K.C. Agrawal, C.J.
1. The Income-tax Appellate Tribunal has referred the following question of law under Section 256(1) of the Income-tax Act, 1961, from the assessment years 1974-75 to 1982-83 :
'Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in holding in law that the entire gross receipts of the assessee were eligible for exemption under Section 10(29)?'
2. The above question of law is common in all the above numbered references and, therefore, all these references are disposed of by one single order.
3. The brief facts of the case are that the Rajasthan State Warehousing Corporation is constituted under the Warehousing Corporations Act, 1962, promulgated by Parliament. The Corporation is having its income which has been derived from different sources.
4. The facts in respect of the assessment year 1976-77 are taken into consideration for adjudicating the dispute between the parties and to find out the scope of Section 10(29) of the Income-tax Act. The assessee is deriving its income mainly from letting out the warehouses, interest, trading in agricultural products on behalf of the Food Corporation of India and the State Government. It was claimed before the Income-tax Officer that the entire income of the corporation is exempted under Section 10(29) of the Act. The Income-tax Officer came to the conclusion that the income other than the warehousing activities is not exempt and, therefore, exemption cannot be allowed. The various heads under which the income was derived was as under :
Rs.1.Warehousing charges51,06,4332.Procurement of grains for the State Government and FCI11,06,0343.Interest11,41,3504.Supervision charges23,7905.Fumigation service charges6,5396.Misc. income48,254Total
74,32,400
5. The provision of Section 10(29) reads as under :
'In the case of an authority constituted under any law for the time being in force for the marketing of commodities, any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities.'
6. The above provision was inserted by the Finance (No. 2) Act of 1967, with effect from April 1, 1968.
7. The question that the assessee is an authority constituted under any law far the time being in force is concluded by a decision of this court in favour of the assessee in CIT (Addl.) v. Rajasthan State Warehousing Corporation . The only thing which is to be seen is the interpretation of 'facilitating the marketing of commodities'. The provisions of Section 10 provide that in computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included and Section 10(29) grants exemption to income which is derived from the letting of godowns or warehouses, for storage, processing or facilitating the marketing of commodities, the income which is so derived from the letting of the godowns or the warehouses is qualified with the words storage, processing or facilitating the marketing of commodities'. Thus, the 'letting of godowns or warehouses' could be for 'storage' or the 'letting of godowns' or 'warehouses' could be 'for processing' or the 'letting of godowns or warehouses' could be 'for facilitating the marketing of commodities.' The controversy is as to what would be included within the ambit of letting of godowns or warehouses for facilitating the marketing of commodities.
8. The Madhya Pradesh High Court in U. P. Warehousing Corporation v. CIT : [1982]133ITR158(MP) has held that in order to claim exemption it must be proved that the income derived by an authority constituted for the marketing of commodities is income which is derived from the letting of godowns or warehouses for the purposes specified in Section 10(29), which are storage, processing or facilitating the marketing of commodities. If the letting of godowns or warehouses is for any other purpose, or if income is derived from any other source, then such income is not exempt under the clause. In this case the dispute was with regard to the interest received from the bank on deposits of moneys held in the course of business of the corporation and commission received for handling the work of loading and unloading of goods. The High Court has held that the Tribunal was justified in holding that the income derived by the assessee from the handling of goods or from the banks by way of interest was not covered by Section 10(29) of the Act.
9. In M. P. State Warehousing Corporation v. CIT : [1984]145ITR420(MP) the dispute was with regard to the commission received from handling of goods and the interest received from the banks on the deposits of moneys. Relying on, the earlier decision, the said source of income was held not covered under Section 10(29) of the Act.
10. In U. P. State Warehousing Corporation v. ITO : [1974]94ITR129(All) the Allahabad High Court has observed that Section 10(29) of the Income-tax Act applies to an authority constituted for the marketing of commodities and, evidently, such authority will specifically be a business enterprise, Ex hypothesi, the term 'authority',' as occurring in Section 10(29), cannot possibly be construed as referring to an authority having quasi-governmental powers. Any legal entity or juristic personality constituted by law for the purpose of marketing commodities would be an 'authority' within the meaning of Section 10(29). The petitioner which was established under the Warehousing Corporations Act, 1962, was an 'authority' constituted under a law within the meaning of Section 10(29). The court further held that the term 'marketing of commodities' as used in Section 10(29) excludes an activity done by the assessee for its own benefit, because it refers to income from letting of godowns or warehouses for purposes, inter alia, of facilitating the marketing of commodities. Obviously, if the owner of the warehouse does the activity for facilitating for his own benefit, he will not get any income from the letting of the warehouse. In the last clause, the term 'marketing' clearly excludes the idea of an activity done for one's own self. The word 'marketing' has been used in the wider sense to include the various activities which generally go to form the trade of marketing.
