Income Tax Appellate Tribunal - Mumbai
Shankar K. Bhanage, Mumbai vs Department Of Income Tax on 29 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'J' MUMBAI
BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND
SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
ITA Nos. 3216 & 3217/Mum/2010
Assessment Years- 2005-06 & 2006-07
The ITO-19(3)(4), Shri Shankar K. Bhanage,
Piramal Chambers, Lalbaug, 6, Believue Apartments,
Mumbai-400 012 1/5, Dr. Ambedkar Road,
Vs. Bandra (W),
Mumbai-400 050
PAN-AAIPB 8595P
(Appellant) (Respondent)
Appellant by: Shri Mohit Jain
Respondent by: Shri S.N. Inamdar
Date of Hearing :29.08.2012
Date of pronouncement: 05.09.2012
ORDER
PER N.K. BILLAIYA, AM:
In both these appeals the Revenue has challenged the correctness of the orders of the Ld. CIT(A)-30 Mumbai dt.5.2.2010 pertaining to assessment years 2005-06 & 2006-07. In these appeals, assessee has taken common ground except amount of disallowance of expenses varies. Therefore, we heard these appeals together and dispose off the same by this common order for the sake of convenience and brevity.
ITA No. 3216/M/2010- A.Y. 2005-062. The sole grievance of the Revenue is that the Ld. CIT(A) ought not to have allowed the claim of the assessee u/s. 80IB (11A) of the Act amounting to Rs.64,00,624/-.
2 ITA No. 3216 & 17/M/103. The facts giving rise to this dispute are that the assessee is an individual and proprietor of M/s. Shree Siddhivinayak Enterprises following mercantile system of accounting. For the year under consideration, the assessee returned income of Rs. 4,43,710/-. The assessee claimed deduction u/s. 801b(11A) of the Act to the tune of Rs. 64,00,624/-.
4. During the course of assessment proceedings, the Assessing Officer sought clarification from the assessee to establish his eligibility for the claim of deduction u/s. 80IB(11A) of the Act. In response to which, the assessee vide his letter dt. 28.5.2007 submitted that M/s. Siddhivinayak Enterprises is deriving profit from integrated business of handling, storage and transportation of foodgrains. It was further submitted that the assessee has been appointed as a contractor for handling of foodgrains at Turbhe/Kalyan/Bhivandi Goods Shed and storage of foodgrains at Bhivandi Depot and transportation of i.e. foodgrains from all the above goods shed to Bhivandi Depot and vice versa. To substantiate his claim, the assessee submitted a letter from the Food Corporation of India in which M/s. FCI has mentioned that the assessee is appointed as H&T Contractor for handling of foodgrains at Turbhe/Kalyan/Bhivandi Goods Shed and storage at Bhivandi Depot and transportation of stock from all the above goods shed from Bhivandi Depot and vice versa. The AO gave a thoughtful consideration to the nature of business of the assessee and also to the letter issued by General Manager, FCI and opined that the assessee has to perform the duties that of handling and transportation of foodgrains and storage at Bhiwandi Depot. Thereafter, the AO issued notice u/s. 133(6) of the Act to the General Manager, FCI calling further information in relation to the nature of work done by the assessee in response to which G.M. submitted copy of the tender issued by the FCI before awarding contract.
5. After considering the documents received from M/s. FCI, the AO observed that the tender invited by M/s. FCI is for appointing handing and transport contractor and the activities to be carried out by the contractor are in the nature of handling and transportation. There is no mention of any 3 ITA No. 3216 & 17/M/10 storage work/activity to be performed by the contractor. The AO further observed that the assessee did not have any storage of his own and no storage was taken by the assessee on rent. Therefore, the assessee does not fulfill all the conditions as mentioned u/s. 80IB(11A) of the Act. To examine the claim of the assessee, the AO issued summons to the Dy. General Manager (General) of FCI whose statement was recorded on oath u/s. 131 of the I.T. Act on 21.8.2007. Statement of Shri Sugriv Sable was recorded. On a specific question relating to the owner of the storage space/godowns, the deponent replied that the storage place/godowns are owned by M/s. FCI wherever the storage space/godowns are not owned by M/s. FCI, the same are taken on rent.
