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Commissioner of Income-tax Vs. Gujarat State Warehousing Corporation - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference Nos. 40 of 1975 and 39 & 168 of 1976
Judge
Reported in[1980]124ITR282(Guj)
ActsIncome Tax Act, 1961 - Sections 10(29); Warehousing Corporations Act, 1962 - Sections 24
AppellantCommissioner of Income-tax
RespondentGujarat State Warehousing Corporation
Appellant Advocate G.N. Desai and;R.P. Bhatt;of R.P. Bhatt & Co., Solicitors
Respondent Advocate J.P. Shah, Adv.
Cases ReferredSukhdev Singh v. Bhagatram
Excerpt:
direct taxation - exemption - section 10 (29) of income tax act, 1961 and section 24 of warehousing corporations act, 1962 - exemption under section 10 (29) claimed by assessee-corporation - exemption claimed in respect of its income from letting of godowns and warehousing, from transport including facilitating marketing of commodities - assessee-corporation was authority established under act of 1962 for marketing of commodities - as per section 10 (29) in order to get exemption three conditions must be satisfied - firstly authority must be constituted under any law in force - secondly it must be constituted for marketing of commodities - thirdly exemptible income must be derived from letting of godowns or warehouse for storage, processing or facilitating marketing of commodities - all.....1. in the first reference the question posed by the tribunal is as under :'whether the tribunal was right in law in holding that the assessee-corporation having been established under the warehousing corporations act, 1962, was an authority established for marketing of commodities and was consequently entitled to exemption under section 10(29) of the act in respect of its income from letting of godowns and warehousing and connected matters of storage of agricultural produce and for transport, including facilitating marketing of commodities '2. the first reference was for the assessment years 1970-71 and 1971-72, the other two references are for the years 1968-69 and 1969-70 and 1972-73, respectively, on the identical question and, therefore, they are disposed of by this common order.3. in.....
Judgment:

1. In the first reference the question posed by the Tribunal is as under :

'Whether the Tribunal was right in law in holding that the assessee-corporation having been established under the Warehousing Corporations Act, 1962, was an authority established for marketing of commodities and was consequently entitled to exemption under Section 10(29) of the Act in respect of its income from letting of godowns and warehousing and connected matters of storage of agricultural produce and for transport, including facilitating marketing of commodities '

2. The first reference was for the assessment years 1970-71 and 1971-72, The other two references are for the years 1968-69 and 1969-70 and 1972-73, respectively, on the identical question and, therefore, they are disposed of by this common order.

3. In the first reference, the ITO had allowed the claim of the assessee, Gujarat State Warehousing Corporation, for exemption under Section 10(29) in respect of the income relating to the warehousing. Thereafter, the Additional Commissioner having exercised the power under Section 263 and having disallowed the exemption on the ground that the assessee-corporation was not a marketing authority within the meaning of Section 10(29), the matter was carried in appeal before the Tribunal which has allowed this exemption claim relying on the decision of the Allahabad High Court in U.P. State Warehousing Corporation v. ITO : [1974]94ITR129(All) . The Tribunal having accordingly restored the order of the ITO, the Commissioner has come up in this reference. The other two references are for the other assessment years, as earlier pointed out, on this identical question.

4. The relevant exemption section is Section 10(29) under which, in computing total income of the assessee of a previous year, this exemption is provided in the following words :

'(29) in the case of an authority constituted under any law for the time being in force for the marketing of commodities, any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities.'

5. Therefore, the assessee-corporation would be entitled to exemption under Section 10(29) if three conditions are fulfilled :

(i) it is an authority constituted under any law in force ;

(ii) it is an authority constituted for the marketing of commodities ;

(iii) the exemptible income must be one derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities.

6. There is no controversy as regards the third ingredient because the exemption is claimed only in respect of that part of the income which was in respect of letting of godowns or warehouses for storage, processing or facilitating the marketing commodities. The controversy has only centred round the first two ingredients.

