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Union Of India And Another v. U.P State Warehousing Corporation .
Factual and Procedural Background
An appeal by certificate was filed by the revenue against the Allahabad High Court’s judgment and order dated November 30, 1973 in Civil Miscellaneous Writ Petition No. 6122 of 1973, which granted the U.P. State Warehousing Corporation exemption under Section 10(29) of the Income Tax Act, 1961. The Corporation, constituted under the Warehousing Corporations Act, 1962, had been required by the Income Tax Officer, Lucknow, to pay advance tax for Assessment Year 1974–75. The Income Tax Officer’s consistent view in earlier years was that the Corporation’s rental income from godowns/warehouses was not exempt; after repeated rejection of its claim, the Corporation filed a writ petition challenging the notice. The High Court quashed the notice, and that decision was challenged in the present appeal.
Legal Issues Presented
- Whether the U.P. State Warehousing Corporation qualified for exemption under Section 10(29) of the Income Tax Act, 1961 in respect of income derived from letting of godowns or warehouses.
- Whether the Corporation was an “authority constituted under any law” and constituted “for the marketing of commodities” within the meaning of Section 10(29).
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court analyzed eligibility under Section 10(29) by applying the three conditions implicit in the provision: (i) the entity must be an authority constituted under law; (ii) it must be constituted for the marketing of commodities; and (iii) the relevant income must be derived from letting godowns/warehouses for storage, processing, or facilitating marketing.
On the first condition, the High Court had found (and the court accepted) that the Corporation was established under the Warehousing Corporations Act, 1962. The court emphasized that, on a plain reading of Section 10(29), the requirement is that the authority be a “creature of law” with a legal personality ordained by law. It considered the High Court’s discussion of the breadth of the authority’s powers to be “alien” to the relevant concept, and held that the Corporation nonetheless satisfied the requirement of being an authority constituted under law.
On the second condition, the court relied on Section 24(d) of the Warehousing Corporations Act, 1962, which obliges a State Warehousing Corporation to act as agent of the Central Warehousing Corporation or the government for purchase, sale, storage, and distribution of specified agricultural produce and other commodities. The court reasoned that these agency functions “undoubtedly” facilitate the marketing of commodities, thereby satisfying the “constituted for marketing” requirement. It also agreed with the High Court’s view that the Corporation’s activities have a business element, adding its own reasoning on facilitation of marketing.
On the third condition, the court found no difficulty because it was undisputed that the income in question was derived from letting of godowns or warehouses.
Holding and Implications
APPEAL DISMISSED.
The court held that, having satisfied all three statutory tests, the U.P. State Warehousing Corporation was rightly entitled to exemption under Section 10(29) as affirmed by the High Court, and the High Court’s quashing of the notice stood. No costs were awarded because there was no opposition. The opinion does not indicate any broader implications beyond granting the exemption on the stated premises.
Order
1. This appeal by certificate is directed against the judgment and order dated November 30, 1973 of Allahabad High Court at Allahabad in Civil Miscellaneous Writ Petition No. 6122 of 1973 where by U.P State Warehousing Corporation, the respondent herein, was granted exemption as envisaged under Section 10(29) of the Income Tax Act, 1961.
2. The U.P State Warehousing Corporation is a creature of the Warehousing Corporations Act, 1962. The Income Tax Officer, Lucknow, required the respondent to pay a sum of money as advance tax for the Assessment year 1974-75. The view of the Income Tax Officer throughout in the previous years was that rental income derived by the assessee from its godowns and warehouses was not exempt from income tax. The claim of the assessee having repeatedly been rejected it thought it proper and did file a writ petition in the High Court of Allahabad challenging the notice. The High Court quashed the notice. The view of the High Court has been assailed here by the revenue.
3. The claim of the assessee is based on Section 10(29) of the Income Tax Act, 1961. It provides:
“10. Incomes not included in total income.— 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—
(29) 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.”
4. As is apparent, the assessee would be entitled to exemption if—
(i) It is an authority constituted under any law.
(ii) It is an authority constituted for marketing of commodities.
(iii) The exemptable income is in respect of letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities.
5. The High Court had no difficulty in coming to the conclusion that the assessee had been established under law i.e the Warehousing Corporation Act, 1962. The question whether the assessee was an “authority” within the meaning of Section 10(29) of the Income Tax Act, 1961 led to a long discussion, as is plain from the judgment. The High Court agreed with the assessee that it was such an authority. Keeping apart, the reasoning given by the High Court, plain reading of sub-section (29) of Section 10 makes it evident that the authority must be constituted under any law for the time being in force, which in other words means that it should be a creature of law. As an artificial person, it should be clothed with a personality ordained by law. The power of the authority whether it is wide or narrow, as discussed by the High Court, with due respect, appears to us alien to the concept with which we are concerned in sub-section (29) of Section 10. So the ancillary test, we say so unhesitatingly, was also satisfied that the assessee was an authority constituted under the law.
6. 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 agent of the Central Warehousing Corporation or the government for the purpose of purchase, sale, storage and distribution of agricultural produce, seeds, manures, fertilisers, 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 of ours is an addition to the reasoning assigned by the High Court in coming to the conclusion that the activities of the assessee have a business element. We agree with the High Court on that score also.
7. The third test with regard to the exemptable income being in respect of letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities presents no difficulty because it stands undisputed that the income derived by the assessee was from letting of godowns or warehouses.
8. The assessee having fulfilled all the tests was rightly entitled to the exemption as claimed. We are fully in agreement with the High Court that the assessee was entitled to relief on these premises. Accordingly, we dismiss this appeal. We should have awarded costs also but since there is no opposition, there shall be no order as to costs.
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