11. This judgment of the Allahabad High Court was affirmed in Union of India v. U. P. State Warehousing Corporation [1991] 187 ITR 54 by the apex court observing that the assessee was an authority and that the second test requiring the authority to be constituted for marketing of commodities is also fully satisfied by Section 24(d) of the Warehousing Corporations Act, 1962, which enjoins upon a State Warehousing Corporation to act as an agent of the Central Warehousing Corporation of the Government for the purpose of purchase, sale, storage and distribution of agricultural produce, seeds, manures, fertilizers, agricultural implements and individual commodities. These activities of the State Warehousing Corporation as an agent, undoubtedly, would be activities facilitating the marketing of commodities. This reasoning is in addition to the reasoning assigned by the High Court in coming to the conclusion that the activities of the assessee have a business element.
12. The above decision of the Allahabad High Court was considered by the Gujarat High Court in CIT v. Gujarat State Warehousing Corporation : [1980]124ITR282(Guj) and it was observed as under (at page 295) :
'The whole crux of the matter is that Parliament in its wisdom has used the expression 'authority for the marketing of commodities'. The expression 'for' would show the purpose, the ultimate object to be served by this authority. The authority must promote marketing by its services in the mandated area of its functioning and the Legislature while constituting this statutory authority and laying down its function or jurisdiction has delimited its area by setting the field for its activity so that it serves or better promotes this purpose or object of marketing the commodities. Whatever enhances the utility value, clearly enhances the real worth of the commodities in question and looking at the matter from this crucial angle there could be no doubt that warehousing or storage is such an essential step in the whole process of marketing that it enhances the utility of the commodities in question by making them more valuable. Therefore, it has a direct impact on the very trading activities by enhancing their real value. The same is true of the other activities of processing of these commodities and even facilitating the distribution by transport to and from the warehouses. Even storage would have to be looked at by way of preservation from the ravages of natural causes and even from being eaten away by rodents and insect life. If all these essential aspects of the warehousing activities are borne in mind the wisdom of the Legislature is too apparent in using this phrase 'authority for marketing1, so that warehousing corporations on the plain tenor of Section 10(29) earn this exemption. As earlier pointed out, in the present case, even Clause (d) of Section 24 itself clinches this issue, but we are resting this decision on a much wider ground of the warehousing activity itself. It should also be borne in mind that so far as co-operatives are concerned, including the co-operative banks, similar exemption is to be found right from the beginning in section 80P(2)(e) where such co-operative societies are given deduction in respect of similar income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, to the extent of the whole of such income. And even under the earlier corresponding section as well as this section, the co-operative banks would earn that exemption without any trading activity as such.'
13. The Karnataka High Court in the case of Addl. CIT v. Karnataka State Warehousing Corporation : [1980]125ITR136(KAR) has held that the expression 'marketing of commodities' in Section 10(29) of the Income-tax Act, 1961, must not be construed in a narrow sense ; it includes every activity of purchasing, selling and distribution as also warehousing.
14. In CIT v. Haryana Warehousing Corporation it was observed that the word 'marketing' has been used under Section 10(29) of the Act in a wider sense so as to include the various activities such as storage of commodities which generally go to form the trade of marketing.
15. Under the provisions of section 80P(2)(e), the whole income of the co-operative society is exempt in respect of any income derived by the cooperative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities.
16. The Karnataka High Court in Udupi Taluk Agricultural Produce Cooperative Marketing Society Ltd. v. CIT : [1987]166ITR365(KAR) has held while interpreting section 80P(2)(e), that the income which has been derived by way of commission from the Karnataka Food and Civil Supplies Corporation for procurement of paddy and rice and reimbursement of transport charges is not entitled to exemption as no part of income represented earnings from the letting of godowns or warehouses of the society for the purposes of storage, processing or facilitating the marketing of commodities and, therefore, the exemption under section 80P(2)(e) was not available to the assessee. The decision of the Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. v. CIT : [1971]79ITR722(Guj) and the decision of the Madras High Court in the case of CIT v. South Arcot District Co-operative Marketing Society Ltd. : [1973]92ITR371(Mad) were also taken into consideration and it was held that the income derived by the co-operative society for the purpose of exemption under Clause (e) must be relatable to the letting or the use of its godowns or warehouses. It was also held that any income derived by the society unconnected with such letting or use of the godowns or warehouses will not fall under Clause (e).
