ORDER
Joginder Pall, Accountant Member
1. By this order we shall dispose of this appeal of the assessee filed against the order of CIT, Chandigarh passed Under Section 263 of the Income-tax Act, 1961 for the assessment year 92-93.
2. In this appeal, the assessee has raised the following three grounds:
“1(i) That the order of learned Commissioner of Income-tax Under Section 263 is against law and without jurisdiction.
(ii) That the matter having been considered by the Commissioner of Income-tax (Appeals) and the Assessing Officer having passed order thereafter discussing the matter in detail, it did not lie within the competence of the learned Commissioner to exercise the jurisdiction Under Section 263.
2. Without prejudice to the above contention even in merits the learned Commissioner was wholly unjustified in holding that the income of Rs. 5,83,75,805/- is not income from letting of godowns and as such not exempt Under Section 80-P(2)(e). The issue is directly covered by the order of Hon’ble ITAT, Delhi Bench.
3. That the learned Commissioner was not justified in holding that the order of Assessing Officer was prejudicial to the interest of revenue and setting aside the same for fresh assessment.
It is, therefore, prayed that the order of the learned Commissioner be quashed.”
Thus, the issue disputed by the assessee relates to action of the Commissioner of Income-tax Under Section 263 of the Income-tax Act. The facts of the case are that the assessee is a federation of co-operative societies whose members are district wholesale societies and other co-operative unions who did not possess any agricultural land of their own. In the return of income filed for the assessment year under reference, the assessee had claimed deduction in respect of its entire income Under Section 80(2)(a)(iii) of the Income-tax Act. The AO completed the original assessment Under Section 143(3) on 16.3.95 disallowing the claim of the assessee for deduction Under Section 80P(2)(a)(iii) on the ground that assessee was not marketing the agricultural produce produced by the member societies. He relied on the judgment of Hon’ble Supreme Court in the case of Assam Co-operative Apex Marketing Society v. CIT, 201 ITR 338.
3. Aggrieved the assessee impugned the order of the AO in appeal before CIT(A). During the course of proceedings before CIT(A), the assessee raised an additional ground claiming deduction Under Section 80P(2)(e) in respect of income derived by the cooperative society from letting of godowns or warehouses for storage and processing or facilitating the marketing of commodities. It was contended before ld. CIT(A) that apart from earning of income on purchase and sale of wheat on behalf of the Govt., the assessee also provided various services including storage of wheat in godowns owned by the assessee. It was submitted that out of the rental charges of Rs. 6,41,64,009, the assessee had received rental charges of Rs. 5,83,75,805 from the FCI. It was further submitted that in regard to the remaining rental charges of Rs. 57,88,204, the AO had allowed deduction Under Section 80P(2)(e). It was further explained that assessee did not make any separate claim for deduction Under Section 80P(2)(e) before the AO because it was under a bonafide belief that the entire income was exempt Under Section 80P(2)(a)(iii) of the Income-tax Act. The ld. CIT(A) admitted the additional ground. However, she observed that this issue was not raised before the AO. She, therefore, set aside the order of the AO with a direction to consider this claim of the assessee as per law. The relevant finding recorded by ld. CIT(A) in para 3.2 of her order dated 28.6.95 is reproduced as under:
“3.2 I have carefully considered the rival submissions. The relevant Sub-clause (e) reads as under:-
“(e) – 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, the whole of such income.”
Thus, there appears to be merit in the contention that exemption would be admissible in respect of income being earned from godowns and warehouses in accordance with the provisions of Section 80P(2)(e) of the I.T. Act. It is further observed that part of such income has already been treated as exempt in the case of the appellant for the A.Y. 1992-93 itself by the AO. This issue was not raised before the AO. However, the issue deserves to be considered now as there was reasonable cause for not raising this issue before the AO as entire income arising from the agricultural produce including rent of godowns and warehouses was being claimed as exempt and also treated as exempt upto the A Y 1991-92. In view of thee observations, the AO is directed to consider this claim of the appellant now as per law. Thus, the additional ground is admitted and the issue is referred to the AO for fresh consideration.”
3.1 Thereafter, the AO considered this claim during the course of completing the set-aside assessment. Details of rental income were called for and examined. The AO held that assessee was indeed entitled to deduction of income of Rs. 5,83,75,805 Under Section 80P(2)(e) of the Income-tax Act. The relevant finding of the AO as recorded in the assessment order is exercised below:
”
…..The assessee appeared before me with all the details of storage charges received from Food Corporation of India on wheat during the year 1992-92. The charges given by FCI were as per a letter from Govt. of India, Ministry of Food, Kirishi Bhawan, New Delhi to Secy. Govt. of Haryana Food & Supplies Deptt., Chandigarh.
