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TMI Blog1977 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, Gujarat State Warehousing Corporation, for exemption under s. 10(29) in respect of the income relating to the warehousing. Thereafter, the Additional Commissioner having exercised the power under s. 263 and having disallowed the exemption on the ground that the assessee-corporation was not a marketing authority within the meaning of s. 10(29), the matter was carried in appeal before the Tribunal which has allowed this exemption claim relying on the decision of the Allahabad High Court in U.P. State Warehousing Corporation v. ITO [1974] 94 ITR 129. The Tribunal having accordingly restored the order of the ITO, the Commissioner has come up in this reference. The other two references are for the other assessment years, as earlier pointed out, on this identical question. The relevant exemption section is s. 10(29) under which, in computing total income of the assessee of a previous year, this exemption is provided in the following words: " (29) in the case of an authority constituted under any law for the time being in force for the marketing of commodities, any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo bodies and for administrative convenience, it was decided that the two bodies should function independently under separate enactments and, therefore, the 1962 Warehousing Corporations Act and National Co-operative Development Corporations Act, 1962, had been passed. And under the present Act under the aforesaid s. 43(2)(g) a State Warehousing Corporation set up under the old law has been deemed to be a warehousing corporation established for the respective States under the new law. Section 2(a) defines " agricultural produce " and s. 2(e) defines " notified commodities " as commodities declared to be notified commodities by a notification in this behalf by the Central Government. For the purposes of this Act, the later part of the condition that the commodity must be one with respect to which Parliament has power to make laws by virtue of entry 33 under List III in the Seventh Schedule to the Constitution had been deleted by the Warehousing Corporations Supplementary Act, 1965, so far as this Gujarat State is concerned with effect from November 29, 1965. The list of these notified commodities was a large list which, besides agricultural produce defined in s. 2(1), included iro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the officers and other employees of a warehousing corporation; laying down their duties and conduct of officers and employees of a warehousing corporation and in respect of the powers and duties which may be entrusted or delegated to the managing director of a warehousing corporation, and generally, the efficient conduct of the affairs of a warehousing corporation. The appropriate Government was also conferred power under. s. 42(3) by a notification in the Official Gazette to rescind any regulation which it had sanctioned and thereupon the regulation shall cease to have effect. It is in the context of these provisions that we have to decide whether this is an authority constituted under any law and whether it is an authority for the marketing of cornmodities. The Tribunal has relied upon the afore said decision of the Allahabad High Court which has taken the view that such a State Warehousing Corporation satisfies the requirements of s. 10(29). On the first question as to the Corporation being an authority, the Allahabad High Court at page 133 has rightly taken the wider view because the context was not of the authority being a State within the meaning of art. 12 of the Consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf undertake the planning and construction of warehouses at all nuclear points of trade in agricultural produce. The warehousing system should be operated by a public corporation organised on lines similar to those of the improvement trust. " The Rural Banking Enquiry Committee (1950) also emphasised the importance of storage and warehousing in relation to rural credit and rural banking. It had suggested the formation of a Warehousing Development Board with a large capital for the purpose of giving loans and subsidies to those who were prepared to take up this line of activity as a business. The Committee of Direction of the All India Rural Credit Survey (1954) had thoroughly examined these questions of warehousing and had recommended the creation of National Co-operative Development and Warehousing Board and All India Warehousing Corporation by a statute, as a result of which the earlier 1956 Act was enacted establishing the National Co-operative Development and Warehousing Board which was now bifurcated only in 1962. The whole function of the Board was to prepare plans and to promote programmes for agricultural production, processing, marketing and storage, warehousing, exporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilitating the marketing of commodities." In the I.T. Act, 1961, these provisions were re-enacted as ss. 81, 82 and 83 by way of providing these deductions. By the Finance (No. 2) Act of 1967, with effect from April 1, 1968, ss. 81 and 82 were substituted so far as they were concerned by ss. 80P and 80Q, while s. 83 which dealt with this particular provision, by styling it as income of marketing societies, is now re-enacted as s. 10(29). Section 10(29), except for this material change in the whole grouping by changing the character of this exemption or deduction by giving complete immunity to this income in the computation of the total income under s. 10, is otherwise in identical terms with s. 14(5) of the 1922 Act. In view of this coincidental measure of exemption introduced by Parliament for giving incentive to these newly created business institutions in these vital fields of warehousing and marketing through co-operative societies and by granting exemption in respect of this particular income derived from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the legislative intention was rightly found to be to encourage the war ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho want them." These authors have