction for the first five years and thirty per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad incurred expenses towards hamali charges and transportation of food grains. The case law relied upon by the ld. AR of the assessee are distinguishable on facts to the case of the assessee. Res-judicata does not apply in this case. The ld. AR also failed to produce earlier AYs orders passed u/s 143(3) of the Act to show that any deduction was granted u/s 80IB(11A) of the Act. The case law relied upon by the ld. counsel for the assessee in his written submissions quoted supra, are not applicable to the facts of the case of the assessee as they are distinguishable on facts. 9.5 In view of the above observations, we do not find any infirmity in the order of the CIT(A) wherein he held that the assessee is not entitled for deduction u/s 80IB (11A) by observing as under: "5.10 The AR completely misinterpreted the provision. 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 transport ..... X X X X Extracts X X X X X X X X Extracts X X X X
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