7. It is true that the exemption is granted only to an authority which is constituted under any law for the time being in force and, therefore, the assessee must be an authority which is constituted under any law in force. The assessee in the present case is the Gujarat State Warehousing Corporation which is deemed to have been set up under the Warehousing Corporations Act, 1962. Originally this corporation was constituted under Section 28(i) and (iii) of the earlier repealed Act, viz., Agricultural Produce (Development and Warehousing) Corporations Act, 1956, by the notification dated December 5, 1960. But under Section 43(2)(g) (Warehousing Corporations Act, 1962), such a State Warehousing Corporation established in the Gujarat State under the repealed Act is deemed to be a State Warehousing Corporation established for the Gujarat State under the 1962 Act. The preamble of the Act states that it is an Act to provide for the incorporation and regulation of corporations for the purpose of warehousing of agricultural produce and certain other commodities and for matters connected therewith. Under the earlier repealed Act, the Agricultural Produce (Development and Warehousing) Corporations Act, 1956, two independent bodies, viz., the National Co-operation Development and Warehousing Board and the Central Warehousing Corporation, were established and they were under the administrative control of the Ministry of Food and Agriculture. Subsequently, as a result of reallocation of business among the Ministry of Community Development and Co-operation and the Ministry of Agriculture and Food, in the interest of better functioning of the two bodies and for administrative convenience, it was decided that the two bodies should function independently under separate enactments and, therefore, the 1962 Warehousing Corporations Act and National Co-operative Development Corporations Act, 1962, had been passed. And under the present Act under the aforesaid Section 43(2)(g) a State Warehousing Corporation set up under the old law has been deemed to be a warehousing corporation established for the respective States under the new law.

8. Section 2(a) defines 'agricultural produce' and Section 2(e) defines 'notified commodities' as commodities declared to be notified commodities by a notification in this behalf by the Central Government. For the purposes of this Act, the later part of the condition that the commodity must be one with respect to which Parliament has power to make laws by virtue of entry 33 under List III in the Seventh Schedule to the Constitution had been deleted by the Warehousing Corporations Supplementary Act, 1965, so far as this Gujarat State is concerned with effect from November 29, 1965. The list of these notified commodities was a large list which, besides agricultural produce defined in Section 2(1), included iron and steel (metal), iron and steel structurals, insecticides, fungicides and weedi-cides, rubber, portland cement, etc. Thereafter, in the detailed scheme of the various provisions, the Central Warehousing Corporation and the State Warehousing Corporation have been constituted. Sections 3 and 11 deal with the constitution and functions of the Central Warehousing Corporation while Sections 18 and 24 deal with the constitution and functions of the State Warehousing Corporation. Under Section 18(4) in cases of such deemed State Warehousing Corporation by the fiction introduced by Section 43(2)(g) it is not necessary to establish such a State Warehousing Corporation under Section 18. The functions laid down by this statute for the State Warehousing Corporation in Section 24 are as under :

' Functions of the State Warehousing Corporation.--Subject to the provisions of this Act, a State Warehousing Corporation may-

(a) acquire and build godowns and warehouses at such places within the State as it may, with the previous approval of the Central Warehousing Corporation, determine;

(b) run warehouses in the State for the storage of agricultural produce, seeds, manures, fertilisers, agricultural implements and notified commodities ;

(c) arrange facilities for the transport of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities to and from warehouses;

(d) act as an agent of the Central Warehousing Corporation of the Government for the purposes of the purchase, sale, storage and distribution of agricultural produce, seeds, manures, fertilizers, agricultural implements and notified commodities; and

(e) carry out such other functions as may be prescribed.' Chapter IV deals with finance, accounts and audit. In the miscellaneous provisions in Chap. V, in Section 41 power to make rules is conferred on the Government and under Section 42 the power of making regulations is conferred on warehousing corporations with the previous sanction of the appropriate Government to make rules not inconsistent with the Act and the rules made thereunder; to provide for all matters for which provision is necessary or expedient for the purposes of giving effect to the provisions of the Act, and, in particular, without prejudice to the generality of that power in Sub-section (2) in respect of the specified matters, including the conditions of service and remuneration payable to the officers and other employees of a warehousing corporation ; laying down their duties and conduct of officers and employees of a warehousing corporation and in respect of the powers and duties which may be entrusted or delegated to the managing director of a warehousing corporation, and generally, the efficient conduct of the affairs of a warehousing corporation. The appropriate Government was also conferred power under Section 42(3) by a notification in the Official Gazette to rescind any regulation which it had sanctioned and thereupon the regulation shall cease to have effect. It is in the context of these provisions that we have to decide whether this is an authority constituted under any law and whether it is an authority for the marketing of commodities.