made the following classification of the marketing functions : (1) Activities involving transfer of ownership: (a) buying; (b) selling ; (2) Activities involving physical supply: (a) transportation; (b) storage; (3) Activities facilitating the foregoing functions: (a) standardisation and grading; (b) financing; (c) risk taking; (d) market research. The storage function was explained as the marketing function involving holding and preserving goods between the time of production and their use. It was, therefore, pointed out that the marketing process consisted of processes of concentrating and dispersing all goods between the producers and consumers. In both these processes, storage and warehousing form important activities. Therefore, warehousing or storage was clearly an essential element of the process of marketing. Encyclopaedia Britannica, 1960 Edn., Vol. 14, p. 915, says that marketing consists of those activities which effect transfers in the ownership of goods and services and provide for their physical distribution. Similarly, the Encyclopaedia of Social Science, 1959 Edn., Vol. 10, p. 133, says that as an economic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mohan Lal, AIR 1967 SC 1857, was examined where the authority in the limited context of art. 12 must be a public administrative agency or corporation having quasi-governmental powers and authorised to administer a revenue producing public enterprise. The expression " other authorities " was interpreted and it was held to include within it every authority created by a statute and functioning within the territory of India and also all constitutional or statutory authorities on whom powers are conferred by law. Even in commercial or trading activities if the authority had power to make rules and regulations and to administer the Act, it would be clear that sovereign powers were delegated to the said authority. A public authority was a body which had public or statutory duties to perform and which performs those duties and carries out its transactions for the benefit of the public and not for private profit. It is in this context that in order to decide whether the authority was a State within the meaning of art. 12 that these tests were laid down of such public or statutory authority, which was authoritative in that wider sense. Possession of such law-making power by way of laying dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly the limited administration, one which is specified in the law creating it, viz., functions laid down in s. 24. It is the specification of these functions in s. 24 which lays down the mandated area or sphere or jurisdiction of this authority, within which sphere it is completely authoritative because of the law which has created it to exercise its functions within that field. The only question which we have, therefore to examine is the other question as to whether this limited sphere which has been set out by the legislature for this statutory authority by its functions specified in s. 24, is such a sphere which makes it the authority " for marketing ". The legislature has advisedly used the words " authority for marketing " by emphasising the object and purpose or the sphere of the statutory authority. So far as s. 24 is concerned, the functions are all of such wide nature, as earlier pointed out, which includes specifically marketing besides setting up godowns or warehouses and running these warehouses for storage of agricultural produce, seeds, manures, fertilisers, agricultural implements and notified commodities and arranging facilities for the transport thereof to and fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacturer. In our country, when even foodgrains have to be imported, the importance of the functions of the warehousing and storage could never be lost sight of as furnishing a vital link in the flow of the goods to the ultimate consumer even when the grains have to be imported from outside. Therefore, the marketing must be interpreted in the wider concept as it is now understood as per the modern principles and practices of marketing and it would embrace within its reach all the business activities which help the flow of the goods from the producer to the consumer and it could never be restricted to mere simple buying and selling of the commodities in question. The learned standing counsel vehemently tried to rely upon the Taxation Enquiry Committee Report, 1953-54, at page 126, which was the basis for enlarging the existing taxation concessions to co-operative societies including State co-operative banks. Under para. 67(3) it is stated as under : " To this end we make the following recommendations ...... (iii) in the scheme of agricultural organisation that is favoured by competent authorities, the extension of a system of warehouses in rural areas is deemed to be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities of marketing. The whole exemption provision would then be self-defeating. The exemptible income is contemplated from the letting of godowns and warehouses for storage, transport or facilitating the marketing of commodities and if such warehousing authority whose substantial income is only from these activities is to be denied this exemption on the ground that it does not carry on the actual trading activity the income from which is not made exemptible, the legislative intention would be completely frustrated. The learned standing counsel also tried to urge that the adjectival clause " for the marketing " is attached to the law and not to the authority. This distinction or even the use of the term " marketing " again in s. 10(29) would hardly be material to illumine the point under discussion as to whether the term " marketing " has a narrow or wider meaning. The whole crux of the matter is that Parliament in its wisdom has used the expression " authority for the marketing of commodities". The expression "for " would show the purpose, the ultimate object to be served by this authority., The authority must promote marketing by its services in the mandated area of its fun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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