In the letter submitted to me all charges to be paid to HAPED were worked out for instance in April, 1991, 19668 M.T. of wheat of Rabi 89′ quality, 60000 M.T. of Rabi 90′ quality and 16150 M.T. of Rabi 91′ quality were delivered and the rates as per Govt. of India’s approval were 254.55 /per M.T., 125.55/- and Rs. 31/- per M.T. for the 3 qualities respectively and the total storage charges received in April came to Rs. 4,24,422/-, Rs. 7,53,3000/- and Rs. 5,00,450/- respectively.
The storage charges for the entire year has been worked out as for April cited above.
I have verified the facts and examined the issues involved in detail and after discussion, the total income of the assessee is computed as under:-
3.2 Thereafter the Commissioner of Income Tax, Panchkula examined the records and was prima facie of the view that deduction Under Section 80P(2)(e) had been wrongly allowed by the AO. He, therefore, issued a show cause notice to the assessee proposing to revise the order of the AO Under Section 263 of the Income-tax Act. In reply to show cause notice, the assessee objected to the proposed action of the Commissioner of Income Tax on the ground that this matter had already been considered by the CIT(A) in appeal and, therefore, the CIT was precluded from exercising jurisdiction in terms of Explanation (c) to Section 263(1) of the Income-tax Act. It was further submitted that the claim was examined by the AO and rightly allowed after satisfying himself about the requirements of law. Thus, even on merits, the assessee was entitled to such deduction and CIT had no jurisdiction to exercise revision Under Section 263 of the Income-tax Act. The CIT considered these submissions but was not impressed with the same. He was of the view that CIT(A) had merely set aside the assessment and restored the issue to the file of the AO for readjudication in accordance with law. The CIT was of the view that the order passed by the AO was erroneous insofar as it was prejudicial to the interest of the revenue. Accordingly, the CIT set aside the assessment to be framed afresh after allowing an opportunity to the assessee. The relevant findings of the CIT, as recorded in paras 6 and 7 of the impugned order, are reproduced hereunder:
“6. I have carefully considered the arguments of the assessee. As I have stated above this issue has not been adjudicated upon by the CIT(A). At the time when the appeal was heard by the CIT(A), no such addition had been made. The CIT(A) had only given her comments on the additional grounds raised and the matter was restored to the AO for fresh adjudication.
7. At the time of passing the order on 15.11.95, the AO did consider the ground and allowed the deduction. She however made a mistake in the computation by stating that the same was being allowed under the direction of the CIT(A). In this order it has to be examined whether her order was in conformity with law or was an order that was erroneous in so far as it is prejudicial to the interest of the revenue. In the decision quoted by Sh. M.L. Garg, the ITAT, Delhi Bench-B has taken a decision in the case of Haryana Warehousing Corporation whose objective is warehousing i.e. the letting out of premises on rent. In the case of the assessee, the objective is different and is the procurement and marketing of certain agricultural produce.In the course of this produce is to be stored and so space has to be utilised. The food-grain that it procured is then further sold. In my opinion the sale price that is received and which is detailed in the letter dated 12th Nov., 93 which has been reproduced supra, contains a break-up of the payment that the assessee realises. One of the components is a compensation or payment of storage charges. In my opinion, the letter merely gives a break-up of the payment that is to be made tote. The payment made to the assessee is not for letting out of a premise for storage, processing of for facilitating the marketing of commodities. Rather the money is received as a component of the price at which the grain is further supplied by the assessee. Accordingly in my opinion, the case of the assessee is distinguishable from the case of Haryana Warehousing Corporation to which the assessee has referred to. It thus appears that the order of the AO was erroneous. Since a deduction of Rs. 5,83,75,805/- was allowed and to which the assessee was not entitled, the order was thus prejudicial to the interest of the revenue. It is therefore, directed that this part of the order is set-aside to be framed afresh by the AO after affording an opportunity to the assessee.”
Assessee is aggrieved with the order of the CIT. Hence this appeal before us.
