Airports Authority of India v. CIT

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The Tax Publishers2012 TaxPub(DT) 0584 (Del-Trib) : (2012) 134 ITD 0034 : (2013) 153 TTJ 0676 : (2011) 012 ITR (Trib) 0540 INCOME TAX ACT, 1961 --Exemption under section 10(29)--Income from warehousingEligibility of assessee, International Airports Authority of India--In the original assessment proceedings, the assessee Authority has all along been claiming exemption under section 10(29) with regard to its income from letting out of warehouses. However, the claim of the assessee under section 10(29) was being disallowed by the assessing officer. This disallowance was being made on the basis of the reasoning adopted by the assessing officer in the earlier years, wherein it had been held that the assessee authority was not an Authority for the purpose of marketing of commodities. While making the disallowance for the year under consideration, the assessing officer noted that for assessment year 1995-96, while rejecting the assessee's claim, the assessing officer had observed that he did not agree with the assessee's contention that it was an authority constituted for marketing of commodities. The assessing officer observed that from sub-clause (c) of section 24 of the Warehousing Act, 1962 it was appreciable that the State Warehousing Corporation acted as an agent of the Central Warehousing Corporation of the Government for the purpose of purchase, sale, storage and distribution of agricultural produce, seeds, etc., whereas, in the case of the assessee-International Airports Authority, no such functions were vested in them; that in the case of State Warehousing Corporations, the warehouses had been established with the sole purpose of marketing of the various commodities and they were open to the public at large for this purpose only, whereas, in the case of the assessee Authority, the basic function was to manage the airport efficiently and maintenance of warehouses at the airports was an ancillary facility for the efficient operation of the airport transport services; that the warehouses at the airports were established to achieve the main object, i.e., to manage the airport efficiently and could not be considered for the purposes of marketing of commodities as stipulated under the Warehouses Corporations Act, 1962, for the Gujarat Warehousing Corporation; that the intent of the legislature for including the income of warehousing under section 10, i.e., as an exempt income was primarily to give impetus to small farmers to store their perishable commodities in warehouses constructed specifically for this purpose by the Authority constituted by the Government or by specific notification; that if an entity is created by a statute, primarily or specifically for the purpose of marketing of commodities, it will be an Authority within the meaning of these provisions; that in the assessee's case, as was evident from the Preamble of the International Airport Authority Act, 1971, warehousing activity was only a subsidiary activity of the assessee; that the intent of the legislature was all the more evident from the fact that the banks performed activities akin to letting out of godowns or warehouses, in the nature of lockers facility, which they provided to the customers and the same was not exempt from tax under section 10(29), for the activities so performed; and that if the Airport Authority of India was created by the statute primarily or specifically for the purpose of marketing of commodities, it would have been covered by section 10(29). Aggrieved, the assessee has been carrying the matter in appeal before the Commissioner (Appeals). The Commissioner (Appeals) has all along allowed the exemption under section 10(29) to the assessee Authority, except for assessment year 1998-99. For assessment years 1999-2000 to 2001-02, however, the Commissioner (Appeals) cancelled the disallowance and upheld the claim of exemption under section 10(29). The revenue and the assessee both took the matter further in appeal before the ITAT. In the said order, the Tribunal had restored the issue to the assessing officer to re-examine the matter of application of the appropriate law and to determine whether the assessee was running or establishing warehouses or cargo complexes. Upon remand by the Tribunal by virtue of its order dated 27-7-2007, the assessing officer, vide order dated 27-3-2009, passed under sections 254/143(3), allowed exemption under section 10(29) to the assessee, accepting the assessee's contentions that for claiming exemption under section 10(29), (a) the authority must be an authority constituted under some law, (b) it should be an authority constituted for marketing of commodities and (c) the exemptible income must be derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of the commodities; that the assessee did fulfill all these conditions under section 10(29); that the assessee was an authority constituted under the Airports Authority of India Act, 1994, satisfying the first condition; that as per the provisions of section 12(3)(g) of the Airports Authority of India Act, 1994, one of the functions of the assessee was to establish warehouses and cargo complexes at the airports for the storage or processing of goods; that the assessee authority played a vital role in facilitating the transportation of exports and imports of various commodities through its airports; that the airport warehouses provided facilities to various exporters and importers and international air transport carriers to store, process, and transport goods and commodities all over the world; that the assessee had established warehouses and storage facilities in the international air cargo complexes at various airports and earned revenue from the letting of such warehouses; that warehousing or storage was an essential step in the whole process of marketing, enhancing the utility of the commodities by making them more valuable, thus having a direct impact on the trading activities; that the same was also true of the other activities of processing of commodities and facilitating their distribution and their preservation from ravage by natural causes; that therefore, the assessee fulfilled the second condition of section 10(29) too; and that since the assessee was claiming exemption only in respect of letting of godowns and warehouses for storage, processing or facilitating the marketing of commodities, it also complied with the third and final condition prescribed by section 10(29). In the impugned order dated 24-2-2011, the CIT