9. The Tribunal has relied upon the aforesaid decision of the Allahabad High Court which has taken the view that such a State Warehousing Corporation satisfies the requirements of Section 10(29). On the first question as to the Corporation being an authority, the Allahabad High. Court at page 133 has rightly taken the wider view because the context was not of the authority being a State within the meaning of Article 12 of the Constitution, where it must be authoritative in the sense of the agency of the State or a governmental or a semi-governmental instrumentality of the State or such other public authority in the State sphere. The compelling context in Section 10(29) was a limited context of the statutory authority which is constituted under the law in only a limited sphere, viz., for marketing and, therefore, if the authority so constituted had its jurisdiction and functions charged upon it by the law creating it in this limited sphere in a State, the authority so far as such limited sphere is concerned would be the authority functioning within that mandated area laid down by law under which it was created and shall be to that extent authoritative because it is created under the authority of law for exercising these enumerated functions within this mandated area laid down for its functioning. It is the specification of this sphere in which this authority is set up by the law creating it which would make it the authority constituted under the law. That is why at page 133 in the Allahabad decision in view of the compelling context of Section 10(29) it was held that the kind of authority which was envisaged was one for the marketing of commodities. If, therefore, a legal entity or corporation was constituted by a law for the purpose of marketing commodities, this specified quality of this authority would make it authoritative within the meaning of Section 10(29). Having been set up under the Warehousing Corporations Act, 1962, itself, it was an authority constituted under the law within the meaning of Section 10(29). Thereafter, in that decision the entire historical background was taken into account as to how warehousing corporations were established along with the establishment of the co-operative societies for the marketing of commodities and simultaneously Parliament had begun granting incentive to the newly created institutions in the shape of exemption in respect of income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. The report of the First Agricultural Finance Sub-Committee in 1945 was referred to, which had made the following observations in its summary of recommendations :

'The construction of a chain of warehouses is unlikely to attract immediately sufficient private capital. Hence we recommend that the U.P. State Warehousing Corporation v. ITO : [1974]94ITR129(All) . State should itself undertake the planning and construction of warehouses at all nuclear points of trade in agricultural produce. The warehousing system should be operated by a public corporation organised on lines similar to those of the improvement trust. '

10. The Rural Banking Enquiry Committee (1950) also emphasised the importance of storage and warehousing in relation to rural credit and rural banking. It had suggested the formation of a Warehousing Development Board with a large capital for the purpose of giving loans and subsidies to those who were prepared to take up this line of activity as a business. The Committee of Direction of the 'All India Rural Credit Survey (1954) had thoroughly examined these questions of warehousing and had recommended the creation of National Co-operative Development and Warehousing Board and All India Warehousing Corporation by a statute, as a result of which the earlier 1956 Act was enacted establishing the National Co-operative Development and Warehousing Board which was now bifurcated only in 1962. The whole function of the Board was to prepare plans and to promote programmes for agricultural production, processing, marketing and storage, warehousing, exporting and importing agricultural produce through a co-operative society or a warehousing corporation. Under the Act two types of corporations were provided. The Central Warehousing Corporation at Delhi was established to carry out its functions at centres of all India importance, while the State Corporations were to work at centres of State importance and above sub-divisional level. Apart from this, the co-operative societies were also set up to carry out warehousing functions below sub-divisional level. Even though in 1962 Parliament enacted these two separate Acts, the Warehousing Corporations Act had provided for this important aspect of warehousing not only of agricultural produce but included in its scope even other notified commodities. The very functions, which have been set up for these corporations under Sections 11 and 24 are of very wide range and included power to act as an agent of the Government for purposes of purchase, sale, storage and distribution of agricultural produce besides notified commodities, besides the activities of setting up godowns and warehousing at convenient places and for running these warehouses for storage of the agricultural produce and notified commodities and for arranging even facilities for the transport of the agricultural produce, seeds, manures, fertilizers, etc. Therefore, looking to the purpose underlying the constitution of these authorities, viz., warehousing, which may essentially be needed in the process of marketing by making this agricultural produce and other notified commodities very valuable through its efforts when they were being transferred from the producer to the consumer, Parliament thought of granting exemption.

