Deduction for godown income denied where commission was part of trading margin, not rent for storage under section 80P(2)(e).

Section 80P(2)(e) applies only where income is derived from letting of godowns or warehouses for storage, processing or marketing of commodities, and the assessee bears the burden of proving that character. On the facts, the commission received from storage and distribution of controlled commodities formed part of the commercial margin between issue price and sale price, not rent for use of godowns. The assessee also treated the commodities as part of its own trading stock, making the transaction one of its own trading operations rather than storage on behalf of another. The Court distinguished South Arcot on its facts and held that the amount did not qualify for deduction under section 80P(2)(e).

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Issues: Whether the commission received by a co-operative society for storage and distribution of controlled commodities was income derived from the letting of godowns or warehouses so as to qualify for deduction under section 80P(2)(e) of the Income-tax Act, 1961.

Analysis: The deduction under section 80P(2)(e) is a special deduction and the burden lay on the assessee to show that the income was derived from letting of godowns or warehouses for storage, processing, or facilitating the marketing of commodities. The terms of the relevant control order and the rate-fixation mechanism showed that the so-called commission formed part of the commercial margin between issue price and sale price, rather than rent for use of godowns. The assessee also treated the controlled commodities as part of its own trading stock. The distinction between mere storage on behalf of another and storage as part of the assessee's own trading operations was therefore decisive. The earlier decision in South Arcot was distinguished on the basis of its facts, while the reasoning in the line of cases dealing with the real nature of the transaction was approved.

Conclusion: The amount received was not income from letting of godowns or warehouses and did not qualify for deduction under section 80P(2)(e) of the Income-tax Act, 1961; the issue was decided against the assessee.

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