6. Next question related to the preparation relating to the stacking plan for storage of food grains to which the deponent replied that the concept of FCI regarding storage of food grain is maximum utilization of space. For this purpose, the stacking plan is prepared by Manager Depot in consultation with the labourers of the H&T contractor. The AO further asked how the storage was done by the assessee when assessee was specifically appointed as H&T contractor to which the deponent replied that the entire stock of food grains is to be handled by the contractor. From the time the food grains arrives in the depot and the time till they are liquidated, the same are handled by the labourers of the contractor. The process of preserving the food grains involves brushing of the bags, putting the Aluminium phosphate tablets, covering the bags with polythene, fumigation of the food grains, preparation of sand snakes etc. All these activities are carried out by the labourers of the contractor as per the advice of the QC staff. An opportunity to cross examine Shri Sugriv Sable was also given to the assessee. On cross examination, the cross examiner asked whether the space have been given as per tender contract for storage of 10,000 M.T. of food grains by FCI to the assessee to which Shri Sugriv Sable replied the storage area of 10,000 M.T. is the area available in the godown of FCI for the purpose of storage of food grains. The H&T contractor is allowed to use these spaces for storage purposes. On re-
4 ITA No. 3216 & 17/M/10examination, the AO sought clarification relating to the ownership of the space for storing 10,000 M.T. of food grains. The deponent replied that the space belongs to FCI. The AO further questioned the deponent to verify when the storage space belong to FCI and the custody of food grains are also with the depot Manager of FCI then how comes storage could be done by the H&T contractor, to which the deponent replied since the entire stock of food grains is to be handled by the contractor from the time the food grains emphasizes in the depot and the time till they are liquidated therefore it was stated that the H&T contractor are involved in the process of storage.
7. The AO after giving thoughtful consideration to the statement of Shri Sugriv Sable and considering the facts in totality came to the conclusion that the assessee has not fulfilled all the conditions so as to make him eligible for deduction u/s. 80IB(11A) of the Act and held that the assessee is not engaged in the integrated business of transportation, handling and storage of food grains and therefore the assessee is not eligible for deduction u/s. 80IB(11A) of the Act and accordingly rejected the claim of the assessee.
8. The assessee agitated this matter before the Ld. CIT(A) and reiterated his stand that he is doing the integrated business of handling, storage and transportation of food grains and therefore it is eligible for deduction u/s. 80IB (11A) of the Act.
9. The Ld. CIT(A) gave a thoughtful consideration to the statement of Shri Sugriv Sable recorded by the AO during the course of assessment proceedings and came to the conclusion that Shri Sugriv Sable was very much categorical in his statement that the assessee is doing the storage activity also. During the course of appellate proceedings, the assessee submitted certificate from FCI DT. 7.7.2008 signed by AGM contract with which certificate read as under:
To whom it may concern :
This is to certify that M/s. Shree Siddhivinayak Enterprises is doing the integrated business of Handling, storage and transport 5 ITA No. 3216 & 17/M/10 contract of food grains for Food Corporation of India since 12.12.2003 to till today."
10. After considering the submissions put forth by the assessee, the Ld. CIT(A) came to the conclusion that the assessee has been awarded contract by FCI for undertaking integrated business of handling, transportation and storage of food grains. The assessee is not merely stacking food grains in the godowns of FCI but also responsible for protection of stock from pests, rodents and snakes by use of fumigation, pesticide phosnamum tablets etc. The Ld. CIT(A) further relied upon the certificate given by FCI certified that the assessee is engaged in handling transportation and storage of foodgrains and finally the Ld. CIT(A) opined that in his considered view, the assessee is carrying on the storage activity on behalf of the FCI and as such is engaged in the integrated business of handling storage and transportation of food grains. Therefore, the assessee is eligible for deduction u/s. 80IB(11A) of the Act and accordingly directed the AO to allow the claim of the assessee made u/s. 80IB (11A) of the Act.
11. The Revenue is aggrieved by this finding of the Ld. CIT(A) and is in appeal before us.
12. The Ld. Departmental Representative strongly supported the findings of the AO. Per contra, the Ld. Counsel for the assessee reiterated that the assessee has fulfilled all the conditions making him eligible for claim of deduction.