17. The Karnataka High Court in the case of CIT v. Karnataka State Warehousing Corporation Ltd. : [1990]185ITR25(KAR) has held that the income derived by the assessee-warehousing corporation from services rendered in respect of goods not stored in its godowns was not entitled to exemption under Section 10(29) of the Act. The fumigation charges and laboratory analysis fees in respect of goods not stored in the assessee's own godown were not exempt under Section 10(29) of the Act. Though the question with regard to fumigation of goods stored in its godowns was not in dispute, impliedly it was held that such exemption could be available under Section 10(29). The dispute in this case was for the fumigation of goods stored outside the godown premises (elsewhere-external), it was held that the assessee is not entitled to get the exemption in respect thereof.
18. In CIT v. Ahmedabad Maskati Cloth Dealers Co-operative Warehousing Society Ltd. [1986] 162 1TR 142 the Gujarat High Court has held that the expression 'facilitating the marketing of commodities' would suggest a stage anterior to the actual sale of the commodity. The words 'facilitating the marketing of commodities' would not lend colour to the words 'godowns or warehouses' so as to enlarge their meaning.
19. In CIT v. South Arcot District Co-operative Marketing Society Ltd, : [1989]176ITR117(SC) the apex court while interpreting the provisions of Section 14(5)(iv) of the Indian Income-tax Act, 1922, which were analogous to the provisions of section 80P(2)(e) of the Income-tax Act, 1961, observed that the provision for exemption was intended to encourage co-operative societies to construct warehouses which were likely to be useful in the development of rural economy and exemption was granted from income-tax in respect of income derived from the letting of such warehouses for the storage of fertilizers and other related commodities concerned with co-operative marketing. Having regard to the object with which the provision has been enacted, it is apparent that a liberal construction should be given to the language of the provision and, therefore, in the circumstances of the present case, it must be regarded that what the assessee did was to let its godowns for the purpose of storing the ammonium sulphate handed over to it by the State Government. The remaining services performed by the assessee were merely incidental to the essential responsibility of using the godowns for the storage of that stock. It is true that a certain sum was paid to the assessee and described as commission for the services performed by it, but having regard to the totality of the circumstances and to the true substance of the agreement, it seems to us plain that the amount was paid merely by way of remuneration for the use of the godowns. In the result, the assessee is entitled to the exemption claimed by it. The assessee in this case was required to take necessary steps to enable such stocking and storage of the fertilizer including taking delivery of the stock at the rail-head and transporting it to the godowns.
20. The Income-tax Appellate Tribunal in the present case has observed that the income derived from the State Government/Food Corporation of India for procurement of grains, interest, supervision charges, fumigation services charges and miscellaneous income are exempt under Section 10(29) and that the activity of the assessee is an integrated one and the entire activity is claimed as facilitating the marketing of goods. The assessee owns warehouses where agricultural produce is stored. The whole activity carried on being an integrated one, the activity cannot be split up. The assessee may have the income from different sources. Section 10 has granted the exemption in respect of income in different phraseology which has been specified in the different clauses of Section 10. A different phraseology has been used in Clause (20A) of Section 10 using the words 'any income' which has been exempted under that clause. This refers to the entire income of that authority which is exempt. Similarly, clauses (21) and (22) also use the words 'any income' and in these cases the entire income of the assessee would be exempt. In the case of Section 10(29) if the income is from two sources, i.e., one from a source which is exempt and the other from a source which is not exempt, then the entire income cannot be considered to be exempt nor can it be said that one activity is so integrated with the other that the income is derived from letting out for the three purposes mentioned in the said clause.
