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TMI Blog2021 (10) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... reduces the loss of food grain and contributes to the preservation of food grains - CIT(A) has righty allowed the claim of deduction under section 80IB(11A) of the Act and we decline to interfere with the order of the ld. CIT(A). Disallowance u/s 14A - HELD THAT:- The assessee is not liable for any disallowance on interest as no interest bearing funds have been utilized for the purpose of making investment. Since, the share of profit from the partnership is mere distribution of income which is already been taxed, hence the provisions u/s 14A are not attracted in such case. Further, we also affirm the principle of no disallowance is called for where there is no exempt income earned. The AO is directed to re- compute the disallowance, keeping in view the guidelines mentioned above. Prior period Expenses - amount comprised of excess input tax receivable and bank processing charges - AO disallowed prior period expenses on the grounds that they do not relate to the relevant previous year - HELD THAT:- The relevant facts are that the aforesaid expenditure was duly claimed as deduction in the computation of income as the same were business expenditure incurred in the ordinary co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007 - 08 in ITA No. 4046/Del/2013, allowed deduction claimed u/s 80 IB(11 A) of the Act and dismissed the appeal of the revenue. The relevant findings of the Tribunal, is extracted hereunder: 24. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the Section 80IB (11A) of the Act mandates that the undertaking of the assessee should be engaged in an integrated business and the assessee has demonstrated before us that the combining or coordinating of the three elements i. e. handling, storage and transportation of food grains is harmonious interrelated as whole activity and thus eligible for deduction under Section 80IB(11A) of the Act. The decision in case of Dilip Kumar (Supra) held that exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... integral part of reducing the post- harvest food grain loss. 63. We, accordingly find that the assessee cannot be denied the deduction under section 80IB(11A) of the Act either in respect of the activities conducted by the assessee to meet the demand of the section, namely, deriving income from the integrated business of handling, storage and transportation of food grains or for non- compliance with the conditions depleted under Section 80IB(2) of the Act. We do not find anything illegality are regularity either in the reasoning or the conclusions reached by the Ld. CIT(A) on this aspect, and while confirming the same find the grounds number 1 to 3 of Revenue s appeal devoid of merits and reliable to be dismissed. Thus, the CIT(A) has rightly allowed the claim of deduction under Section 80IB(11A) of the Act. It is pertinent to note that all the conditions which have been stipulated in the statute have been fulfilled i.e. all the three activities of handling, storing and transportation have been undertaken on an integrated basis by the assessee. Thus, Ground No. 3 to 5 of Revenue s appeal are dismissed. 25. In result, the appeal of the assessee is partly allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intent is not to encourage transportation or handling of food grains but the Legislative intent is to encourage construction of godowns and warehouses with a view to providing storage of food grains. If we consider the entire combat of the scheme relating to the tax holiday provided by the Legislature, we find that the deductions are available under various provisions when the assessee has contributed something towards the infrastructure development of the country, but the main purpose of bringing this provision is construction of godowns specifically for stocking food grains for greater efficiency in the grain management system and minimize post- harvest food grain losses. Thereafter, in para 39 to 43, the Tribunal examined the activities undertaken by LT Foods Ltd. in the integrated business of handling, storage and transportation of food grains and observed as under: 39. In this context, it is necessary to look at the activities conducted by the assessee in their integrated business of handling, storage and transportation of the food grains in furtherance of the above object of enhancing the food security by achieving the greater efficiency in the grain management sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnique of processing i.e. cleaning, parboiling and milling, adopting the grading practices to get more profit and to avoid the economic losses, and using efficient and good packaging for storage, as well as in transportation, by investing more than ₹ 30 crores for setting up of the eligible unit and for this purpose advanced machinery with improved technology was installed for efficiently handling food grains and to avoid any post- harvest losses, developed huge storage capacity to handle paddy stock of more than 1,50,000 Metric Ton (MT) and 70,000 MT of rice in order to bring efficiency in the grain management system and incurring significant expenditure to facilitate transportation of food grains by way of acquiring trucks, tractors and trolleys and has also hired trucks for the purposes of