IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 16.2.2015 CORAM HON'BLE MR.JUSTICE R.SUDHAKAR AND HON'BLE MR.JUSTICE R.KARUPPIAH T.C.(A).No.10 of 2008 Tamilnadu Warehousing Corporation No.100, Anna Salai, Guindy Chennai 600 032.Appellant Vs. Deputy Commissioner of Income-tax Company Circle III(1) Chennai 600 034. Respondent PRAYER: Appeal under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal 'C' Bench, Chennai, dated 27.9.2007 made in I.T.A.No.1487/Mds/2002 for assessment year 1998-1999. For Appellant: Dr.Anita Sumanth For Respondent: Mr.M.Swaminathan Standing Counsel JUDGMENT (Delivered by R.SUDHAKAR, J.) assessee has filed this appeal assailing order of Income Tax Appellate Tribunal 'C' Bench, Chennai, dated 27.9.2007 made in I.T.A.No.1487/Mds/2002 for assessment year 1998-1999 and same was admitted on following questions of law:(2)(i) Whether Tribunal is right in law in allowing department's appeal concerning exemption under Section 10(29) of Income Tax Act? (ii) Whether Tribunal is right in law in not noting that Supreme Court had referred identical issue to Larger Bench of Supreme Court for its consideration on account of conflicting decisions of two benches of Supreme Court? (iii)Whether Tribunal is right in law in not holding that appellant is engaged in warehousing activities as result of which, all its incomes are directly derived from same, thus being eligible for exemption under Section 10(29) of Income Tax Act? (iv)Whether Tribunal is right in law in holding that incomes from supervision charges, fumigation activities and weigh bridge receipts are not eligible for exemption under Section 10(29) of Income Tax Act? 2.1. facts in nutshell are as under: appellant is Government of Tamil Nadu sponsored undertaking. assessee, during course of their business operations, derived income from warehousing charges, supervision charges, weigh bridge charges and other receipts. assessee claimed above income as exempt under Section 10(29) of Act. Assessing Officer held that only amount received under head storage charges is entitled to exemption under Section 10(29) of Act and disallowed other receipts like supervision charges, fumigation (3) charges, weigh bridge receipts, etc. 2.2. assessee appealed to Commissioner of Income Tax (Appeals), who partly allowed appeal and granted exemption in respect of supervision charges, weigh bridge receipts and fumigation charges totalling Rs.46,91,920/-. However, Commissioner of Income Tax (Appeals) disallowed some of claims made by assessee stating that they are not connected with maintenance of warehouses. 2.3. Calling in question said order, Revenue has preferred appeal before Tribunal. Tribunal, relying upon earlier order passed by it in assessee's own case for assessment years 2000-2001 to 2002-2003 in I.T.A.Nos.1037 to 1042/Mds/06, dated 27.7.2007, allowed appeal filed by Revenue holding as under: 3. We have heard both parties and perused materials on record. Similar issue came up for hearing before this Tribunal, Chennai Bench in assessee's own case for asst.years 2000-01 to 2002-03 in I.T.A.Nos.1037- 1042/Mds/06 dated 27.07.07 wherein it Tribunal held as follows: 'In case of Orissa State Warehousing Corporation Ltd. and Rajasthan Ware Housing Corporation vs. CIT (237 ITR 589) it was held as under: 'On plain reading of section 10(29) of Income-tax Act, 1961, it appears that pre- requisite element for entitlement as regards claim for exemption is income which is derived (4) from letting out of godowns or warehouses for storage, processing or facilitating marketing of commodities and not otherwise. Legislature has been careful enough to introduce in section itself, clarification by using words 'any income derived therefrom', meaning thereby obviously for marketing of commodities by letting out of godowns or warehouses for storage, processing or facilitating same. If letting out of godowns or warehouses is for any other purpose, question of exemption would not arise. Section 10(29) is categorical in its language and this exemption is applicable only in circumstances as envisaged under section. word 'any income' as appearing in body of statute is restrictive in its application by reason of user of expression 'derived from'. Sections 10(20A), 10(21), 10(22B), and section 10(27) show that wherever as matter of fact Legislature wanted unrestrictive exemption same has used 'any income' without any restriction so as to make it explicit that entire income of assessee would be exempt. Having due regard to language used, question of exemption would arise pertaining to that part of income only which arises or is derived from letting of godowns or warehouses and for purposes specified in section 10(29). statute has been rather categorical and restrictive in matter of grant of exemption: storage, processing or facilitating marketing of commodities are (5) definitely regarded as three different forms of activities which are entitled to exemption in event of there being any income therefrom. In event letting of godowns or warehouses is for any other purpose or if income is derived from any other source, then and in that event such income cannot