1. This is a departmental appeal. The only issue is whether the income derived from letting out certain premises would be exempt under Section 80P(2)(e) of the Income-tax Act, 1961 ('the Act').
The assessee is a co-operative society carrying on business of ginning and pressing of cotton for the Maharashtra State Co-operative Marketing Federation. It appears that the assessee had constructed a few tenements which had been let out for different persons. One of these is let out to a post office, another to a Government office, a third to a doctor for running a dispensary and the rest to different shopkeepers. It is an admitted position that in the premises given to the shopkeepers the tenants are running a regular business of buying and selling goods. The total rent received from all the premises was Rs. 58,344. Out of this amount Rs. 12,686 represented rent from post office, dispensary, etc. In respect of the balance, i.e., from the shopkeepers, the rent received was Rs. 45,658.
3. Before the ITO, the assessee claimed that Rs. 45,658 will be exempt under Section 80P(2)(e). The ITO found that these shopkeepers were small merchants dealing in cloth, stationery, kirana, etc. These premises are merely shops where day-to-day purchases and sales are carried out. According to him, these premises could not be considered as warehouse. He pointed out that in order to be eligible for exemption, there should be warehouse and the warehouses should be used for marketing of commodities. The commodities should be" one manufactured or dealt with by the concerned co-operative society. He, therefore, rejected the assessee's claim and brought the income to tax.
4. The assessee appealed. The Commissioner (Appeals) found that a similar matter had come before the Tribunal for the assessment year 1976-77. The Tribunal was considering the rent received from the Apex Body, i.e., Maharashtra State Co-operative Marketing Federation. The Tribunal had held that the rent received will be exempt. The Commissioner (Appeals) felt that the same principle will apply in respect of the rent received from the tenants.
5. The department is on appeal before us. Shri Verma for the department submitted that the Commissioner (Appeals) has not understood the ratio laid down by the Tribunal's decision. He submitted that the tenants are ordinary shopkeepers purchasing and selling goods which had no connection at all with the activities of the co-operative society. He submitted that in order to be eligible for exemption the tenants should deal with a commodity which is connected with the society. He then relied on the decision of the Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. v. CIT  79 ITR 722 wherein the Gujarat High Court has laid down that the exemption is available only in respect of income derived from letting of godowns or warehouses where the purpose of letting is storage processing or facilitating the marketing of commodities. For the assessee, Shri Atal, the learned Counsel, submitted that the expression 'warehouse' would cover the shops which are the subject-matter of the dispute. He submitted that the dictionaries had treated warehouse and shop as synonyms. He then pointed out that there are no case laws which referred to the meaning of the expression 'warehouse' in Section 80P and, therefore, it would be correct to go by the dictionary meanings. He then submitted that it is not necessary that the commodity dealt in the warehouse should be a commodity in which the assessee-co-operative society was connected. He then pointed out that in principle there is no difference between the rent received from the Apex Body which was dealt with by the Tribunal for the assessment year 1976-77 and the rent received from other tenants during the accounting year. The same principle would be applicable to both types of rent.
6. We have considered the facts of the case. Section 80P(2)(e) reads as follows : in respect of any income derived by the co-operative society from the letting of godowns for warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income ; The conditions which must be satisfied before income could be exempt under this section are (i) income must be derived from letting, (ii) the letting must be of godowns or warehouses, (iii) the letting should be for storage, processing or facilitating the marketing of commodities. It will be seen from the section that the three conditions have to be considered cumulatively. In order" to be eligible for exemption, the assessee should satisfy all the three conditions. Now with this idea in mind, we can turn to the facts of the case. There is no difficulty in stating that the first condition, i.e., premises being let out and the income is derived from letting out, is satisfied. With regard to the second condition, the premises let out must be a godown or a warehouse. The assessee's counsel had argued that a shop is also a warehouse. For this purpose he had relied on dictionary meanings. The dictionary meanings laid down by him are given below :As per Oxford A building or part of a building used for the storage or merchandise.As per Websters Third Diction- A structure or room for the storage ofary merchandise or commodities.
A wholesale establishment of the service A close scrutiny of the above would show that emphasis had been laid thereon in the storing of goods. Whereas a shop would be a place where goods are kept in display primarily for sale, a warehouse would be a place where primarily the goods are stored. The idea of sale which is predominant in the expression 'shop' is absent in expression 'warehouse'. In fact, the statute itself makes it clear by the juxtaposition of the two expressions 'godowns' and 'warehouses'. From this angle, it would be difficult for us to hold that the shops in question would satisfy condition No. (ii).
7. Even if we consider that the shops would be synonyms for warehouses, condition No. (iii) remains unsatisfied. This condition is that the letting out should be only for storage of the commodities or for processing or facilitating the marketing of the commodity. On the facts of the case, we need consider only whether the premises are used for the storage of the commodities. The Bombay High Court had a occasion to consider the meaning of the expression 'storage' in the case of Central Hindustan Orange & Cold Storage Co. Ltd. v. Prafullachandra Ramachandra Oza AIR 1967 Bom. 126. They had observed : ...The ordinary meaning that would be given to the word 'storage' is a place for storing. That means any place where the goods can be stored. It may be that for different commodities different conditions of storage may be necessary ... but still all these places are the places for storing the various commodities and irrespective of the conditions which may be obtaining in each of these places, they would all be called storages because what is done there is that actually the goods or commodities are stored or kept for a length of time....
If we apply this test regarding storage, we find that the shops cannot be considered as a place for storage of commodities. The shops are primarily places where customers can buy commodities. They are not premises where commodities are stored per se.
8. The decision relied on by Shri Verrna, the departmental representative, clearly shows that an extension of the exemption provisions of Section 80P is not called for. The Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. (supra) had made it clear that the exemption is available only in respect of income derived from letting of godowns or warehouses where the purpose of letting is only storage, processing or facilitating the marketing of commodities. It, therefore, cannot be extended to any other purpose.
9. As the departmental representative correctly pointed out, the ratio of the Tribunal's decision given for the year 1976-77 cannot be applied to the facts of the case. Therein certain premises were let out to the Apex Body of the assessee-co-operative society for marketing. The activities of the assessee has some connection with the activities of the marketing federation. In other words, the letting out is clearly for facilitating the marketing of commodities to use the expression given in Section 80P(2)(e). Therefore, that case can be easily distinguished.
10. Under these circumstances, we allow the departmental appeal. The ITO's order will be restored.