Restricted "derived from" test denies exemption for interest and other independent receipts linked to warehouse operations.

Section 10(29) exemption was confined to income derived directly from the activity of letting out warehouses for storage, processing or facilitating the marketing of commodities. The phrase "derived from" was applied in a restricted sense, so only receipts with the warehouse activity as their immediate and effective source qualified. Interest on deposits, loans and advances to staff, belated refund interest and similar receipts were treated as arising from independent sources, not from the eligible activity. The later Supreme Court ruling in Orissa State Warehousing Corpn. was applied, and the contrary view taken earlier in the assessee's own case was not followed. The impugned receipts were therefore held not to qualify for exemption.

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Issues: Whether the assessee was entitled to exemption under section 10(29) on receipts such as property income, interest on loans and advances to staff, interest on belated refund from companies, and interest on bank deposits.

Analysis: The exemption under section 10(29) was confined to income derived from the activity of letting out warehouses for storage, processing or facilitating the marketing of commodities. The expression "derived from" was applied in a restricted sense, requiring the immediate and effective source of the income to be the eligible activity itself. Interest earned on deposits and similar receipts was held to arise from the deposits or other independent sources, not from the warehouse activity. The later Supreme Court ruling in Orissa State Warehousing Corpn. was treated as governing the issue and the earlier Tribunal view in the assessee's own case was not followed.

Conclusion: The assessee was not entitled to exemption on the impugned receipts; the issue was answered against the assessee and in favour of the Revenue.

Final Conclusion: The Revenue's appeals succeeded and the orders granting exemption were reversed.

Ratio Decidendi: For exemption provisions using the expression "derived from", only income having the eligible activity itself as its immediate and effective source qualifies, and interest or similar receipts from independent sources do not fall within the exemption.

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