11. Therefore, coinciding with the enactment of the 1956 Act, the Indian I.T. Act, 1922, was amended by introducing Section 14(3), (4) and (5). Section 14(3)(iii) provided:

' (3) The tax shall not be payable by a co-operative society...

(iii) in respect of any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities.'

12. From April 1, 1960, it stood amended as Section 14(5) :

' (5) The tax shall not be payable by an assessee, which is an authority constituted under any law for the time being in force for the marketing of commodities, in respect of any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities.'

13. In the I.T. Act, 1961, these provisions were re-enacted as Sections 81, 82 and 83 by way of providing these deductions. By the Finance (No. 2) Act of 1967, with effect from April 1, 1968, Sections 81 and 82 were substituted so far as they were concerned by Sections 80P and 80Q, while Section 83 which dealt with this particular provision, by styling it as income of marketing societies, is now re-enacted as Section 10(29). Section 10(29), except for this material change in the whole grouping by changing the character of this exemption or deduction by giving complete immunity to this income in the computation of the total income under Section 10, is otherwise in identical terms with Section 14(5) of the 1922 Act. In view of this coincidental measure of exemption introduced by Parliament for giving incentive to these newly created business institutions in these vital fields of warehousing and marketing through co-operative societies and by granting exemption in respect of this particular income derived from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the legislative intention was rightly found to be to encourage the warehousing industry, which was set up by creating this specified authority by making it eligible for such substantial tax exemptions. There was complete absence of any warehousing industry iii the country and when private business was so hesitant to enter this unexplored field, Parliament has remedied the situation by creating the necessary statutory authority in this special field of marketing which had such vital place, in our rural economy by entrusting it with the authority to carry on these essential functions specified in Sections 11 and 24. These incentives by way of tax exemption having 'been granted and being limited only to income arising from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the intention of the legislature was obvious to make this statutory authority eligible for this exemption. That is why looking to the benevolent purpose of this exemption scheme so as to encourage this vital national activity in the interest of rural economy, the term 'marketing' has to be construed in a manner which would achieve this beneyolent purpose of exemption rather than defeat the said purpose as per the settled rules of construction.

14. In that context, thereafter, the term ' marketing ' is examined, in the context of various meanings given to that term in various dictionaries and authorities. In the passage in Corpus Juris Secundum, Vol. 55, p. 785, the term ' marketing ' has been defined as follows :

' 'Marketing' signifies a bringing or sending to market, and includes buying as well as selling.'

15. This would show that buying and selling was an activity which is included in the term ' marketing '. Therefore, buying and selling was one of the activities in this field of marketing which did not exhaust its whole content. The passage from the ' Principle and Practice of Marketing in India ' by Dr. C.B. Mamoria and B.L. Joshi, is very important and instructive in this context.

' ' Marketing ' includes all activities involved in the creation of place, time and possession utilities. Place utility is created when goods and services are available at the places they are needed, time utility when they are needed, and possession utility when they are transferred to those who need them. The process of marketing makes goods and services much more valuable when they are wanted and transferred to the people and place who want them.'

16. These authors have made the following classification of the marketing functions :

(1) Activities involving transfer of ownership :

(a) buying ;

(b) selling ;

(2) Activities involving physical supply :

(a) transportation;

(b) storage ;

(3) Activities facilitating the foregoing functions :

(a) standardisation and grading;

(b) financing;

(c) risk taking;

(d) market research.

17. The storage function was explained as the marketing function involving holding and preserving goods between the time of production and their use. It was, therefore, pointed out that the marketing process consisted of processes of concentrating and dispersing all goods between the producers and consumers. In both these processes, storage and warehousing form important activities. Therefore, warehousing or storage was clearly an essential element of the process of marketing. Encyclopaedia Britannica, 1960 Edn., Vol. 14, p. 915, says that marketing consists of those activities which effect transfers in the ownership of goods and services and provide for their physical distribution. Similarly, the Encyclopaedia of Social Science, 1959 Edn,, Vol. 10, p. 133, says that as an economic concept the term ' marketing ' is susceptible of various interpretations. It was pointed out that a common but fallacious theory was that it was concerned chiefly, if not wholly, with finished goods and was the activity of specialised class of middlemen or that it was limited to adding time, place and possibly possession utilities to completed goods. The marketing process was infinitely far-reaching than the transfer of goods from manufacturers to final consumers.

