TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 87
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....red in law on facts in restricting the disallowance of deduction u/s 35AD of the IT Act, 1961 to Rs. 2,78,09,352/- as against disallowance of Rs. 12,84,85,530/-, thereby by giving relief of Rs. 10,06,76,178/-" 3. The brief facts of the case are that the assessee company is engaged in the business of warehousing of agricultural products. During the course of assessment proceedings, the Assessing Officer observed that the assessee had claimed deduction u/s. 35AD of Rs. 12,84,85,530/- being 150% of the amount capitalized on the date of commencement of its operation. The Assessing Officer observed that the assessee had constructed several godowns and had leased the same to various parties from various dates as mentioned in the respective agre....
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.... Assessing Officer rejected both the contentions of the assessee and disallowed the entire claim of deduction u/s. 35AD of the Act amounting to Rs. 12,84,85,530/- while making the addition, the ld. Assessing Officer observed as under:- "3.4 In the submission, assessee has admitted that one of the godowns is not used for specified business. However, assessee claims that deduction u/s 35AD should be disallowed in respect of the godown which has not been used for specified business and not entire deduction claimed u/s 35AD Here, it will relevant to reproduce section 35AD (7B) which as under: "Where any asset, in respect of which a deduction is claimed and allowed under this section, is-used for a purpose other than the specified business ....
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....leased out to Banas Dairy was not used for the purpose of storage of agricultural produce. However, the ld. CIT(A) concurred that the alternate contention of the assessee that since only one go-down is not used being for specified business and accordingly, the disallowance should be restricted to that particular go-down only. The ld. CIT(A) held that as per section 35AD(7B), rental income less depreciation on specified asset as mentioned in the aforesaid section should be granted. Accordingly, the ld. CIT(A) directed the Assessing Officer to grant proportionate relief to the assessee in terms of section 35AD(7B) of the Act. While partly allowing the appeal of the assessee, the ld. CIT(A) made the following observations:- "4.2 Ground no.2 ....
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....ct as much as that even the mixing or packing has been held as manufacturing activity ton various sections of u/s.801 of the Act. Therefore, the contention raised by the appellant is rejected. Appellant alternately submitted that as only one godown is not used for specified business and accordingly disallowance should be restricted to that particular godown. Appellant relied on the ratio laid down in following case laws: 1) AkashNidhi Builders & Developers 76 taxmann.com 36 (SC) 2) Saket Corporation 62 taxmann.com 38 (Gujarat) I perused the above judgments and ratio laid therein. Although both the judgments are on allowably of i deduction u/s 8016(10) of the Act, but ratio laid down by Hon'ble Apex court and Hon'ble juri....
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....ted that in this case out of total of five go-downs, four godowns were leased out for storage of "agricultural produce" and this fact has not been disputed by the Department. Even if it were accepted that the 5th go-down leased out to Banas Dairy was used for storage of non-agricultural produce, even then, the disallowance should be proportionately disallowed in view of the express language of 35AD(7B) of the Act. 6. We have heard the rival contentions and perused the material on record. We are of the considered view that CIT(A) has not erred in holding that the entire amount of deduction claimed by the assessee u/s. 35AD of the Act cannot be disallowed, when admittedly four out of the five go-downs were leased out for specified purposes a....