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

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 308 of 1977
Judge
Reported in[1986]157ITR149(Cal)
ActsIncome Tax Act, 1961 - Sections 83 and 154; ;Warehousing Corporations Act, 1962
AppellantWest Bengal State Warehousing Corporation
RespondentCommissioner of Income-tax
Appellant AdvocatePal, Adv.
Respondent AdvocateBagchi, Adv.
Excerpt:
- .....case of m. p. warehousing corporation v. cit : [1982]133itr158(mp) . there, it was held that to claim exemption under section 10(29) (corresponding to section 83 since deleted by the finance (no. 2) act, 1967 with effect from april 1, 1968), it must be proved that the income derived by an authority constituted for the marketing of commodities is income which is derived from letting of godowns or warehouses for the purpose specified in section 10(29), which are storage, processing or facilitating the marketing of commodities. if the letting of godowns or warehouses is for any other purpose, or if income is derived from any other source, then such income is not exempt under that clause. therefore, the income derived by the assessee, a corporation established under the warehousing.....
Judgment:

Ajit Kumar Sengupta, J.

1. This is a reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1967-68. For that year, the assessee, the West Bengal State Warehousing Corporation, filed a return showing a total income of Rs. 92,578 and the assessment was made on a total income of Rs. 9,17,117. An appeal was preferred against the said assessment and the Appellate Assistant Commissioner partly allowed the appeal by an order dated May 19, 1972.

2. On October 1, 1973, the assessee made an application under Section 154 of the Income-tax Act, 1961, claiming amongst other matters that the income of the assessee was exempt from taxation. By an order dated November 2, 1973, the Income-tax Officer rejected the application holding that since the claim for exemption was not made in the course of assessment or even before the Appellate Assistant Commissioner, the claim for exemption cannot be considered.

3. The assessee came before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner by his order dated October 3, 1974, accepted the contention of the assessee by holding that there is a glaring and obvious mistake of law in this case as the income of the assessee from warehousing was exempt.

4. Aggrieved by the said order of the Appellate Assistant Commissioner, the Revenue came up in appeal before the Income-tax Appellate Tribunal. The Tribunal considered the respective submissions and held that for claiming exemption under Section 83 of the Income-tax Act, 1961, as it then existed, it will be necessary to prove in the first place that the assessee was constituted under the law for the marketing of commodities and the exemption will be limited only to income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. The printed accounts of the assessee show that apart from the receipt of Rs. 5,72,323, there were other receipts which cannot be said to be obviously from the letting of godowns, etc., in respect of which exemption would automatically be available under Section 83 of the Income-tax Act, 1961, without the possibility of any dispute or difference of opinion on this point. The Tribunal also held that nothing turns on what happened in the subsequent assessment years 1969-70 and 1970-71 for a decision on the issue whether the claim for exemption under Section 83 for the assessment year 1967-68 under consideration here which was not made either before the Income-tax Officer or before the Appellate Assistant Commissioner could be allowed as a mistake apparent from the record by order under Section 154.

5. On the aforesaid facts, the following question of law has been referred to this court :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the claim of exemption under Section 83 of the Income-tax Act, 1961, as it then stood, which was not made before the Income-tax Officer or before the Appellate Assistant Commissioner in the course of appeal against the assessment order, could not be entertained under Section 154 of the Income-tax Act, 1961 ?'

6. Dr. Pal, learned advocate for the assessee, has submitted that it is true that no claim was made before the Income-tax Officer or the Appellate Assistant Commissioner as regards the exemption of income derived from warehousing but as soon as the mistake was detected, the claim was made. As a matter of fact, the claim for exemption for the subsequent years was accepted by the Income-tax Officer. He submits that from the profit and loss account and the balance-sheet filed before the Income-tax Officer, it would be evident that Rs. 5,72,323 was the income from warehousing. Therefore, the said income was exempt from taxation.

7. Mr. Bagchi, learned advocate for the Revenue, on the other hand, has submitted that whether the provision of exemption under Section 83 (now Section 10(29)) would be applicable or not would depend on an investigation of facts. The claim not having been made before the Income-tax Officer or the Appellate Assistant Commissioner, it cannot be said that there is a mistake apparent from the records. He, therefore, submitted that the Tribunal was right in rejecting the claim of the assessee.

