Tribunal upholds deduction for constructing SILO under Income Tax Act

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision to allow the deduction under section 35AD of the Income Tax Act for the expenditure on constructing a SILO for storage of agricultural produce. The Tribunal found that the SILO qualified as a warehousing facility for agricultural produce, meeting the requirements of the specified business under section 35AD. The SILO, used for storing castor seeds in the assessee's manufacturing business, was considered essential for operational purposes, resulting in cost savings.

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Issues:
- Dispute over deduction u/s. 35AD of the Income Tax Act for setting up a SILO for storage of agricultural produce.

Analysis:

Issue 1: Deduction u/s. 35AD of the Act

The appeal by the Revenue challenges the order of CIT(A) upholding the assessee's claim for deduction u/s. 35AD of the Income Tax Act. The Revenue contended that the deduction was not allowable as the SILO was set up for captive purposes, contrary to the provisions of Sec. 35AD which require a "specified business." The Assessing Officer disallowed the claim, stating that the assessee did not set up a warehouse for agricultural produce and was not in the business of warehousing. However, the CIT(A) disagreed, equating a SILO to a warehouse and emphasizing that the assessee had met the requirements of Sec. 35AD. The Tribunal noted that the deduction is based on capital expenditure for a specified business, which includes operating a warehousing facility for agricultural produce. The assessee had indeed constructed a SILO for storing castor seeds used in its manufacturing business. The Revenue's objection that the assessee did not operate a warehousing facility was deemed incorrect, as the warehouse was used in the course of business, resulting in savings on storage costs. Therefore, the Tribunal affirmed the CIT(A)'s decision, ruling in favor of the assessee.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the deduction u/s. 35AD for the expenditure on constructing a SILO for storage of agricultural produce.

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