RAJESH BALIA, J. - (1.) IN all these appeals relating to different assessment years from 1991 -1992 to 1996 -97, the following common question has been raised. Since the matter has been decided by the Tribunal by common order, all the appeals are decided by this common order. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee society is entitled to deductions under Section 80P(2)(e) of the IT Act in respect of the income derived from commission/ margin without letting out godown or warehouse contrary to the income derived from letting of godown or warehouse and such income being deductible under Section 80P(2)(e) of the Act ?
(2.) THE respondent assessee is a co -operative society and engaged in running a consumer co -operative store and having 30 branches in the city of Udaipur itself. It is dealing in non -controlled commodities as well as in controlled commodities. In the present case, we are concerned with amount included in the computation of taxable income arising from commission earned by the assessee society as wholesale dealer of the controlled commodities viz. wheat, rice and sugar. The commodities in question were declared as essential commodities and became part of regulated trade through public distribution system in terms of orders issued by appropriate Government under Essential Commodities Act. The assessee has its own godowns as well as hired godowns for the purpose of his business including dealing in the essential commodities. The foodgrains wheat and rice are included in Schedule I of the Rajasthan Foodgrains and other Essential Articles (Regulation of Distribution) Order, 1976 and other commodity viz. 'sugar' is also included in Schedule II of the said Order. The assessee held the licence of 'authorized wholesaler' under the provisions of the aforesaid Order of 1976. In respect of the essential commodities in question the price at which the commodity concerned was to be made available to consumer was fixed by the competent authority under the provisions of the Order 1976 and such price included commission to be charged by an authorised wholesale dealer as part of consideration at which he were to sell such commodities to retail authorised dealer at fair price shop. The present dispute had arisen out of this commission retained by the assessee co -operative society in respect of essential commodity viz. wheat, rice and sugar sold by it to the retailers. There is no dispute that the commodities were to be supplied by the Food Corporation of India to the respondent assessee. He was to pay the price of the essential commodities received by him and he was entitled to earn profit at fixed rate as part of the price at which he was required to sell the said commodities to the retailer, as per directions of the Government. Apparently, since the goods were received as essential commodities by the assessee, it was to be stored in the godown until the same was transported to the retailer on the basis of the authorisation issued by the competent authority. The supply was to be distributed ultimately as an essential commodity in a particular area during the particular period through authorised retailer as fair price shopkeeper. Initially, the assessee has claimed the commission, part of the price fixation, to be retained by him as its income arising from business of sale and purchase of the commodities. However, subsequently the revised return was filed claiming that entire amount of the commission received by the assessee as exempted under Section 80P(2)(e) of the IT Act, 1961 as income arising from leasing out godowns. It was claimed that the assessee was only acting as agent of the State Government for storing the essential commodities for facilitating the public distribution of such commodities by the State Government and commission was paid to the assessee only for the purpose of storage of the essential commodities at its godowns. The receiving of essential commodities was on the payment of price and its transportation to retailer in consideration of the price thereof was only an incidental service rendered by the assessee for facilitating the marketing, processing and distribution of essential commodities for the public. Therefore, the entire commission must be considered as income of society from letting out godowns or warehouses for the purpose of storage of essential commodities in question for facilitating the public distribution of such essential commodities by the State Government. Buttressing the contention, it was urged on behalf of the assessee that stocks of the essential commodities which were supplied to the assessee by the Food Corporation of India was only as its agent for carrying it to the public distribution system had remained throughout the property of the Food Corporation of India/State and whatever was allowed, to be retained by the assessee was only for the purpose of storing of such essential commodities during transition period and providing incidental services of transportation to retailer for its distribution to the consumer at the fixed price as determined from time to time by the competent authority under the Order of 1976 and other relevant orders. In support of this contention, reliance was placed on the decision of Bombay High Court in CLT v. Bhandaia Zilla Sahakari Kharedi Vikri Sangh Ltd. : [1995]212ITR124(Bom) and the decision of apex Court in CIT v. South Arcot District Co -operative Marketing Society Ltd. : [1989]176ITR117(SC) . The AO had not accepted the contention and rejected the claim of the assessee to deduction under Section 80P(2)(e). However, the contention urged by learned Counsel for the assessee had been accepted by the CIT(A) and Tribunal. Hence these appeals are preferred by Revenue.
(3.) THE learned Counsel for Revenue has contended that godowns/warehouses owned or hired by the assessee for storing of the goods were as a part of its business of selling and purchasing of the commodities both essential and non -essential. He was not a mere storing agent on behalf of the State Government for the essential commodities but was duly authorised licence holder for the essential commodities as a wholesale dealer, albeit the area of its freedom in the matter of carrying on business was circumscribed by the statutory orders issued in respect of essential commodities under the Essential Commodities Act by appropriate authorities. The exemption/deduction under Section 80P(2)(e) is not available to any co -operative society in all spheres of activity which may be using the godowns as a part of its own regular business activity. The deduction under Section 80P(2)(e) is available only in respect of such income derived from the use of the godowns leased out for the purpose of facilitating the business which is anterior to actual trading. Since the assessee was having licence for dealing in essential commodities so declared under the Order of 1976 as a wholesaler and was receiving supplies of the essential commodities as a part of its wholesale trade, he having obtained the licence/authorisation of the wholesaler on his own volition, he was required to trade as per the terms and conditions imposed under the licence and after he received the essential commodities from Food Corporation of India and other agencies on payment of price fixed for such supplies he was to sell commodities to other authorised retailer/fair price shopkeeper at a price fixed for such sale by the State Government or other competent authority authorised in this behalf. In such event difference in price paid on supplies and price received on sale to retailer could properly be gross profit of such transaction and nothing else. In this connection, storage of the essential commodities by the assessee from the date of receipt of supplies to date of disposal was not as a recipient of the commodities for the storage on behalf of State but as a part of its own stock -in -trade. Merely because the stock -in -trade is in storage at a godown, which is integral feature of any trading activity in the commodities, the assessee cannot be said to be rendering services of leasing out godown/warehouses for storing of essential commodities and receiving consideration for leasing one godown on rent or for use for incidental activities. That being the case, the nature of income embedded in the price at which assessee was required to sell the essential commodities to the retailer was not a remuneration received from the lessee for use of godown for the purpose of storing and facilitating marketing of those commodities.;