18. Therefore, the learned judges had rightly found that 'marketing' includes all business activities directed towards the flow of goods and services from producer to consumer, and they were within the concept of ' marketing ', and the term could not be restricted only to buying and selling activity. If the narrow meaning was accepted, the whole purpose of the legislature would be frustrated. That is why, looking to the larger concept of modern marketing, when Parliament set up this statutory authority charging it with this vital function for the nation for proper development of our rural economy, this tax exemption which was intended for this statutory authority could not by any process of construction be denied as that would be repugnant to the settled principles of construction of this benevolent measure whose whole object is to encourage such statutory authorities, which carry out the mandate charged on them by remaining within the sphere of marketing. We are in complete agreement with the Allahabad High Court in that conclusion.

19. The learned standing counsel, however, vehemently relied upon the decision in Sukhdev Singh v. Bhagatram : (1975)ILLJ399SC . It was in the context of the definition of the term ' State ' under Article 12 where, in the context of that article, the term ' other authority ' was interpreted by their Lordships. At page 1342, it was pointed out that the State undertook commercial functions in combination with governmental functions in a welfare State, Governmental function must be authoritative. It must be able to impose decisions by or under law with authority. The element of authority was the binding character. The rules and regulations were authoritative because these rules and regulations direct and control not only the exercise of powers by the corporation but also all persons who deal with these corporations.

20. The ratio in the case of Rajasthan State Electricity Board v. Mohan Lal : (1968)ILLJ257SC , was examined where the authority in the limited context of Article 12 must be a public administrative agency or corporation having quasi-governmental powers and authorised to administer a revenue producing public enterprise. The expression 'other authorities' was interpreted and it was held to include within it every authority created by a statute and functioning within, the territory of India and also all constitutional or statutory authorities on whom powers are conferred by law. Even in commercial or trading activities if the authority had power to make rules and regulations and to administer the Act, it would be clear that sovereign powers were delegated to the said authority. A public authority was a body which had public or statutory duties to perform and which performs those duties and carries out its transactions for the benefit of the public and not for private profit. It is in this context that in order to decide whether the authority was a State within the meaning of Article 12 that these tests were laid down of such public or statutory authority, which was authoritative in that wider sense. Possession of such law-making power by way of laying down rules and regulations was held to be one of such attributes of the sovereign power which would make such a statutory or public authority carrying on even such commercial functions the State within the meaning of Article 12, Even his Lordship, Mathew J., in Sukhdev Singh v. Bhagatram : (1975)ILLJ399SC , had in his judgment evolved in that context the doctrine of instrumentality of State or State agency under which despite the fact that there were no provisions for issuing binding directions to third parties, the disobedience of which would entail penal consequences, the corporations set up under statutes to carry on a business of public importance and which was fundamental to the life of the State would come within the concept of State. Various decisions were examined in the context for finding out what was the State action which made these instrumentalities or agencies, State agencies. It should also be noted that at page 1340, even the decision in U. P. State Warehousing Corporation's case : (1970)ILLJ32SC , was in terms referred to as the corporations had power to make statutory regulations, to which we have already referred. Therefore, it was held at page 1341 that that earlier decision in U.P. State Warehousing Corporation's case : (1970)ILLJ32SC , was in direct conflict with the decision in Mafatlal Narandas Barot's case : (1966)ILLJ437SC , which was decided by the Constitution Bench. Therefore, so far as the State Warehousing Corporation is concerned, which has under statute power to make even binding regulations having the force of law, as per this settled legal position, even this wider test of instrumentality of a State or authoritativeness as such a Governmental authority would be satisfied. We are, however, not inclined to accept the argument of the learned standing counsel because it would be proceeding on a totally irrelevant test, which was evolved in a totally different context of what is a State within the meaning of Article 12 and where such authoritativeness has to be found as to make the action of the authority a State action. That is why the sphere of that action had to be that wider sphere of some kind of governmental action or governmental administrative function. What we are concerned with is, however, a totally different context of Section 10(29) where the authority must be a statutory authority constituted under the law which is charged with only the limited administration, one which is specified in the law creating it, viz., functions laid down in Section 24. It is the specification of these functions in Section 24 which lays down the mandated area or sphere or jurisdiction of this authority, within which sphere it is completely authoritative because of the law which has created it to exercise its functions within that field.