13. We have carefully heard the rival submissions and perused the orders of lower authorities. The whole dispute revolves around the claim of the assessee u/s. 80IB(11A) of the Act. Let us first examine the provisions of Sec. 80IB(11A) of the Act.
Sec. 80IB (11A)...... The amount of deduction in a case of an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or] from] the integrated business of handling, storage and transportation of 6 ITA No. 3216 & 17/M/10 foodgrains, shall be hundred per cent of the profits and gains derived from such undertaking for five assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the 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 fulfilment 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.]"
14. A plain reading of the aforementioned provisions show that the deduction is available to an undertaking deriving profit from three business activities. We are not concerned with the first two business activities. We are concerned with the third business activity. For our convenience, let us reframe the provision which 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 dispute in the present case 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 business of a hotel. To address the country's basic concerns relating to enhanced food security and agricultural 7 ITA No. 3216 & 17/M/10 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 cent deduction for the next five years."
Policy and its implementation :- The entire scheme covered by Sec. 80-IB(11A) relates to services in connection with preservation of food grains promoted by the Government of India under TFC-14/99-Volume III, dt. 4th July, 2000 following the national policy in respect of handling, storage and transportation of food grains. It relates to both construction contract and the preservation contracts arising out of a scheme sponsored by the Government of India administered by an agency of the State Government. It is part of the central scheme under the implementation of Food Corporation of India in pursuance of the national policy for handling, storage and transportation of food grains.
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 transportation of food grains" using the very language of the policy.
Both the construction as well as the preservation contract are subject to an agreement with central or State Warehousing Corporation in pursuance of the policy and the other papers issued from time to time by the Government.
8 ITA No. 3216 & 17/M/1015. It is not in dispute that the assessee is neither the owner nor the lessee of the godown. The ownership vests with the FCI. The Ld. Counsel submitted that even when the assessee was carrying food grains in his truck, he was in the process of storage of food grains. To substantiate, the Ld. Counsel relied upon the decision of the Hon'ble High Court of Orissa in Criminal Revn. No. 43 of 1951 decided on 15.01.1953 in the case of Balabhadra Raja Guru Mohapatra Vs The State AIR 1954 Orissa 95 and submitted that in this case, the Hon'ble High Court of Orissa has held that carrying of goods in a truck amounts to storage. We have carefully gone through the cited case. We find that in that case the accused was carrying 50 bags or 100 maunds ragi in a truck which according to the State was in contravention to the Orissa Food Grains Control Order, 1947 wherein it was provided that "No person shall engage in any undertaking which involves the purchase, sale or storage for sale, in wholesale quantities of any food grains except under and in accordance with a licence issued in that behalf by the Director of Food Supplies". Explanation (2) of the said order provided that for the purpose of this clause any person who stores Mung and Biri or their products in quantities exceeding 20 standard maunds and other food grains in quantities exceeding 50 standard maunds, shall unless the contrary is proved be deemed to store the food grains for purposes of sale. It was held that the truck belongs to the accused and therefore 100 maunds of ragi found in the truck belonged to the accused. The question before the Hon'ble Court was whether possession of the goods while in transit in a truck can be described as "storage" within the meaning of the Control Order. On this question, the Hon'ble High Court has held that the petitioner was engaged in an undertaking which involved the storage for sale of more than 50 maunds and accordingly had contravened the provisions of clause III(1). We do not find any substance in the submission of the Ld. Counsel to rely upon the meaning given to "storage" of this decision of the Hon'ble High Court of Orissa because in that case, the accused was found to carry goods which were prohibited by the law and on that note, the Court has held that even if a person is found 9 ITA No. 3216 & 17/M/10 carrying goods will be taken as involved in the storage for sale. However, the point which is to be noted here is that the Court has emphasized on "storage" in relation to "sale". Assuming yet denying that by carrying goods, the assessee was in the process of storage then such process should culminate into sale which is missing on the facts of the instant case. The assessee further relied upon the decision of the Hon'ble Gujarat High Court in the case of CIT Vs Ahmedabad Maskati Cloth Dealers Co-Operative Warehouses Society Ltd. 162 ITR 142 wherein the Hon'ble Gujarat High Court had an occasion to consider "words "godowns or warehouses" and their dictionary meaning. In that case, the assessee claimed exemption u/s. 80P(2)(e) on the pretext that rental income received by it on letting out of shop amounted to rental income received from godowns or warehouses. After considering in detail, the meaning of the words "godowns and warehouses" and the Legislative intent for allowing deduction u/s. 80P(2)(e) of the Act, the Hon'ble High Court held that assessee society must show that it has derived income from the letting of godowns or warehouses which it has failed because it has received rental income from the letting of shops used for business in cloth which cannot be said to be income derived from letting of godowns and warehouses. In our humble opinion this decision also does not help the assessee on the facts of this case.
