1. This is an appeal by the assessee, a Government undertaking, relating to the assessment year 1976-77 against the order of the Commissioner (Appeals).
2. The said Government undertaking was constituted for the purpose of building and maintaining godowns and warehouses in the State of Rajasthan with a view to provide facilities for storage of agricultural produce. Besides this activity, the assessee undertook the work of procurement of grains on behalf of the State Government and the Food Corporation of India ('the FCP) and derived income from such activity also during the year under appeal. The assessee also derived income from interest, supervision charges, fumigation service charges and miscellaneous items. From perusal of the profit and loss account (see page 21 of the annual report and statement of accounts of the assessee, pertaining to the assessment year 1975-76, included on page 23 of the paper book), it appears that the assessee derived the following incomes during the year under appeal:2. Administrative overhead being surplus of recovery over cost on procurement activities on behalf The assessee claimed an exemption in respect of the whole income under Section 10(29) of the Income-tax Act, 1961 ('the Act') which says that in computing the total income of a previous year of any person, any income derived by an authority constituted under any law for the time being in force for the marketing of commodities, any income derived from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, shall not be included. The ITO did not accept the claim of the assessee. He held that only income from warehousing qualified for exemption under Section 10(29) and the other incomes shown under the heads : (i) procurement of grains for the State Government/FCI ; (ii) interest ; (Hi) supervision charges ; (iv) fumigation service charges ; and (v) miscellaneous income, are not exempt under Section 10(29). On appeal, the Commissioner (Appeals) concurred with the ITO that only the receipt from warehousing was exempt under Section 10(29) and that the incomes derived from other activities were not exempt. Quintessence of the finding of the Commissioner (Appeals) is as follows : Now, as pointed out (supra), the principal activity and main source of the assessee's income was warehousing. The assessee, in fact, came into existence for carrying on this activity. The staff, etc., employed by the assessee and the other expenses incurred by it were mainly for the purpose of carrying on this activity. The other activities undertaken by the assessee were wholly independent of this activity-they did not form part of this activity and, therefore, in regard to the other activities, they are the assessee's business. At the same time, it is not a case of exemption of interest or dividend. Section 10(29) of the Act allows exemption in respect of income derived from the warehousing activity and not in respect of gross receipts from this activity. It can be nobody's case that 'income' can be correctly computed without deduction of expenses from the receipts especially in a case where the source of such income is the principal activity of the assessee and the expenses are mainly incurred for carrying on that activity. In view of the facts of the case, I am of the opinion that the ITO was correct in law to determine the tax-exempt income from the warehousing activities by deducting proportionate expenses from the receipts of warehousing charges (sic). No interference is called for from me on this point.
3. This is how the assessee has come up in appeal to the Tribunal.
Before us, Shri Ranka, the learned counsel for the assessee, argues that the assessee does not receive income from different sources, but from an integrated activity. It is argued that the activity of the assessee is single, indivisible and integrated and that all the activities are aimed at facilitating the marketing of the goods. It is said that the sole aim of the assessee is maintaining the flow of the goods and services from producer to consumer. It is argued that the income shown under the heads 'Procurement of grains for the State Government/FCI, interest, supervision charges, fumigation service charges and miscellaneous income', are covered by the expression "facilitating the marketing of commodities", occurring in Section 10(29) and, therefore, the assessee is entitled to exemption in respect of the entire income. So, the question for consideration is whether the assessee is entitled to exemption under Section 10(29) in respect of the income derived from the State Government/FCI for procurement of grains, interest, supervision charges, fumigation service charges and miscellaneous income. We find substance in the submissions of Shri Ranka that the activity of the assessee is an integrated one and that the entire activity is aimed at facilitating the marketing of all the goods. The assessee owns warehouses where the agricultural produce are stored. For storage of foodgrains, the assessee constructs new warehouses also. Maintenance of the warehouses is also done by the assessee. Procurement of foodgrain was done by the assessee at the instance of the State Government and FCI. In the nature of the activity being carried on by the assessee, it cannot be said that the assessee's activity of warehousing is different from the other activities. The Gujarat High Court in CIT v. Gujarat State Warehousing Corporation  124 ITR 282 held that marketing includes all business activities directed towards the flow of goods and services from producer to consumer. Similar view has been taken by other High Courts also.
Relying on this authority, we hold that the whole activity being carried on by the assessee as an integrated one and that the activities of the assessee cannot be split up. The issue arising out of this case is not res Integra and the question whether the charges being received from State Government/FCI for procurement of grains qualify for exemption or not under Section 10(29), was already discussed by Allahabad Bench 'B' of the Appellate Tribunal in the case of UP State Warehousing Corporation pertaining to the assessment years 1973-74 and 1974-75. A copy of such an order is on pages 10 & 11 of the paper book.
The U.P. State Warehousing Corporation, Lucknow, also received commission from FCI for procuring and storing wheat and other food articles on its behalf. The question arose whether the said commission income was exempt under Section 10(29). The Allahabad Bench 'B', having accepted the contention of the assessee, allowed exemption under Section 10(29). When commission received from FCI on the procurement of grains is exempt under Section 10(29), we do not see any reason why the income received from the State Government for the procurement of grains is not covered b Section 10(29). Such income, we think, is fully covered by the expression "facilitating the marketing of commodities", occurring in Section 10(29). Relying on the decision dated 8-11-1977 of Allahabad Bench 'B' (supra) we hold that the assessee is entitled to exemption in respect of Rs. 11,06,034.33, representing administrative overhead charges. The interest income amounting to Rs. 11,41,350.23, is also fully covered by the decision of the Allahabad Bench 'A' of the Tribunal. The copy of the said order is on pages 1 to 5. This case also pertains to the U.P. State Warehousing Corporation. The said Corporation earned interest on short-term fixed deposits. Idle money belonging to the Corporation was deposited and the interest was earned.
The question arose whether such interest income qualifies for exemption under Section 10(29). The Allahabad Bench 'A' answered the said question in affirmative and in favour of the assessee. Following the said decision dated 31-7-1976, pages 1 to 5 of the paper book, we hold that the assessee is entitled to claim exemption in respect of interest income amounting to Rs. 11,41,350.25.
4. Then, we take up the supervision charges, fumigation service charges and the miscellaneous income amounting to Rs. 23,790.67, Rs. 6,538.65 & Rs. 48,253.49, respectively, for consideration. The assessee having carried on the single and indivisible activity, we hold that these items qualify for exemption under Section 10(29) as they are fully covered by the expression "facilitating the marketing of commodities" as occured under Section 10(29).