8. The question before us is whether the assessee not having made the claim for exemption of its income derived from warehousing before the Income-tax Officer or the Appellate Assistant Commissioner can ask for the exemption in a proceeding under Section 154 of the Act. Section 154 of the Act provides that the Income-tax Officer may amend the order of assessment if there is a mistake apparent from the records. The mistake in such a case should be glaring and obvious. If there is any debatable question or if only upon construction of a statute the mistake has to be ascertained, then it will not be a mistake apparent from the records. The Appellate Assistant Commissioner held that 'there are no two opinions that the income of the Warehousing Corporation established under the statute is exempt.' The assessee-corporation was established under the Agricultural Produce (Development and Warehousing) Corporation Act, 1956, replaced by the Warehousing Corporations Act, 1962. The assessee was being assessed as a company under Section 39 of the Warehousing Corporations Act, 1962, Section 39 of the Act provides that for the purpose of income-tax a warehousing corporation shall be deemed to be a company within the meaning of the said Act and shall be liable to income-tax and super-tax accordingly on its income, profits and gains. The assessee is a statutory corporation created to perform the functions laid down in Section 24 of the Warehousing Corporations Act, 1962. Section 24 of the said Act, inter alia, provides as follows :

'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, fertilisers, agricultural implements and notified commodities to and from warehouses ;

(d) act as 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 ; and

(e) carry out such other functions as may be prescribed.' It appears from the records that the assessee made an application on May 23, 1973, under Section 264 of the Income-tax Act before the Commissioner of Income-tax, West Bengal, contending, inter alia, that, the assessee-corporation was formed by the Government of West Bengal for warehousing facilities, i.e. for storing and marketing agricultural commodities in the State, and the income derived by the said corporation arises from the warehousing charges received from the Government and other authorities and that due to their ignorance, the claim under Section 83 of the Income-tax Act, 1961, was not made before the Income-tax Officer in the course of the proceedings. The said application was, however, rejected and thereafter an application was made by the assessee under Section 154. From the profit and loss account for the year ending March 31, 1967, it appears that a sum of Rs. 5,72,383.03 was received as and by way of warehousing charges. This fact was not disputed before the Tribunal.

9. Dr. Pal has relied on a decision of the Allahabad High Court in the case of U. P. State Warehousing Corporation v. ITO : [1974]94ITR129(All) to emphasise that the legislative intent was to encourage the warehousing industry by granting substantial tax exemption and because of the ignorance of the assessee-corporation, if it is deprived of the benefit, that will be contrary to public interest. In that case, the Allahabad High Court observed that coinciding with the enactment of the Agricultural Produce (Development and Warehousing) Corporation Act of 1956 (which was later replaced by the Warehousing Corporations Act of 1962), Parliament amended the Indian Income-tax Act, 1922, by introducing Sub-section (5) to Section 14 of that Act (corresponding to Section 10(29) of the 1961 Act). With the establishment of warehousing corporations and co-operative societies for marketing of commodities, Parliament, by way of giving incentive to these newly created business institutions, granted exemption in respect of income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. Evidently, the legislative intent was to encourage the warehousing industry by granting substantial tax exemptions.

10. Dr. Pal also relied on a decision in the case of India Woollen Textile Mills (Pvt.) Ltd. v. CIT [1978] 111 ITR 205, where the Punjab and Haryana High Court held that where a statutory provision was completely lost sight of, the matter could be treated as an error apparent from record and rectified under Section 13 of the Surtax Act especially when the question whether any debatable issue was involved was not raised before the Department or the Tribunal.

11. Dr. Pal has also relied on the judgment of the Gujarat High Court in the case of Chokshi Metal Refinery v. CIT : [1977]107ITR63(Guj) . There the assessee did not claim any relief under Section 80J in the original assessment which was claimed under Section 154 of the Act. The Income-tax Officer rejected the application under Section 154. The Appellate Assistant Commissioner also confirmed the order of the Income-tax Officer by holding that there was no iota of evidence to suggest that any claim was made before the Income-tax Officer. Ultimately the matter went to the Tribunal. The Tribunal also held that no mistake apparent from the records was brought to the notice of the Income-tax Officer. Accordingly, he could not exercise any power under Section 154. On a reference, the Gujarat High Court held that it was the duty of the Income-tax Officer to draw the attention of the assessee to the relief which it was entitled to under Section 84/80J which the assessee had omitted to claim. The Gujarat High Court, however, held against the assessee on the basis of the finding of the Tribunal. The Gujarat High Court held as follows (p. 77) :