possibly come within ambit of section 10(29) of Act and is thus not exempt from tax.' 5. After going through facts of case and in view of judgment of Supreme Court cited supra, we hold that item no.2 to 11 listed in para 4 above can not be eligible for exemption u/s. 10(29) of I.T.Act. Only Item no.1 listed in para 4 viz. Warehousing storage rent is entitled to deduction u/s.10(29) of Act. With regard to exemption of three items viz., supervision charges, fumigation charges and weight b ridge receipts, as per judgment of Supreme Court cited supra, these are not eligible for deduction u/s. 10(29) of I.T.Act. Hence in our opinion Learned Commissioner of Income-tax (Appeals) is not justified in allowing claim of assessee on these three items. Accordingly we reverse order of CIT (Appeals) on these issues and appeal of revenue is allowed.' 4. Respectfully following above decision of Tribunal in assessee's own case, appeal of revenue is allowed. (6) 2.4. Impugning said order, assessee has preferred this appeal on questions of law, referred supra. 3. We have heard Dr.Anita Sumanth, learned counsel appearing for assessee and Mr.M.Swaminathan, learned Standing Counsel appearing for Revenue and perused orders passed by Tribunal and authorities below. 4. main plank of argument of learned counsel for assessee is that supervision charges, fumigation charges and weigh bridge receipts are all incidental activities connected with business of assessee, namely, warehousing and storage, and therefore they are entitled to exemption under Section 10(29) of Act. 5. Section 10(29) of Act, as it stood then, reads as under: Section 10. Incomes not included in total income.--In computing total income of previous year of any person, any income falling within any of following clauses shall not be included-- (1) to (28) *** (29) in case of authority constituted under any law for time being in force for marketing of commodities, any income derived from letting of godowns or warehouses for storage, processing or facilitating marketing of commodities bare reading of said provision makes it clear that any income derived (7) from letting of godowns or warehouses for storage, processing or facilitating marketing of commodities would be eligible for such benefit of exemption. 6. In case on hand, receipts mainly disputed by Revenue are supervision charges, fumigation charges and weigh bridge receipts. When once goods are stored in warehouses, it is duty of warehousing authorities to ensure that no damage or loss is caused to same. Therefore, warehousing authorities maintain security for supervision of warehouses and goods therein. Similarly, maintaining weigh bridge is essential for purpose of carrying on warehousing business. Likewise, for proper maintenance of goods from pests, fumigation is also essential. Therefore, all three activities, referred supra, are integral part of business of warehousing and hence, they would squarely fall within ambit of Section 10(29) of Act and are eligible for grant of exemption. 7. In our considered opinion, Tribunal without understanding nature of warehousing business, on erroneous interpretation of decision of Supreme Court in Orissa State Warehousing Corporation / Rajasthan State Warehousing Corporation v. CIT [1999] 237 ITR 589 (SC) has come to conclusion that above said three activities are not in relation to warehousing business. In impugned order, Tribunal has merely followed its earlier decision in assessee's own case for assessment years 2000-2001 to 2002-2003 in I.T.A.Nos.1037 to (8) 1042/Mds/06, dated 27.7.2007, without any analysis of nature of claim made by assessee. 8. At this juncture, it would be apposite to state that appeals filed by assessee as against order of Tribunal passed in I.T.A.Nos.1037 to 1042/Mds/06, dated 27.7.2007, have been allowed by this Court in Tamilnadu Warehousing Corporation v. Income-tax Officer (OSD), (2014) 363 ITR 1 (Mad.), holding as under: ... supervision charges, fumigation service charges, weighbridge receipts, income from sale of tender forms and interest collected on belated refund of advances were income derived from incidental activities relating to warehousing of produce for storage, processing or facilitating marketing of commodities. Thus, with income having direct nexus to activities, assessee would be entitled to exemption under section 10(29) of Act. 9. For foregoing reasons, 4th question of law is answered in favour of assessee and against Revenue. In view of finding rendered above, questions of law (1) to (3) have become purely academic in this appeal. In result, this appeal is allowed and order passed by Tribunal is set aside. No costs. (9)(R.S.J.) (R.K.J.) 16.2.2015 Index: Yes Internet: Yes sasi To: 1. Assistant Registrar, Income Tax Appellate Tribunal Chennai Bench"C", Chennai. 2.The Secretary,Central Board of Direct Taxes, New Delhi.3.The Commissioner of Income Tax (Appeals)-III Chennai. 4. Deputy Commissioner of Income Tax Company Circle I(1), Chennai. (10) R.SUDHAKAR,J. and R.KARUPPIAH,J. (sasi) T.C.(A).No.10 of 2008 16.2.2015. Tamilnadu Warehousing Corporation v. Deputy Commissioner of Income-tax Company Circle III(1), Chennai