16. Taking a leaf out of the above said decision, we find that the Hon'ble Gujarat High Court has referred to the observations of the Hon'ble Supreme Court in the case of CGT Vs N.S. Getti Chettiar (1971) 82 ITR 599 at pages 605-606 of the said judgement, the Hon'ble Supreme Court has observed as under:
"Words in the section of a statute are not to be interpreted by having those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purposes that they are intended to serve".10 ITA No. 3216 & 17/M/10
In response to which the Hon'ble Gujarat High Court observed that the dictionary meaning of a word or expression used in a statute is relevant but not sacrosanct and the court will not hesitate to depart from the dictionary meaning if the context and the setting in which the word or expression is used so suggests or demands.
17. Literal interpretation of words " integrated business of handling, storage and transportation of food grains" will not lead to any absurdity or produce any manifestly unjust result. The Legislative 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. In the instant case, we do not find any contribution towards the infrastructure by the assessee. The assessee is simply handling and transporting the food grains and storing at the godowns of the FCI which means that the assessee is using the existing infrastructure of the State whereas 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 foodgrain losses. The assessee has not done anything towards these facilities. If we look at tender by which the assessee has been awarded this contract, the tender is issued with the following head note:
"Invitation to tender and instructions to the tenderers for appointment of handling and transport contractor at FSD. Bhuiwandi with handling of foodgrains at Turbhe goods shed/Bhiwandi/Kalyan goods shed and transportation from Turbhe Bhiwandi goods shed and Kalyan goods shed to Bhiwandi Depot and Vice versa. "
Even the tender participated by the assessee show that the assessee has been awarded the contract for handling and transportation of food grains to the places mentioned therein. The contention of the assessee that Sec.
11 ITA No. 3216 & 17/M/1080IB being a Benevolent provision liberal construction should be applied cannot be accepted because beneficial interpretation applies only where two views are reasonably possible whereas in the instant case, we do not find any other possible view on the facts of the matter where the law is clear and unambiguous, we cannot act contrary to it with a view to give benefit to the assessee. After considering the entire facts in totality alongwith the Legislative intent, in our considerate view, the assessee has not fulfilled the conditions precedent for making him eligible for deduction u/s. 80IB(11A) of the Act. We find that the Ld. CIT(A) has been carried away with the certificate issued by DGM of FCI. The DGM in his wisdom may have issued the certificate without considering the Legislative intent of the scheme, therefore we cannot give much weightage to such certificate. The Ld. CIT(A) has erred in allowing deduction to the assessee which he is not eligible. Accordingly, the finding of the Ld. CIT(A) is reversed.
17. In the result, the appeal filed by the Revenue is allowed.
ITA NO. 3217/M/2010 - A.Y. 2006-07
18. The issue involved is same though quantum may differ. On similar lines, similar reasons, mentioned hereinabove, grounds of appeal taken by the Revenue in ITA No. 3217/M/2010 for assessment year 2006-07 are also allowed.
19. In the result, both the appeals filed by the Revenue are allowed.
Order pronounced on this 5th day of September, 2012
Sd/- Sd/-
(D.K. AGARWAL) (N.K. BILLAIYA )
Judicial Member Accountant Member
Mumbai, Dated 5th September, 2012
Rj
12 ITA No. 3216 & 17/M/10
Copy to :
1. The Appellant
2. The Respondent
3. The CIT-concerned
4. The CIT(A)-concerned
5. The DR 'J' Bench
True Copy
By Order
Asstt. Registrar, I.T.A.T, Mumbai
FIT FOR PUBLICATION
JM AM