4. The ld. Counsel for the assessee, Shri, M.L. Garg, submitted that original in this case was completed Under Section 143(3) on 16.3.95. The entire income of the assessee was claimed exempt Under Section 80P(2)(a)(iii). However, the AO disallowed the deduction by relying on the judgment of Supreme Court in the case of Assam Co-op. Apex Society Ltd. v. CIT, 201 ITR 338. He drew our attention to a copy of the assessment order placed on our file. He further submitted that the assessee filed an appeal against the order of the AO and during the course of appeal proceedings the assessee raised an additional ground of appeal claiming deduction Under Section 80P(2)(e) of the Income-tax Act. He submitted that in the assessment year under reference, the assessee had earned rental income of Rs. 6,41,64,009 from letting out godowns and warehouses. Out of the same, income of Rs. 5,83,75,805 was received from FCI and Rs. 57,88,204 was in respect of other parties. The AO had himself allowed deduction Under Section 80P(2)(e) in respect of rental income from other parties. The claim for deduction of rental income of Rs. 5,83,75,805 had not been made before the AO because the deduction in respect of the entire income was claimed Under Section 80P(2)(a)(iii). Taking into account the fact that there was a bonafide reason for not claiming the deduction Under Section 80P(2)(e) before the AO, the ld. CIT(A) admitted the claim of the assessee and restored the issue to the file of the AO for deciding the same in accordance with law.
4.1 He drew our attention to para 3.2 of the order of the CIT(A), Chandigarh dated 28.9.95, a copy of the same was also placed on our file. He further drew our attention to the subsequent assessment dated 15.11.95 completed by the AO in compliance with the directions of the CIT(A). He submitted that during the course of set aside assessment proceedings, the claim was examined by the AO and allowed after verifying the facts. He drew our attention to the finding recorded by the AO on pages 3 and 4 of the assessment orders as extracted above. Thus, the ld. Counsel submitted that once the issue had been considered by ld. CIT(A) in appeal, the ld. CIT was not competent to consider the same Under Section 263. He particularly referred to Explanation (c) to Sub-section (1) of Section 263. He relied on the following judgments in support of his contention that once the matter has been considered by ld. CIT(A) in appeal, the Commissioner has no power to revise the order of the AO Under Section 263 in respect of the same issue:
i) CIT v. Sandur Manganese Iron Ores (P.) Ltd., 259 ITR 446 (Karnataka);
ii) CIT v. Farida Prime Tannery, 259 ITR 342 (Mad.) &;
ii) CIT v. Shri Arbuda Mills Ltd., 231 ITR 50 (SC).
4.2 He further submitted that Section 263 empowers the Commissioner of Income Tax to revise the order if it is erroneous insofar as it is prejudicial to the interests of the Revenue. He submitted that in this case, the AO called for the various details of rental income and after verifying the same, the AO allowed the deduction of Rs. 5,83,75,805 Under Section 80P(2)(e). Therefore, there was nothing wrong with the order of the AO. It was inconformity with the provisions of law. The mere fact that some other view was possible does not confer jurisdiction on the CIT to exercise power Under Section 263. He relied on the following judgments:
i) CIT v. South Arcot District Co-operative Marketing Society Ltd., 176 ITR 117 (SC);
ii) CIT v. Rajasthan State Warehousing Corporation, 210 ITR 906 (Raj.);
He submitted that the facts of the present case are absolutely identical to the facts of the case before the Rajasthan High Court. In that case also, the assessee derived income from letting out warehouses, interest from banks, trading in agricultural products on behalf of the FCI and the State Govt., procurement of grain for the State Govt. and the FCI, supervision charges, fumigation charges and miscellaneous income. Though the assessee had claimed its entire income exempt from tax Under Section 10(29) of the Income-tax Act, the High Court held that only income derived from warehousing activities was exempt. He submitted that in the present case, the assessee is claiming deduction only in respect of income derived from rental from letting out of warehouse and godowns.
iii) ITAT, Delhi Bench in the case of Haryana Warehousing Corporation v. DCIT, 61 ITD 42):
Where by referring to the judgment of Rajasthan High Court in the case of CIT v. Rajasthan State Warehousing Corporation, supra, the income derived from letting of godowns or warehouses for storage, processing or facilitating marketing of commodity was held to be exempt Under Section 10(29) of the Income-tax Act. He submitted that provisions of Section 10(29) are analogous to the provisions of Section 80P(2)(e) of the Income-tax Act.
Thus, the ld. Counsel submitted that the order of the AO cannot be considered erroneous or prejudicial to the interests of the Revenue. Rather, he contended that it is the order of the CIT, which is erroneous and contrary to the provisions of the Act.