21. The only question which we have, therefore, to examine is the other question as to whether this limited sphere which has been set out by the legislature for this statutory authority by its functions specified in Section 24, is such a sphere which makes it the authority 'for marketing'. The legislature has advisedly used the words 'authority for marketing' by emphasising the object and purpose or the sphere of the statutory authority. So far as Section 24 is concerned, the functions are all of such wide nature, as earlier pointed out, which includes specifically marketing besides setting up godowns or warehouses and running these warehouses for storage of agricultural produce, seeds, manures, fertilisers, agricultural implements and notified commodities and arranging facilities for the transport thereof to and from warehouses. 'The important function which is contemplated as being charged to this authority is the one specified in Section 24(b) of being an agent of the Central Warehousing Corporation or of the Government for the purposes of the purchase, sale, storage and distribution of agricultural produce, seeds, manures, fertilisers, agricultural implements and notified commodities. When one has to find out what this authority or the administration is meant for, one has to look to its statutory objects and functions, irrespective of the fact whether in a particular case all these intended objects are actually undertaken or not. Looking to Section 24(d) which covers even purchase and sale, besides storage and distribution, it is obvious that even the narrow test propounded by the learned standing counsel of marketing in the narrow sense is fulfilled by this authority. We, however, do not rest our decision on Section 24(d) alone because looking to the whole context of the sphere of marketing even these activities of warehousing and storage or transport are so essential in the whole process of marketing that an authority charged with these statutory functions would clearly fulfil this test. As pointed out by Dr. C.B. Mamoria and Shri B.L. Joshi in the aforesaid instructive passage marketing must include all activities involved in the creation of place, time and possession utilities. The goods must be available at the place where they are needed, at the time when they are needed, so as to serve even the possession utility for being transferred to those who need them. The process of marketing could be duly organised only when it serves these utilities, and, therefore, the importance of these functions of warehousing, storage or transport or concentrating and dispersing the goods between the purchasers and consumers by making them available at the proper place and time to persons who needed them by fulfilling the real object of marketing. The warehousing would help to adjust conditions of seasonal consumption to year-round production. Enough surplus stocks would be properly warehoused during off-season so that the peak season demand might be met without the need for overtime operation. Proper use of warehousing facilities would enable a producer to store the seasonal surplus so that it could be marketed long after the production season or harvest has ended. The same would be true of the manufacturer. In our country, when even food-grains have to be imported, the importance of the functions of the warehousing and storage could never be lost sight of as furnishing a vital link in the flow of the goods to the ultimate consumer even when the grains have to be imported from outside. Therefore, the marketing must be interpreted in the wider concept as it is now understood as per the modern principles and practices of marketing and it would embrace within its reach all the business activities which help the flow of the goods from the producer to the consumer and it could never be restricted to mere simple buying and selling of the commodities in question.

22. The learned standing counsel vehemently tried to rely upon the Taxation Enquiry Committee Report, 1953-54, at page 126, which was the basis for enlarging the existing taxation concessions to co-operative societies including State co-operative banks. Under para. 67(3) it is stated as under :

'To this end we make the following recommendations......