'We are not deciding this case against the assessee on the ground that no claim was made by the assessee in the course of the original assessment proceedings for relief under Section 84 or Section 80J. We are, however, deciding this case purely on the basis of the findings of fact recorded by the Tribunal, namely, that the materials necessary for the purpose of granting the relief under Section 80J of the Act were not available with the Income-tax Officer at the time of making the original assessment and the further finding of fact by the Tribunal that none of the conditions set out in Section 80J(4) was specifically satisfied by the assessee in the course of the assessment proceedings under Section 143(3) of the Act. It is possible that if a claim had been specifically preferred under Section 84 or Section 80J, as the case may be, the materials required for satisfying the relief under Section 80J could have been pointed out to the Income-tax Officer at the time of the original assessment proceedings and relief under Section 80J might have been granted by the Income-tax Officer. But what we are concerned with is whether there was an error apparent from the record. In view of the findings of fact by the Tribunal regarding the absence of materials necessary for granting the relief under Section 80J and in view of the finding of the Tribunal that none of the conditions laid down by Section 80J(4) was satisfied in the present case, it is obvious that there was no error apparent from the record so far as the original proceedings were concerned. It is only on this limited aspect that we want to base our decision in the instant sase.'

12. Mr. Bagchi has relied on a decision in the case of M. P. Warehousing Corporation v. CIT : [1982]133ITR158(MP) . There, it was held that to claim exemption under Section 10(29) (corresponding to Section 83 since deleted by the Finance (No. 2) Act, 1967 with effect from April 1, 1968), it must be proved that the income derived by an authority constituted for the marketing of commodities is income which is derived from letting of godowns or warehouses for the purpose specified in Section 10(29), which are storage, processing or facilitating the marketing of commodities. If the letting of godowns or warehouses is for any other purpose, or if income is derived from any other source, then such income is not exempt under that clause. Therefore, the income derived by the assessee, a corporation established under the Warehousing Corporations Act, 1962, by way of commission charges for handling the work of loading and unloading of agricultural commodities from the Fertillizer and Food Corporation of India and also interest on fixed deposits with banks are not income derived from the letting of godowns or warehouses by the State Warehousing Corporation and the same is not entitled to exemption under Section 10(29) of the Act. This case was cited to emphasise that there is no mistake apparent from the record.

13. We have considered the rival submissions. It is not in dispute that the assessee is a warehousing corporation established by the State of West Bengal and performs the functions under the Warehousing Corporations Act, 1962. From the record, it would appear that for all the subsequent years the exemption was allowed to the assessee. It is true that the records of the subsequent years may not be relevant for determining 'the question for the assessment year in question, but the same would show that there was no dispute that the assessee was entitled to exemption on its income from warehousing. Even though the claim was not made by the assessee before the Income-tax Officer, all the materials for the purpose of determining the question were before the Income-tax Officer. On the facts of this case, we are unable to hold that the assessee, having not made the claim before the Income-tax Officer or the Appellate Assistant Commissioner for exemption of the income from warehousing as exempt under Section 83 of the Income-tax Act as it stood at the material time, is not entitled to claim such exemption in a proceeding under Section 154 of the Act. The Tribunal has found that the income of the assessee for the assessment year in question included a sum of Rs. 5,72,323 derived from warehousing. Other receipts may or may not be exempt under Section 83 and on that there may be two views possible. But one thing is certain that so far as the income from warehousing is concerned, the assessee is entitled to exemption which has not been disputed by anyone before the Appellate Assistant Commissioner or before the Tribunal.

14. We are, therefore, of the view that the income of Rs. 5,72,323, which indisputably is from warehousing and which comes within the purview of Section 83, cannot be taxed. The Income-tax Officer has no jurisdiction to assess such income which is exempt from taxation. This error of jurisdiction is a glaring and obvious error which can be rectified under Section 154 of the Act.

15. For the aforesaid reasons, we answer the question in this reference in the negative and in favour of the assessee. However, we make it clear that the claim of exemption of the assessee will be restricted only to the sum of Rs. 5,72,323.

Dipak Kumar Sen, J.

16. I agree.


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