Godown rental exemption upheld where storage was the dominant purpose and ancillary services did not change the payment's true character.

Receipt from the State Government for stocking and distributing ammonium sulphate was treated as income from letting out godowns and therefore exempt under section 14(3)(iv) of the Indian Income-tax Act, 1922. The Court read the provision as intended to encourage co-operative societies to construct and let out warehouses for storage of fertilisers and similar commodities. On the facts, the agreement showed that the dominant element of the arrangement was the use of the assessee's godowns for storage, while delivery and transport services were merely incidental. The payment being described as commission did not change its true substance, which was remuneration for use of the godowns.

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Issues: Whether the receipt of Rs. 31,316 from the State Government for stocking and distribution of ammonium sulphate was exempt under section 14(3)(iv) of the Indian Income-tax Act, 1922, on the footing that it was income from letting out godowns.

Analysis: The exemption provision was treated as one intended to encourage co-operative societies to construct and let out warehouses for storage of fertilisers and related commodities. On the facts, the agreement was read as showing that the dominant element of the transaction was the use of the assessee's godowns for storage, while the additional services of delivery and transport were only incidental. The description of the payment as commission did not alter the true substance of the arrangement, which was remuneration for the use of the godowns.

Conclusion: The receipt was exempt under section 14(3)(iv) of the Indian Income-tax Act, 1922, and the finding was in favour of the assessee.

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