2004 (9) TMI 88 - HC - Income Tax

Co-op society's cold storage income exempt under Income-tax Act

The court held that income derived by a co-operative society from cold storage operations qualifies for exemption under section 80P(2)(e) of the ... Deduction under section 80P(2)(e) - income of the assessee-co-operative society from a cold storage - 'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in holding that the income of the assessee-co-operative society from a cold storage was exempt under the provisions of section 80P(2)(e) of the Income-tax Act, 1961?' - Giving a liberal interpretation of the words 'godowns and warehouses' mentioned in section 80P(2)(e) of the Act, a cold storage can be said to be warehouse or godown where goods are stored and thus it falls under the aforesaid section. In this view of the matter, the income from cold storage would be exempt.- In view of the foregoing discussions, we answer the question referred to us in the affirmative, i.e., in favour of the assessee Issues Involved:1. Whether the income of the assessee-co-operative society from a cold storage was exempt under the provisions of section 80P(2)(e) of the Income-tax Act, 1961.Detailed Analysis:1. Income Exemption Under Section 80P(2)(e):The primary issue revolves around whether the income derived by a co-operative society from cold storage operations qualifies for exemption under section 80P(2)(e) of the Income-tax Act, 1961. This section allows for the deduction of income derived from the letting of godowns or warehouses for storage, processing, or facilitating the marketing of commodities.Arguments by Revenue:The Revenue argued that the operation of a cold storage does not constitute the letting of a godown or warehouse for storage or processing. They cited the apex court's decision in Delhi Cold Storage P. Ltd. v. CIT [1991] 191 ITR 656, which held that processing does not occur in a cold storage, and therefore, a cold storage cannot be considered a godown or warehouse under section 80P(2)(e).Arguments by Respondent:The respondent contended that a liberal interpretation of section 80P(2)(e) should be adopted. They argued that a cold storage, where articles are stored at a controlled temperature, functions as a godown or warehouse for storage purposes, even if no processing is involved. They supported their argument by referencing several judicial decisions, including Addl. CIT v. Ryots Agricultural Produce Co-operative Marketing Society Ltd. [1978] 115 ITR 709 (Karn), CIT v. Radha Nagar Cold Storage (P.) Ltd. [1980] 126 ITR 66 (Cal), and others.Court's Interpretation:The court examined various dictionary definitions and judicial interpretations of the terms 'godown' and 'warehouse.' It concluded that both terms are synonymous and refer to places used for the storage of goods, even temporarily. The court also considered the legislative intent behind section 80P(2)(e), which aims to encourage co-operative societies to construct storage facilities beneficial for the rural economy.Precedents and Judicial Reasoning:The court referred to multiple precedents to support its interpretation:- In Radha Nagar Cold Storage (P.) Ltd. [1980] 126 ITR 66, the Calcutta High Court held that cold storage prevents natural decay of stored products.- In Ryots Agrl. Produce Co-operative Marketing Society Ltd. [1978] 115 ITR 709, the Karnataka High Court emphasized the broad scope of 'marketing,' which includes storage.- In Ahmedabad Maskati Cloth Dealers Co-operative Warehouses Society Ltd. [1986] 162 ITR 142, the Gujarat High Court highlighted that godowns or warehouses used for storage, processing, or facilitating marketing qualify for exemption.- The apex court in South Arcot District Co-operative Marketing Society Ltd. [1989] 176 ITR 117 and Kerala State Co-operative Marketing Federation Ltd. [1998] 231 ITR 814 stressed the importance of a liberal interpretation to promote the co-operative sector.Conclusion:The court concluded that a cold storage, where goods are stored at a fixed temperature, can be considered a warehouse or godown under section 80P(2)(e). Therefore, the income derived from such operations is exempt. The question referred was answered in the affirmative, in favor of the assessee and against the Revenue, with no order as to costs.