5. The ld. D.R., Shri S.S. Kemwal, heavily relied on the order of CIT. He drew our attention to the relevant paragraph of ld. CIT(A)’s order as extracted in the order Under Section 263 and submitted that ld. CIT(A) had merely set aside the assessment for deciding the claim of the assessee afresh after affording a reasonable opportunity of being heard. He submitted that ld. CIT(A) had not recorded any finding that the claim of the assessee should be accepted and allowed without any examination. He further relied on the judgment of Rajasthan High Court in the case of CIT v. Emery Stone Mfg. Co., 213 ITR 843, where the High Court has held that CIT can revise the order of the AO Under Section 263 if he (CIT) is of the view that the AO had not applied the correct provisions of law and the claim had not been properly examined. Thus, he submitted that the CIT had rightly passed the order Under Section 263 of the Income-tax Act.
6. We have heard both the parties and given our thoughtful consideration to the rival submissions with reference to facts, evidence and material on record. We have also carefully gone through the orders of the authorities below. From the facts discussed above, it is obvious that in the return of income filed, the assessee had claimed deduction Under Section 80P(2)(a)(iii). The assessee had not claimed deduction Under Section 80P(2)(e) in respect of storage charges received from FCI in view of the fact that entire income had been claimed exempt Under Section 80P(2)(a)(iii). Therefore, the AO had no occasion to examine the claim of the assessee. This claim was made for the first time before ld. CIT(A) by way of additional ground. The ld. CIT(A) was convinced about the bonafide of the assessee in not claiming such deduction before the AO and, therefore, admitted the additional ground. But the ld. CIT(A) directed the AO to consider this claim of the assessee as per law.
6.1 Now, the first issue that requires to be considered is, whether it could be held that this issue had been the subject matter of appeal before the CIT(A) and, therefore, the CIT was not competent to pass an order Under Section 263 on this ground itself Before dealing with the merits of the claim of the assessee, it would be appropriate to reproduce hereunder the provisions of Section 263(1) r/w Explanation (c) thereto as under:
“263(1) – The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being herd and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.
Explanation.- For the removal of doubts, it is hereby declared that, for the purpose of this sub-section,-
(a) xx xx
(b) xx xx
(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the Ist day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.”
A bare reading of Section 263(1) shows that the CIT has wide powers to examine the record of any proceeding and exercise jurisdiction in respect of any order passed by the Assessing Officer if he considers that the said order is erroneous insofar as it is prejudicial to the interest of the revenue. However, Explanation(c) to Section 263(1) restricts the power of the CIT in respect of issues, which have been considered and decided in appeal by ld. CIT(A). In other words, the CIT cannot exercise jurisdiction in respect of such matters, which have been considered and decided in appeal. Explanation(c) to Section 263 makes it abundantly clear that all those issues, which were considered and decided in appeal, would fall outside the purview of Section 263 of the Income-tax Act. The said Explanation has been introduced by the Finance Act, 1989 w.e.f. 1.6.1988. Therefore, the same would apply to all appeals instituted on or before or after Ist day of June, 1988. Therefore, this Explanation is applicable to this case. The following judgments also support the view that all those cases where the issue has been considered and decided in appeal fall outside the scope of Section 263:
i) CIT v. Sandur Manganese Iron Ores (P.) Ltd., 259 ITR 446 (Karnataka);
ii) CIT v. Farida Prime Tannery, 259 ITR 342 (Mad.) &;
iii) CIT v. Shri Abruda Mills Ltd., 231 ITR 50 (SC).