(iii) in the scheme of agricultural organisation that is favoured by competent authorities, the extension of a system of warehouses in rural areas is deemed to be of considerable importance. Where warehouses are constructed by co-operative societies or by regulated market committees enjoying statutory recognition, the income from such property is liable to income-tax under the existing practice referred to above. In view of the usefulness of this development in our rural economy, we recommend that co-operative societies (including banks, marketing societies, etc.) and statutorily constituted market committees which provide warehousing or godown facilities, should enjoy exemption from tax on such part of their income as is derived from godowns and warehouses, even if their yearly income exceeds Rs. 20,000. '

23. As the Finance Minister had implemented fully these recommendations it was argued that only those authorities which under the various State laws were empowered to act as marketing committees themselves were intended to be eligible for this exemption. In this argument, the learned standing counsel ignores that the recommendations included besides co-operative societies even banks, which would have this exemptible income by way of warehousing. The learned standing counsel also ignores how the law has taken rapid strides thereafter. The original Section 14(3), (4) and (5) at the time of the 1961 Act had been re-enacted in Sections 81 to 83 and Section 83 was in identical terms with Section 14(5) and it had the headnote 'Income of marketing societies'. After the 1967 amendment, the sections dealing with co-operative societies are re-enacted as Sections 80P and 80Q and Section 83 is now replaced by Section 10(29). The change is very substantial as now it is not a scheme of mere deduction or exemption but this type of exemptible income is not to be computed at all as income for the computation of total income under Section 10 and is not to be returned at all and has complete immunity like agricultural income. The warehousing activity has also not stood confined as in 1956 to the warehousing of agricultural commodities alone but has been extended from time to time. Therefore, reliance on this extrinsic aid was totally misplaced for construing the plain language of this benevolent exemption in Section 10(29). If any such restricted meaning is given we would be rewriting the phraseology advisedly used by the legislature by putting down the additional qualification that the authority for marketing will be exemptible if it undertakes activity of trading or all the activities of marketing. The whole exemption provision would then be self-defeating. The exemptible income is contemplated from the letting of godowns and warehouses for storage, transport or facilitating the marketing of commodities and if such warehousing authority whose substantial income is only from these activities is to be denied this exemption on the ground that it does not carry on the actual trading activity the income from which is not made exemptible, the legislative intention would be completely frustrated.

24. The learned standing counsel also tried to urge that the adjectival clause ' for the marketing ' is attached to the law and not to the authority. This distinction or even the use of the term ' marketing ' again in Section 10(29) would hardly be material to illumine the point under discussion as to whether the term ' marketing ' has a narrow or wider meaning.

25. The whole crux of the matter is that Parliament in its wisdom has used the expression ' authority for the marketing of commodities '. The expression 'for' would show the purpose, the ultimate object to be served by this authority. The authority must promote marketing by its services in the mandated area of its functioning and the legislature while constituting this statutory authority and laying down its function or jurisdiction has delimited its area by setting the field for its activity so that it serves or better promotes this purpose or object of marketing the commodities. Whatever enhances the utilities value, clearly enhances the real worth of the commodities in question and looking at the matter from this crucial angle there could be no doubt that warehousing or storage is such an essential step in the whole process of marketing that it enhances the utility of the commodities in question by making them more valuable. Therefore, it has a direct impact on the very trading activities by enhancing their real value. The same is true of the other activities of processing of these commodities and even facilitating the distribution by transport to and from the warehouses. Even storage would have to be looked at by way of preservation from ravages of natural causes and even from being eaten away by rodents and insect life. If all these essential aspects of the warehousing activities are borne in mind the wisdom of the legislature is too apparent in using this phrase ' authority for marketing ', so that warehousing corporations on the plain tenor of Section 10(29) earn this exemption. As earlier pointed out, in the present case, even Clause (d) of Section 24 itself clinches this issue, but we are resting this decision on a much wider ground of the warehousing activity itself. It should also be borne in mind that so far as co-operatives are concerned, including the co-operative banks, similar exemption is to be found right from the beginning in Section 80P(ii)(e) where such co-operative societies are given deduction in respect of similar income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, to the extent of the whole of such income. And even under the earlier corresponding section as well as this section, the co-operative banks would earn that exemption without any trading activity as such.

26. In that view of the matter, the Tribunal was right in holding that this assessee-corporation fulfilled all the three requisites for earning exemption under Section 10(29). In that view of the matter, this reference must be answered in the affirmative, i.e., in favour of the assessee and against the revenue. This reference is accordingly disposed of and the revenue shall pay the costs of the assessee. The other references are accordingly answered and the revenue shall pay the costs of the assessee in each reference.


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