High Court Of Gauhati
Assam State Warehousing Corporation vs. CIT & ANR.
Sections 10(29), 37
Asst. Years 1983-84, 1984-85, 1985-86, 1986-87, 1987-88, 1988-89, 1989-90, 1990-91, 199192, 1992-93, 1993-94, 1994-95
D. Biswas & T.N.K. Singh, JJ.
IT Appeal Nos. 34, 35, 49 & 53 to 55 of 2003
5th September, 2006
Counsel Appeared
V.K. Bhatra & R.K. Bhatra, for the Appellant : U. Bhuyan, for the Respondents
JUDGMENT
D. Biswas, J. :
All these appeals under s. 260A of the IT Act, 1961 are directed against a common order dt. 31st May, 2002, passed by the learned Tribunal, Guwahati Bench, in ITA Nos. 282 to 287 of 1998. The appeals relate to the asst. yrs. 1983-84 to 1994-95.
2. The questions of law common to all the appeals are as follows :
“1. Whether, on the facts and in the circumstances of the case, the entire expenditure incurred by the appellant-assessee on its business is to be allowed from the taxable receipts and no allocation of expenditure is permissible as held by the Hon’ble apex Court in CIT vs. Indian Bank Ltd. (1965) 56 ITR 77 (SC); CIT vs. Maharashtra Sugar Mills Ltd. 1973 CTR (SC) 489 : (1971) 82 ITR 452 (SC) and Rajasthan State Warehousing Corporation vs. CIT (2000) 159 CTR (SC) 132 : (2000) 242 ITR 450 (SC)? Whether, on the facts and in the circumstances of the case, all income from ancillary activities except supervision charges and miscellaneous receipts are exempt under s. 10(29) of the IT Act, 1961 ?
Whether, on the facts and in the circumstances of the case and on a proper and true interpretation of s. 254 of the IT Act, 1961, the learned Tribunal had failed to consider and decide the matter in issue in the manner prescribed by law ?
Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in restoring the issue involved in the appeal to the file of the AO to decide the same in the light of the direction given by the Tribunal by its earlier order dt. 27th Nov., 2001, and also in accordance with the direction given under s. 263 of the IT Act, 1961, by the CIT, N.E. region, in view of the substantial importance of the issue involved with reference to the exemption granted under s. 10 (29) of the IT Act, 1961 ?”
We have heard Mr. V.K. Bhatra, learned counsel for the appellants, and also Mr. U. Bhuyan, learned counsel for the Revenue. The appellant-Corporation is a body corporate constituted under the Warehousing Corporation Act, 1962, and is an authority within the meaning of s. 10(29) of the IT Act, 1961. The appellant-authority derives income from various sources such as storage charges, rent received from various sources, weighment charges, handling charges, supervision charges, fumigation charges and other miscellaneous receipts and interests. All the receipts other than interest and rent are relatable to ancillary activities. The case of the assessee is that the income from ancillary activities is also exempt under s. 10(29) of the IT Act, 1961, else the whole of the expenses including that of the warehousing expenses are eligible for deduction from the taxable receipts, the business of the assessee being composite and single with common finance and management. The AO passed the assessment orders holding, inter alia, that the income from the warehousing business is exempt under s. 10(29) but the income from ancillary activities is taxable in view of the decision of the Tribunal in ITA Nos. 182/Gau/1995 to 186/Gau/1995 and in ITA No. 18/Gau/1989. The AO further held that the income received by way of rent from the quarters allotted to the employees is business income and not under the head “Income from house property”. It was further held that the interest income and other miscellaneous receipts including supervision charges are exigible to assessment under the head “Other sources”. The AO thus came to the conclusion that the entire expenses cannot be debited from the business income of the assessee. The CIT(A) was of the view that the entire expenditure incurred by the appellant in the course of its business shall be allowed from the taxable receipts, if any. Even if any of the receipts come under the head “Other sources”, the treatment will be the same as s. 57(iii) is pari materia with s. 37(1). With regard to receipt of rent from the quarters allotted to the employees, the CIT(A) relied upon a decision of the learned Tribunal in Appeal Nos. ITA Nos. 182 to 186/Gau/1985 wherein it was directed that receipts on account of rent should be treated as business income and computed accordingly. Accordingly, the direction was issued to treat the receipts on account of rent as business income. With regard to interest, the CIT(A) found that there was no income from interest from short-term deposits because interest received and interest paid on loans should be treated as contra entries, and, only in the case of surplus, the same is to be taxed. In case of any deficit, the interest to that extent is to be deducted as expenses. This observation has been rendered by the CIT(A) after having noticed on the facts that there was no real income from interest.
On appeal by the Revenue, the learned Tribunal with regard to the income from ancillary activities and exemption of entire expenditure in the course of his business held that the matter has to be looked into by the AO in the light of the direction given in ITA (A) Nos. 213, 214, 215 and 216 of 1995. In respect of rent, relying upon its earlier judgments in ITA Nos. 182 to 186/Gau/1995 it held that the rental income should be treated as business income and computation be made accordingly. In respect of interest, the view of the CIT(A) was upheld. Thus, the matter stood remanded to the AO for reassessment. We have considered the impugned orders with reference to the questions formulated. In our opinion, no provision of law is required to be interpreted by this Court in these appeals. There cannot be any doubt that the AO while making the assessment will have to act in accordance with the judgment of the Hon’ble Supreme Court in CIT vs. Indian Bank Ltd. (1965) 56 ITR 77 (SC); CIT vs. Maharashtra Sugar Mills Ltd. 1973 CTR (SC) 489 : (1971) 82 ITR 452 (SC) and Rajasthan State Warehousing Corporation vs. CIT (2000) 159 CTR (SC) 132 : (2000) 242 ITR 450 (SC). The AO will have to examine whether the business of the assessee is one and indivisible and on the findings of such examination to decide whether the entire expenditure incurred thereon is to be allowed or not [CIT vs. Maharashtra Sugar Mills Ltd. (supra)]. If it is found that the business of the assessee is one and indivisible and yielding both taxable and non-taxable income, the entire amount spent would be deductible in Rajasthan State Warehousing Corporation vs. CIT (supra). Since the AO is seized of the matter, it would not be appropriate to refer the matter back to the learned Tribunal for reappreciation of facts and finalisation of assessment, as argued by Shri Bhatra, learned counsel. The AO shall make reassessment in terms of the observation made above. In the result, the appeals are dismissed.
[Citation : 286 ITR 642]
