1993 (12) TMI 40 - HC - Income Tax

Income from Rajasthan State Warehousing Corp. not fully exempt under Income-tax Act.

The court held that the entire gross receipts of the Rajasthan State Warehousing Corporation were not eligible for exemption under section 10(29) of the ... Income Tax Act, Marketing Of Commodities, Nature Of Income, State Warehousing Corporation Issues Involved:1. Whether the entire gross receipts of the assessee were eligible for exemption u/s 10(29) of the Income-tax Act, 1961.Summary:1. Exemption u/s 10(29):The core issue was whether the entire gross receipts of the Rajasthan State Warehousing Corporation were eligible for exemption u/s 10(29) of the Income-tax Act, 1961. The assessee claimed that its entire income was exempt under this section. The Income-tax Officer, however, concluded that only the income from warehousing activities was exempt, and other sources of income were not.2. Interpretation of 'facilitating the marketing of commodities':The court examined the scope of section 10(29), which exempts income derived from the letting of godowns or warehouses for storage, processing, or facilitating the marketing of commodities. The court referenced multiple judgments, including those from the Madhya Pradesh High Court and the Allahabad High Court, which clarified that only income directly derived from letting godowns or warehouses for the specified purposes is exempt.3. Income from different sources:The court noted that the assessee derived income from various sources, including warehousing charges, procurement of grains, interest, supervision charges, fumigation service charges, and miscellaneous income. It was emphasized that the exemption u/s 10(29) applies only to income derived from letting godowns or warehouses for the specified purposes. Income from other activities, such as procurement of grains and interest, was not considered exempt.4. Integrated activity argument:The Income-tax Appellate Tribunal had previously held that the assessee's activities were integrated and thus all income was exempt. The court disagreed, stating that the exemption is specific to income derived from letting godowns or warehouses. Activities not directly related to letting godowns, even if they facilitate marketing, do not qualify for exemption.5. Specific income sources:- Procurement of grains: The court held that income from procurement of grains for the State Government/Food Corporation of India is an independent activity and not exempt.- Interest: Interest income from banks was also not considered exempt, regardless of whether it was classified as business income or income from other sources.- Fumigation charges: Income from fumigation services related to goods stored in the assessee's godowns was considered incidental to letting and thus exempt.- Miscellaneous income: The Tribunal did not discuss the nature of miscellaneous income in detail, so the court remanded this issue back to the Tribunal for further examination.Conclusion:The court concluded that the Income-tax Appellate Tribunal was not justified in holding that the entire income of the assessee was exempt u/s 10(29). The reference was answered partly in favor of the Revenue and partly against the assessee. The Tribunal was directed to re-examine the nature of miscellaneous income and other unspecified sources to determine if they qualify for exemption under section 10(29).