6.2 However, a question arises as to whether in a case where the matter was merely set aside for framing the assessment afresh, could it still be held that CIT(A) had considered and decided such issue in appeal? A close reading of Clause (c) of Explanation to Section 263(1) shows that the CIT would be debarred from exercising jurisdiction Under Section 263 in respect of issues which were subject matter of appeal and considered and decided in appeal. If the issue has been subject matter of appeal, but neither considered nor decided or even considered but not decided in appeal, the CIT would be competent to exercise jurisdiction Under Section 263. Now, in this case, the assessee raised an additional ground and the same was admitted by the CIT(A). Therefore, the first limb of Explanation restricting the power of CIT Under Section 263 would apply. Similarly, CIT(A) considered the issue and restored the same to the AO. Therefore, even second limb of restriction imposed under the Explanation would apply. But this issue was not decided by the CIT(A) herself. The same was restored to the file of the AO for deciding the same in accordance with law. Therefore, the question that arises now is,whether in a case, where the matter has been set aside and restored to the file of the AO for fresh decision, could it be held that the matter has been considered and decided by the CIT(A) or could it be held that the set-aside assessment completed could be a subject matter of revision Under Section 263 because the CIT(A) has not decided the issue in appeal? We feel that since the issue was not decided by ld. CIT(A) but was only restored to the file of AO, it could not be said that the same was decided by the CIT(A). There is nothing in the order of CIT(A) which would suggest that CIT(A) had allowed relief to the assessee. The AO was free to consider such claim as per law and if he was of the view that assessee was not entitled to the deduction he was at liberty to disallow such claim. Therefore, the CIT(A) has not decided the issue. This condition restricting the power of the CIT(A) is not fulfilled. Therefore, until all the three limbs of the Explanation are found applicable to the case, the CIT would be competent to exercise jurisdiction Under Section 263.
6.3 Besides, we have also referred to the provisions of Section 80P(2)(e) of the Income-tax Act. The same provides deduction in respect of income derived by the cooperative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities the whole of such income. The various courts have also held that only such income derived from letting of godowns or warehouses for specific purpose of storage, processing or facilitating the marketing of commodities could alone be entitled to deduction. Thus, the claim of the assessee required to be examined after calling for the details of income and after examining the same as to whether such income was really derived from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. The quantification of such income would again need examination after considering the proportionate expenses incurred for earning such income in case the assessee has maintained only consolidated profit & loss a/c in respect of various sources of receipts. All these details required to be examined by the AO at the time of deciding the issue afresh. In case, the AO accepts such claim without such examination, inquiry or in haste, it could be held that such order passed by the AO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT would be competent to examine the case as to whether the AO has decided the issue in accordance with law and the claim has been correctly allowed. If it is not, the CIT would be competent to exercise jurisdiction Under Section 263 of the Income-tax Act. Thus we see no justification for restricting the powers of CIT Under Section 263 in respect of such order because the ld. CIT(A) has neither recorded any finding about the eligibility of assessee’s claim nor quantified the amount of deduction. In the light of these facts, we do not find any force in the submission of the ld. Counsel that the order of CIT passed Under Section 263 deserves t be quashed purely on the ground that this matter had been considered and decided by ld. CIT(A) in appeal. The matter was simply restored for deciding the claim of the assessee. Accordingly, this ground of appeal is dismissed.
7. Now, the next question that requires to be considered is, whether the CIT was justified in exercising jurisdiction Under Section 263 of the Income-tax Act? In order to assume jurisdiction Under Section 263, the prerequisites are that the order passed by the AO should be erroneous insofar as it should be prejudicial to the interests of Revenue. The Commissioner has to satisfy the twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; & (ii) it is prejudicial to the interests of the Revenue. Both the conditions must be satisfied. In case the order of the AO is erroneous but is not prejudicial to the interests of Revenue, or if it is not erroneous but is prejudicial to the interests of Revenue, the CIT would not be competent to exercise jurisdiction Under Section 263 of the Income-tax Act. Now, the question arises is as to what is the meaning of order being erroneous? The order Under Section 263 could be considered as erroneous if such order is based on wrong assumption of facts or incorrect application of law. Even the order could be said to be erroneous if it has been passed without proper application of mind, in undue haste without making proper inquiry warranted by the facts of the case. Even if the order is erroneous, this by itself would not be sufficient for invoking the power Under Section 263. The other condition, which requires to be satisfied for assumption of jurisdiction Under Section 263, is that the order should also be prejudicial to the interests of Revenue. The order could be said to be prejudicial to the interests of Revenue if due to an erroneous order of the AO the Revenue has lost tax lawfully payable by a person. The expression “prejudicial to the interests of Revenue” has to be read in conjunction with an erroneous order passed by an Assessing Officer. However, every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of Revenue. In a case where two views are possible and the AO has taken one view with which the CIT does not agree, the said order cannot be treated as an erroneous order prejudicial to the interests of Revenue unless the view taken by the AO is unsustainable in law. All these aspects have been considered by the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT, 243 ITR 83, where the Hon’ble Apex Court has held as under:
“A bare reading of Section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent- if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue- recourse cannot be had to Section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase “prejudicial to the interests of the Revenue” is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase “prejudicial to the interests of the Revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law.”
