C I T vs. M/S HARYANA STATE COOP. SUPPLY AND MKT. FED. LTD.

ITA/359/2008HC Punjab & HaryanaPHHC01080342200823 August 2012Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE GURMEET SINGH SANDHAWALIA5 pages
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What were the facts?

The Revenue (Commissioner of Income-tax, Panchkula) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT) dated September 19, 2007. The appeal pertained to the assessment year 2002-03 and concerned the assessee, M/s Haryana State Co-op. Supply & Marketing Federation Ltd. The dispute involved the eligibility of the assessee for a deduction under Section 80P(2)(e) of the Act in respect of a substantial receipt of Rs. 59,92,26,682/- from the Food Corporation of India (FCI). The High Court noted that identical issues were involved in another appeal, ITA No. 393 of 2008, and that the present appeal was admitted and ordered to be heard along with a previous appeal, ITA No. 157 of 2005.

What did the High Court hold?

The High Court held that the substantial questions of law were answered in favour of the Revenue and against the assessee. The Court found that the issue was concluded by its own previous decision in ITA No. 157 of 2005. In that decision, it was held that exemption under Section 80P(2)(e) is available only in respect of income from 'letting out' for the specified purposes. Income from storage without the storage space having been 'let out' is not eligible for exemption. The Court distinguished the case of South Arcot, relied upon by the assessee, by noting that in that case, statutory or compulsory sale was not in issue, and the assessee was storing stock belonging to the Government under an agreement, where storage charges could be equated to hire charges. However, in the present case, the assessee purchased goods and then sold them to FCI. Storing was part of the assessee's business, and the goods belonged to the assessee until sold to FCI, which did not amount to letting out storage capacity. This factual situation was covered by the Supreme Court judgments in Surat Venkar Sahakari Sangh and A. Venkata Subbarao, as reiterated in Udaipur Sahkari Upbhokta. Therefore, the income from storage could not be treated at par with hire charges. The appeals were allowed.

What were the issues?

1. Whether the Tribunal was correct in holding that the assessee is eligible for deduction under Section 80P(2)(e) of the Income Tax Act, 1961, on receipts of Rs. 59,92,26,682/- from FCI, despite the assessee purchasing foodgrains, treating them as its own stock, and subsequently selling them to FCI, and thus the receipts were not in the nature of income derived from the letting of godowns or warehouses for storage facilities to FCI? 2. Whether the Tribunal was correct in holding that the Assessing Officer correctly computed the deduction under Section 80P(2)(e), considering that the Tribunal itself had dismissed a similar claim under Section 80P(2)(e) for the assessment year 2002-03 in the case of Haryana Warehousing Corporation Ltd. under similar facts? The Revenue contended that the deduction under Section 80P(2)(e) is only available for income from 'letting out' storage facilities, and the assessee's activity of purchasing and selling goods to FCI did not constitute letting out. The Revenue relied on the Supreme Court judgment in Udaipur Sahkari Upbhokta. The Assessee, represented by Ms. Nimrata Shergill, fairly accepted that the case was concluded by a previous decision of the High Court in ITA No. 157 of 2005, which had adjudicated an identical issue in favour of the Revenue.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80P(2)(e)

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 359 of 2008 (O&M) Date of Decision: 23.8.2012 The Commissioner of Income-tax, Panchkula ....Appellant. Versus M/s Haryana State Co-op. Supply & Marketing Federation Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE G.S. SANDHAWALIA. PRESENT: Mr. Tajender Joshi, Advocate for the appellant. Ms. Nimrata Shergill, Advocate for Mr. Rajesh Garg, Advocate for the respondent. AJAY KUMAR MITTAL, J.

1.

This order shall dispose of ITA Nos. 359 and 393 of 2008 as, according to learned counsel for the parties, identical issues are involved therein. For brevity, the facts are being taken from ITA No. 359 of 2008. 2. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 19.9.2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (hereinafter referred to as “the Tribunal) in ITA No. 522/CHD/2007, for the assessment year 2002-03, claiming the following substantial questions of law:- -2- “i) Whether the Tribunal was right in holdi

The order continues below.

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