carrying food grains from the farmers and mandis to its storage blocks and thereafter to the markets, followed by upgradation and modernization of infrastructure for handling of food grains in order to bring greater efficiency in the storage and grain management system and minimize post- harvest food grain losses. Assessee also brought it to the notice of the learned Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted context surely, it is necessary to meet some concreteness on this aspect as against imagination. No doubt the activities enumerated by the Ld. DR too answer the description of handling in the context of food grains under section 80IB(11A) of the Act, is necessary that in order to be eligible to claim the benefits under section 80IB(11A) of the Act, whether the assessee is required to install all such facilities or such facilities at suit the convenience of the assessee while meeting the avowed object of 80IB(11A) of the Act would entitle the assessee to claim such benefit is the mute question. 45. In plain English handling includes any process not amounting to manufacture of the treatment of the product with a view to deal with the same to achieve a desired purpose. In a sense it includes all the activities preparatory and axillary in nature. Merely because the word processing is occurring in 80IB(11A) of the Act in respect of the fruits or vegetables, it does not exclude all the processes from meaning of handling . As stated supra, there are various steps involved in minimizing the post-harvest losses as per the recommendations of the Agricultural Marketing Information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties which were identical to the activities conducted by the assessee in the case of Laxmi Energy (supra) and the assessee before us. 49. For that matter, Ld. DR admitted during the course of arguments while dealing with this alternative prayer for remand of the matter to the file of learned Assessing Officer that the facts involved in Laxmi energy (supra) are identical to the facts involved in the case on hand, in respect of the activities of the assessee. It is therefore, clear that the assessees who were conducting the business similar to the one done by the assessee in this case, were found entitled to the benefit under section 80IB(11A) of the Act and such a view is consistent so far. Without mincing many words, while following the ratio of those cases, we are of the considered opinion that the activities involving the cleaning, steaming, soaking, drying, polishing, grinding etc. are covered by the expression handling and the assessee is certainly conducting such activities which would entitle to the benefit of deduction under section 80IB(11A) of the Act. In the subsequent paras 50 to 53, the Tribunal held that de- husking of the paddy to convert it into rice is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal allowed the claim of deduction under section 80IB(11) of the Act by holding as under: 63. We, accordingly find that the assessee cannot be denied the deduction under section 80 IB(11A) of the Act either in respect of the activities conducted by the assessee to meet the demand of the section, namely, deriving income from the integrated business of handling, storage and transportation of food grains or for non-compliance with the conditions depleted under section 80IB (2) of the Act. We do not find anything illegality are regularity either in the reasoning or the conclusions reached by the Ld. CIT(A) on this aspect, and while confirming the same find the grounds number 1 to 3 of Revenue s appeal devoid of merits and reliable to be dismissed. 8. In view of the aforesaid, it was respectfully submitted that the CIT(A) has righty allowed the claim of deduction under section 80IB(11A) of the Act and we decline to interfere with the order of the ld. CIT(A). Disallowance U/S 14A: 9. The assessee, during the previous year relevant to the assessment year under consideration, received income amounting to ₹ 2,03,13,535/- as share of its profit in partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,57,562/- only and therefore, it cannot be said that any borrowed funds could have been utilised to make such investment incurring any interest expenditure. 98. Viewing from any angle, we did not find any ground to sustain addition made under 14A of the Act read with Rule 8D of the Rules. Such an addition is, therefore, is directed to be deleted. Ground number 17 is accordingly allowed. 12. In view of the aforesaid, it was submitted that there was no warrant to make disallowance u/s 14A of the Act in the case of the assessee. 13. It was also submitted that the Co-ordinate Bench of Tribunal in assessee s own case for the assessment year 2009- 10 in ITA No. 4042/Del/2013 restricted the disallowance u/s 14A by directing the assessing officer to consider only those investments from which exempt income was earned during the year as against total investments appearing in the balance sheet. It may however be pertinent to note that the aforesaid decision rendered by the co-ordinate Bench in the case of LT Foods was not at all considered by the Tribunal. The relevant finding of the Tribunal is extracted hereunder: 11. We have heard both the parties and perused all the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X
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