21. It is true that the words 'facilitating the marketing of commodities' are of wider scope and include number of activities, but the same have to be read along with 'any income derived from letting of godowns or warehouses for facilitating the marketing of commodities'. The income which is exempt under this clause must be derived from the 'letting of godowns', for facilitating the marketing of commodities. The words 'facilitating the marketing of commodities' cannot be considered independently and, therefore, the exemption which has been granted is for the income which has been derived from letting of the godowns, the source of income which has been exempted in this clause. The assessee may have different sources of income, but the exemption is not given to the assessee on its entire income, but only that part of the income which arises from the letting of godowns for facilitating the marketing of commodities. If the income is not connected with the letting of godowns, then the question of interpretation of the words 'facilitating the marketing of commodities' would not be considered. The phrase 'facilitating the marketing of commodities' has different meanings in different contexts and would cover activities including purchase and sale, etc., but here, on the interpretation of Section 10(29), we are of the view that the income derived from letting of godowns is a must and if the income is not derived from letting of godowns then it will not be exempt. It is only the specific purpose which has been given for letting of the godowns and such three purposes are : (1) storage ; (2) processing and (3) facilitating the marketing of commodities. The godowns can be let out for storage of the commodities. Similarly, the godowns can be let out for processing of commodities and the godown can be let out for facilitating the marketing of commodities. The letting of the godowns in all the three circumstances is inevitable and if the main act of letting of godowns is absent, then the income from facilitating the marketing of commodities cannot be claimed to be exempt. The income which has been derived by the assessee from procurement of grains for the State Government/Food Corporation of India is an independent activity, other than the letting of godowns, even though letting of godowns is encouraged by such an activity it could not be said that the income which has been derived from the receipts from the State Government or the Food Corporation of India, could be considered as income from letting out of godowns. The starting point for letting out is receipt of the goods in the godowns/warehouses. If the income is not related in respect of the activities from the stage of receipt of the goods to the despatch of the goods in the godowns/warehouses it could not be said to be income related to the letting of godowns. As explained above, the object of letting out and the purpose for which the warehouse or godowns have been let out could be for facilitating the marketing of commodities. The income which has been derived from administrative overheads being surplus of recovery over cost of procurement is an independent activity. The State Government or the Food Corporation of India could have appointed any other agency for the work of procurement and in that case the exemption for the procurement of goods of that person would not have been available. The assessee is not restricted under law to carry on any other business and if the business of acting as an agent has been carried on by him, that activity cannot be considered as letting out of godowns or warehouses for facilitating the marketing of commodities. The object of facilitating the marketing of commodities under Section 10(29) could be when it is linked with letting of godowns, i.e., while the goods are inside the godown and the facility of marketing of commodities is allowed during the course of letting out of godowns. This can be in a manner that if a particular individual or a company has kept the goods inside the godown/warehouse of the corporation and instead of having its own godown or shop instructions are given to the assessee-corporation for delivery to the constituent of such person to whom the sale is effected, then it should be considered as facilitating the marketing of commodities. The income which is independent of 'letting out of godowns/warehouses' cannot be considered to be exempt even if it falls under the broader terms of 'facilitating the marketing of commodities' as both the words are to be read together and, therefore, we are of the opinion that the Income-tax Appellate Tribunal was not justified in coming to the conclusion that the procurement of grains for the State Government/Food Corporation of India, interest could be considered as integrated activity (sic). Similarly, the interest which the assessee has received from the banks cannot be considered as relating to the letting out of the godowns or warehouses for facilitating the marketing of goods. Though the view which the Madhya Pradesh High Court has taken was in respect of interest income which was considered as 'income from other sources' and in the case of the assessee it has been considered to be 'income from business', we are of the view that this difference does not make any distinction so far as interpretation of Section 10(29) of the Act is concerned and the activities which do not fall within the purview of letting out of godowns or warehouses for facilitating the marketing of commodities cannot be exempted.
22. The fumigation charges are in respect of service charges which have been collected during the course of storage of goods in the godowns of the assessee and, therefore, to that extent the income derived therefrom could be considered as incidental to the income from letting out of the godowns for storage of goods.
23. With regard to miscellaneous income and other income, the Tribunal has not discussed the nature thereof and, therefore, it would be proper if the matter is examined by the Tribunal afresh. Therefore, as to whether the said income could be considered as relating to the letting of godowns for the three purposes mentioned under Section 10(29) of the Act, since this matter has not been considered by the Tribunal in detail, the reference in respect of income other than the three items is returned unanswered.
24. In view of the interpretation of the provisions of Section 10(29) of the Act, we are of the view that the Income-tax Appellate Tribunal was not justified in coming to the conclusion that the entire income of the assessee is exempt under Section 10(29) of the Act. The reference is accordingly answered partly in favour of the Revenue and partly against the assessee. It would, however, be open to the Tribunal to consider the income which has been derived from different sources other than those which have been considered above, and to go into the details of them and then to give a finding as to whether the said income could be said to be income from the letting of godowns for the three purposes, mentioned in Section 10(29) of the Act.