Tamilnadu Warehousing Corporation vs The Deputy Commissioner of Income Tax

K. Raviraja Pandian, J.—This appeal is filed against the order of the Income Tax Appellate Tribunal, Madras ''C'' Bench, Chennai, dated

27.09.2007 passed in ITA No. 1487/Mds/2002.

The appellant is the Tamilnadu Warehousing Corporation established under the Warehousing Corporation Act, 1962 and is owned by the

Government of Tamilnadu. The appellant is an assessee under the respondent. For the assessment year 1998-99, the assessee filed returns and

claimed exemption u/s 10(29) of the Income Tax Act in respect of the income derived from the activities carried on by the assessee, and those are

warehousing charges, supervision charges, weigh bridge receipts, DESS receipts, rent receipts (quarters), interest on staff advances, fumigation

receipts, interest on bank deposit, etc., The said exemption was claimed on the premise that the appellant is an authority constituted under law for

marketing of commodities and any income derived from letting out the godowns and warehouses for storage, processing or facilitating the

marketing of the commodities, would qualify for exemption u/s 10(29) of the Income Tax Act. The assessing officer restricted the exemption only

to warehousing charges and has charged the income pertaining to other activities as income under house property and other sources of tax.

The assessee carried the matter on appeal to the Commissioner of Income Tax (Appeals), who by his order, held that the appellant''s primary

business is the maintenance of warehouses owned by them for the purposes of storage, processing or facilitating marketing of commodities, and

any income from the above activities would qualify for exemption u/s 10(29) of the Act. The goods stored in the warehouse or at the safe custody

of the warehousing authorities are liable for any damage or loss. It is natural that they have to maintain security for supervision of the warehouse

and the goods stored therein. The charges is based on the weight of the goods. Hence, the maintenance of the way bridge is essential for the

purpose of carrying on the business of the appellant. Further, for the proper maintenance of goods from any pests, fumigation is essential. Thus, the

receipt from the three items, viz., supervision charges, weigh bridge receipts and fumigation receipts are held to be exempt u/s 10(29) of the Act.

The revenue, aggrieved by the order of the Commissioner of Income Tax (Appeal), went on further appeal to the Income Tax Appellate

Tribunal. The Tribunal, following the assessee''s own case for the earlier assessment year and taking in aid the judgment of the Supreme Court in

the case of Orissa State Warehousing Corporation Vs. Commissioner of Income Tax, , has come to the conclusion that the words ""any income"" as

appearing in the body of the Section is restrictive in its application by reason of the user of the expression ''derived from'' and hence the income

derived as supervision charges, fumigation charges and way bridge receipt are not eligible for deduction u/s 10(29) of the Income Tax Act. The

assessee is before us, on appeal against the said order by formulating the following substantial questions of law:

Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in Law in allowing the Department''s

appeal concerning exemption u/s 10(29) of the Income Tax Act?

Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in not noting that the Hon''ble

Supreme Court had referred the identical issue to a larger Bench of the Hon''ble Supreme Court for its consideration on account of conflicting

decisions of two benches of the Hon''ble Supreme Court?

Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in not holding that the appellant is

engaged in warehousing activities as a result of which, all its incomes are directly derived from the same, thus being eligible for exemption u/s

10(29) of the Income Tax Act?

Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in holding that incomes from

Supervision charges, Fumigation activities and Weigh Bridge Receipts, are not eligible for exemption u/s 10(29) of the Income Tax Act, 1961?

We heard the arguments of the learned Counsel for the appellant and perused the materials available on record.

The appellant being a State owned Corporation before filing an appeal against the Income Tax Department, we are of the view has to obtain

clearance from the Committee of Disputes (CoD). The apex Court, in the case of Oil and Natural Gas Corporation Ltd. Vs. City and Indust. Dev.

Corpn., Maharashtra and Others, , after referring to the earlier cases in 1992 (61) ELT 3 (SC); Oil and Natural Gas Commission and Another Vs.

Collector of Central Excise, ; Oil and Natural Gas Commission Vs. Collector of Central Excise, ; in which directions have been issued to set up

governmental committee to resolve the dispute between the intra-governmental or intergovernmental disputes involving Government Departments

or Government owned companies of the Central and State Governments, rather than adjudicating the same before Courts of law, and having

regard to the fact of the particular case, that the matter was pending since 1990 and considering the nature of the controversy, which is a recurring

feature, directed that a Committee be formed to sort out the differences between the Central Government and the State Government entities. The

composition of such committee is also stated to be as follows:

The Cabinet Secretary of the Union;

Chief Secretary of the State;

Secretaries of the departments concerned of the Union and the States; and

Chief Executive Officers of the undertakings concerned.

The Supreme Court in the case of Chief Conservator of Forests, Govt. of A.P. Vs. The Collector and Others, has held as follows:

Disputes between Government Departments cannot be contested in Court. States/Union of India must evolve a mechanism for resolving

interdepartmental controversies. Constitution of Committees suggested which should consist of Chief Secretary, Secretaries of the departments

concerned, Secretary of Law and Secretary of Finance (where financial commitments are involved) whose decision should be binding on all

departments concerned.

The apex Court also held that it shall be the obligation of every Court and every Tribunal where such a dispute is raised hereafter to demand a

clearance from the committee in case it has not been so pleaded and in the absence of the clearance, the proceedings would not be proceeded

with. The same has been reiterated in the latest decision of the Supreme Court in the case of CIT, Delhi VI v. Oriental Insurance Co. Ltd. in Civil

Appeals Nos. 4529 of 2008 etc., decided on July 18, 2008.

In order to discharge that obligation, when we posed a question to the learned Counsel as to whether such a clearance has been obtained from

the CoD, he admitted that such a certificate from COD has not been obtained. Hence, the appeal is dismissed as not entertainable in the absence

of the clearance, however, by giving liberty to the appellant to move this Court after obtaining clearance from CoD. No costs.