observed that the assessing officer had not re-examined the matter as per the directions of the Tribunal, allowing exemption under section 10(29) merely on the basis of the power given to the assessee-authority under section 12(3)(g) of the Airports Authority of India Act, 1994, to 'establish warehouses and cargo complexes', that the assessing officer had not given any clear finding as to whether the assessee was actually running a warehouse or cargo complex, or both; that the assessing officer had not considered the documents including the minutes of the Meeting held in the Cabinet Secretariat on 25-5-1982, wherein, consequent to the establishment of the Tribunal, the warehouses had been assigned to the authority for storage or processing of the goods at the International Airports; that due to the absence of any determination qua running or establishing of warehouses or cargo complexes by the assessee authority and because of the assessing officer not having determined the nature of the assessee's cargo income, the assessment order was erroneous; and that the assessing officer's action of not having followed the directions issued by the Tribunal, resulted in the assessment order to be erroneous insofar as it was prejudicial to the interests of the revenue. It was in this factual backdrop the assessee was in appeal regarding the issue of grant of exemption under section 10(29). *Held:* It is seen that the CIT has not pointed out any error in the assessment order, nor can one be inferred therefrom. In CIT v. Goyal Family Specific Trust, it has been held to the effect that where the assessment order is not a detailed one and the CIT fails to point out any error, the assessment order being brief by itself cannot be a sufficient reason to brand it as erroneous and prejudicial to the interests of the revenue. That apart, even otherwise, it is seen from the material brought on record, that the assessee is entitled to exemption under section 10(29). To reiterate, section 10(29) requires that for an income to be eligible for exemption, it should be an income derived by an authority constituted under any law for the time being in force, for the marketing of commodities, from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. The airport warehouses of the Central Warehousing Corporation thus came to vest in the assessee authority, who is carying on its functions, inter alia, under section 12(3)(g) of the Airports Authority of India Act, 1994. In the facts, as brought before the assessing officer by the assessee, it stands undisputedly established that the assessee is running 'warehouses' or 'cargo complexes' at the airports. The contentions of the assessee having been accepted by the assessing officer in the light of the material brought before him, the assessing officer rightly granted the exemption to the assessee under section 10(29), it cannot be said that the assessing officer was oblivious of the fact that the assessee was indeed actually running warehouses and cargo complexes at the airports, while so granting the exemption. Accordingly, the order of the CIT on this issue is set aside and that of the assessing officer granting exemption to the assessee under section 10(29) on its income derived from the letting out of the warehouses and cargo complexes at the airports, is revived. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0584 (Del-Trib) : (2012) 134 ITD 0034 : (2013) 153 TTJ 0676 : (2011) 012 ITR (Trib) 0540

INCOME TAX ACT, 1961

--Exemption under section 10(29)--Income from warehousingEligibility of assessee, International Airports Authority of India--In the original assessment proceedings, the assessee Authority has all along been claiming exemption under section 10(29) with regard to its income from letting out of warehouses. However, the claim of the assessee under section 10(29) was being disallowed by the assessing officer. This disallowance was being made on the basis of the reasoning adopted by the assessing officer in the earlier years, wherein it had been held that the assessee authority was not an Authority for the purpose of marketing of commodities. While making the disallowance for the year under consideration, the assessing officer noted that for assessment year 1995-96, while rejecting the assessee's claim, the assessing officer had observed that he did not agree with the assessee's contention that it was an authority constituted for marketing of commodities. The assessing officer observed that from sub-clause (c) of section 24 of the Warehousing Act, 1962 it was appreciable that the State Warehousing Corporation acted as an agent of the Central Warehousing Corporation of the Government for the purpose of purchase, sale, storage and distribution of agricultural produce, seeds, etc., whereas, in the case of the assessee-International Airports Authority, no such functions were vested in them; that in the case of State Warehousing Corporations, the warehouses had been established with the sole purpose of marketing of the various commodities and they were open to the public at large for this purpose only, whereas, in the case of the assessee Authority, the basic function was to manage the airport efficiently and maintenance of warehouses at the airports was an ancillary facility for the efficient operation of the airport transport services; that the warehouses at the airports were established to achieve the main object, i.e., to manage the airport efficiently and could not be considered for the purposes of marketing of commodities as stipulated under the Warehouses Corporations Act, 1962, for the Gujarat Warehousing Corporation; that the intent of the legislature for including the income of warehousing under section 10, i.e., as an exempt income was primarily to give impetus to small farmers to store their perishable commodities in warehouses constructed specifically for this purpose by the Authority constituted by the Government or by specific notification; that if an entity is created by a statute, primarily or specifically for the purpose of marketing of commodities, it will be an Authority within the meaning of these provisions; that in the assessee's case, as was evident from the Preamble of the International Airport Authority Act, 1971, warehousing activity was only a subsidiary activity of the assessee; that the intent of the legislature was all the more evident from the fact that the banks performed activities akin to letting out of godowns or warehouses, in the nature of lockers facility, which they provided to the customers and the same was not exempt