8. The present case also requires to be decided by applying the above tests laid down by the Hon’ble Supreme Court. We observe from the assessment order that the AO has not allowed the claim Under Section 80P(2)(e) without making further inquiries. He called for the details of the total charges received from the FCI as sanctioned by the Govt. of India, Ministry of Food, Krishi Bhawan, New Delhi vide their letter dated 12th Nov., 1993. The break up of the various charges sanctioned by the Govt. is at page 3 of the impugned order. Item 5 of the same mentions storage charges @ Rs. 1.05 per quintal for 2.95 months including 0.5 months or 15 days for advance hiring @ Rs. 1.05 per qtl per month. Aggregate amount of the same was given at Rs. 3.10 per quintal. He further noted that these storage charges were fixed at different rates in respect of three qualities and the total receipts in the month of April came to Rs. 4,24,422, Rs. 7,53,000 and Rs. 5,00,450 for three different varieties. He further observed that the claim of the assessee was examined and verified and thereafter allowed deduction of Rs. 5,83,75,805 Under Section 80P(2)(e). Section 80P(2)(e) allows deduction in respect of income derived by the cooperative society from letting of godowns, warehouses for storage, processing or facilitating the marketing of commodities. Thus, as per provisions of the Act, the assessee was entitled to such deduction Under Section 80P(2)(e). In fact, such deduction in respect of storage charges amounting to Rs. 57,88,204 received from others had been claimed and allowed at the time of completing the original assessment. The claim of the assessee is also supported by the judgment of Rajasthan High Court in the case of CIT v. Rajasthan State Warehousing Corporation, 210 ITR 906, where it has been held that only income derived from letting of godowns or warehouses for facilitating marketing of commodities qualifies for deduction. The ITAT Delhi Bench in the case of Haryana Warehousing Corporation v. DCIT, 61 ITD 42, followed this judgment. Even the Hon’ble Supreme Court in the case of Orissa State Warehousing Corporation and Rajasthan State Warehousing Corporation v. CIT, 237 ITR 589, has held that assessee is entitled to deduction in respect of income derived from letting of godowns and warehouses. We also observe that the total income of the assessee, as determined in the original order, was Rs. 11,31,84,636. Thus, the AO has not allowed deduction in respect of the entire income. He had restricted the deduction Under Section 80P(2)(e) only in respect of income by way of storage charges received for letting of godowns and warehouses. These facts shows that the AO has not decided the matter on incorrect facts or by incorrect application of law. Therefore, the order passed by the AO could not be considered as erroneous. Likewise, the order passed by the AO could also not be considered prejudicial to the interests of the Revenue merely because the CIT did not agree with the view taken by the AO. We may further point out that this is a case of a Govt. undertaking. The assessee had made purchases of wheat and rendered various services on behalf of FCI and the State Govt. The amounts received from the FCI were sanctioned by the Govt. of India. The same included not only the support price but also various other charges like Mandi charges, Mandi labour charges, internal movements, storage charges, establishment charges, interest charges etc. Thus, the assessee had not only purchased wheat but had rendered various other services also. It is also not denied that assessee owned warehouses and godowns where the wheat purchased was stored. Storage charges of such a huge amount of Rs. 5.87 crores were paid by the Govt. for providing storage facilities. Had the FCI owned its own godowns, the Govt. would have not paid such storage charges. The object of providing deduction in respect of income derived by cooperative societies from letting of godowns and warehouses is to promote the development of rural economy. In this case, the object of providing such deduction to cooperative societies in respect of such income is fully met. It is not the case of the revenue that the AO had passed the order in undue haste without examining the relevant aspects of the case. Moreover, the claim of the assessee is also supported by the various judgments referred to above. The revenue has not cited even a single case where such claim for deduction is held to be as not allowable. Thus such income qualified for deduction Under Section 80P(2)(e) and the AO allowed the same after due application of mind and after making proper inquiries. In the light of these facts, we do not find any error in the order of the AO. The AO took a reasonable view based on facts, evidence and material on record. Therefore, such order cannot be called prejudicial to the interests of the Revenue. We are, therefore, of the considered opinion that twin conditions for assuming jurisdiction Under Section 263, i.e. (i) the order should be erroneous and (ii) it should be prejudicial to the interests of the Revenue, have not been satisfied in this case. Accordingly, we hold that CIT was not justified in revising the order of the AO Under Section 263. We cancel the order of the CIT passed Under Section 263 and allow the respective grounds of appeal.
9. In the result, the appeal of the assessee is partly allowed.