Cold storage as preservation supports deduction under section 80IB(11A) and defeats revision under section 263

Cold storage operations for storing growers' produce were treated as "preservation" for deduction under section 80IB(11A), because letting out the facility did not alter the character of the business. The assessee was therefore engaged in eligible preservation activity and entitled to the deduction. On that basis, the assessment could not be regarded as erroneous or prejudicial to the interests of Revenue under section 263 merely because the facility was used by growers. The earlier tribunal ruling cited by Revenue was not binding, as it had not examined the precise preservation question.

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Issues: Whether the assessee's cold storage activity, including letting out the facility to growers for storage of produce, amounted to "preservation" so as to qualify for deduction under section 80IB(11A) of the Income-tax Act, 1961, and whether the Principal Commissioner could validly revise the assessment under section 263 of the Income-tax Act, 1961.

Analysis: The assessee was found to be carrying on the business of cold storage, and the mere fact that the facility was rented to growers for storing their produce did not change the character of the activity. The activity was held to fall within the statutory expression "preservation" for purposes of section 80IB(11A). Once the assessee was regarded as engaged in preservation of eligible produce, the assessment allowing the deduction could not be characterised as erroneous or prejudicial to the interests of Revenue on that ground. The earlier tribunal ruling relied upon by Revenue was held not to be binding on the present issue because the precise question of preservation had not there been examined.

Conclusion: The assessee was held entitled to deduction under section 80IB(11A), and the revisionary order under section 263 was set aside.

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