from tax under section 10(29), for the activities so performed; and that if the Airport Authority of India was created by the statute primarily or specifically for the purpose of marketing of commodities, it would have been covered by section 10(29). Aggrieved, the assessee has been carrying the matter in appeal before the Commissioner (Appeals). The Commissioner (Appeals) has all along allowed the exemption under section 10(29) to the assessee Authority, except for assessment year 1998-99. For assessment years 1999-2000 to 2001-02, however, the Commissioner (Appeals) cancelled the disallowance and upheld the claim of exemption under section 10(29). The revenue and the assessee both took the matter further in appeal before the ITAT. In the said order, the Tribunal had restored the issue to the assessing officer to re-examine the matter of application of the appropriate law and to determine whether the assessee was running or establishing warehouses or cargo complexes. Upon remand by the Tribunal by virtue of its order dated 27-7-2007, the assessing officer, vide order dated 27-3-2009, passed under sections 254/143(3), allowed exemption under section 10(29) to the assessee, accepting the assessee's contentions that for claiming exemption under section 10(29), (a) the authority must be an authority constituted under some law, (b) it should be an authority constituted for marketing of commodities and (c) the exemptible income must be derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of the commodities; that the assessee did fulfill all these conditions under section 10(29); that the assessee was an authority constituted under the Airports Authority of India Act, 1994, satisfying the first condition; that as per the provisions of section 12(3)(g) of the Airports Authority of India Act, 1994, one of the functions of the assessee was to establish warehouses and cargo complexes at the airports for the storage or processing of goods; that the assessee authority played a vital role in facilitating the transportation of exports and imports of various commodities through its airports; that the airport warehouses provided facilities to various exporters and importers and international air transport carriers to store, process, and transport goods and commodities all over the world; that the assessee had established warehouses and storage facilities in the international air cargo complexes at various airports and earned revenue from the letting of such warehouses; that warehousing or storage was an essential step in the whole process of marketing, enhancing the utility of the commodities by making them more valuable, thus having a direct impact on the trading activities; that the same was also true of the other activities of processing of commodities and facilitating their distribution and their preservation from ravage by natural causes; that therefore, the assessee fulfilled the second condition of section 10(29) too; and that since the assessee was claiming exemption only in respect of letting of godowns and warehouses for storage, processing or facilitating the marketing of commodities, it also complied with the third and final condition prescribed by section 10(29). In the impugned order dated 24-2-2011, the CIT observed that the assessing officer had not re-examined the matter as per the directions of the Tribunal, allowing exemption under section 10(29) merely on the basis of the power given to the assessee-authority under section 12(3)(g) of the Airports Authority of India Act, 1994, to 'establish warehouses and cargo complexes', that the assessing officer had not given any clear finding as to whether the assessee was actually running a warehouse or cargo complex, or both; that the assessing officer had not considered the documents including the minutes of the Meeting held in the Cabinet Secretariat on 25-5-1982, wherein, consequent to the establishment of the Tribunal, the warehouses had been assigned to the authority for storage or processing of the goods at the International Airports; that due to the absence of any determination qua running or establishing of warehouses or cargo complexes by the assessee authority and because of the assessing officer not having determined the nature of the assessee's cargo income, the assessment order was erroneous; and that the assessing officer's action of not having followed the directions issued by the Tribunal, resulted in the assessment order to be erroneous insofar as it was prejudicial to the interests of the revenue. It was in this factual backdrop the assessee was in appeal regarding the issue of grant of exemption under section 10(29). Held: It is seen that the CIT has not pointed out any error in the assessment order, nor can one be inferred therefrom. In CIT v. Goyal Family Specific Trust, it has been held to the effect that where the assessment order is not a detailed one and the CIT fails to point out any error, the assessment order being brief by itself cannot be a sufficient reason to brand it as erroneous and prejudicial to the interests of the revenue. That apart, even otherwise, it is seen from the material brought on record, that the assessee is entitled to exemption under section 10(29). To reiterate, section 10(29) requires that for an income to be eligible for exemption, it should be an income derived by an authority constituted under any law for the time being in force, for the marketing of commodities, from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. The airport warehouses of the Central Warehousing Corporation thus came to vest in the assessee authority, who is carying on its functions, inter alia, under section 12(3)(g) of the Airports Authority of India Act, 1994. In the facts, as brought before the assessing officer by the assessee, it stands undisputedly established that the assessee is running 'warehouses' or 'cargo complexes' at the airports. The contentions of the assessee having been accepted by the assessing officer in the light of the material brought before him, the assessing officer rightly granted the exemption to the assessee under section 10(29), it cannot be said that the assessing officer was oblivious of the fact that the assessee was indeed actually running warehouses and cargo complexes at the airports, while so granting the exemption. Accordingly, the order of the CIT on this issue is set aside and that of the assessing officer granting exemption to the assessee under section 10(29) on its income derived from the letting out of the warehouses and cargo complexes at the airports, is revived.