ORISSA STATE WAREHOUSING CORPN. ETC. vs. COMMISSIONER OF INCOME TAX

CIVIL APPEAL No. 3476/1993Supreme Court[1999] 2 S.C.R. 38301 April 1999Bench: 2 JudgesAuthor: M. SRINIVASAN, U.C. BANERJEE STATE WAREHOUSING CORPN. ETC.19 pages
AI SummaryDismissed

What were the facts?

The appellants, warehousing corporations established under the Warehousing Corporation Act, 1962, received interest on fixed deposits with banks. Section 10(29) of the Income Tax Act, 1961, exempts income derived by such corporations from letting out commodities, godowns, and warehouses. The Income-tax Officer added the interest income to the assessees' total income, holding it was not exempt under Section 10(29). The Commissioner of Income Tax (Appeals) upheld this. The Income Tax Appellate Tribunal, however, allowed the assessees' appeals, reasoning that if the entire income was exempt, interest earned thereon should also be exempt. The Revenue referred the matter to the High Court, which answered the reference in favour of the Revenue, holding the interest income was not exempt under Section 10(29). The assessees appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court dismissed the appeals, holding that the interest received by the warehousing corporations on fixed deposits was not exempt from tax under Section 10(29) of the Income Tax Act, 1961. The Court emphasized the principle of interpreting fiscal statutes based on their plain language. It held that Section 10(29) was categorical and restrictive, providing exemption only for income derived from letting out commodities, godowns, and warehouses. The phrase 'derived from' was interpreted restrictively. The Court found that the appellant corporations being put into funds by themselves did not mean these funds were for facilitating the marketing of commodities, thus the interest income could not be considered exempt. The Court rejected the argument that interest on fixed deposits was incidental to business, stating that if income was derived from any other source than those specified, it fell outside the ambit of Section 10(29). The High Court's decision was affirmed, and the appeals were dismissed. No issue was expressly left undecided.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest received by the assessee from banks on fixed deposits was exempt under Section 10(29) of the Income Tax Act, 1961? (Question of law) 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest received from banks on fixed deposits was incidental to or consequential to the activities of the business of the assessee and was not taxable under the head 'income from other sources' and thus exempt under Section 10(29) of the Income Tax Act, 1961? (Question of mixed law and fact) Assessee's contentions: - The assessees argued that the interest income on fixed deposits was incidental to their business activities and therefore exempt under Section 10(29). They relied on Sections 2(45), 4, and 5 of the Act, and Sections 16 and 24 of the Warehousing Corporation Act, 1962, emphasizing that all funds had to be deposited in banks as a statutory obligation, making the interest earned part of their functioning. Revenue's contentions: - The Revenue contended that Section 10(29) was specific in its exemption and did not cover interest income from fixed deposits. They argued that the exemption was limited to income derived from letting out commodities, godowns, and warehouses, and that the language of the section was clear and unambiguous, not allowing for interpretation of integrated or consequential activities.

Which sections of the Income-tax Act were involved?

Section 10(29),Section 256(1),Section 2(45),Section 4,Section 5

AI-generated summary — verify with the full judgment below

ORISSA STATE WAREHOUSING CORPN. ETC. v. COMMISSIONER OF INCOME TAX APRIL I, 1999 [M. SRINIVASAN AND UMESH C. BANERJEE, JJ.] Income Tax Act 1961, s. 10(29)-Whether interest received from banks on fixed deposits was incidental to business activities and not taxable under A B the head 'income from other sources' and thus exempt under s. 10(29)-Held, C no; exemption allowed only for income derived from letting out of commodities, godowns and warehouses Interpretation of Statutes-Golden rule-Fiscal Statute-Court to ascribe natural and ordinary meaning to words and not substitute own impression in place of legislative intent. D The appellant-assessees were warehousing corporations established under the Warehousing Corporation Act, 1962. Any income derived by the corporations from the letting out of commodities and the letting out of god owns or warehouses for storage, processing or facilitating the marketing E of commodities was exempt from income tax under s.l 0(29) of the Income tax Act, 1961. ('Act')

The interest received by the assessees on fixed deposits placed by them with banks was added to their income by the Income-tax Officer (ITO), who held that this wa

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 10(29)

All 28 judgments and leading authorities on Section 10(29) →

Recent GST High Court judgments

Search GST case law →