Proportionate disallowance u/s 35AD justifiable as only one godown used for non-agricultural purpose

Rushay Commodities Pvt. Ltd. Vs DCIT (ITAT Ahmedabad)

ITAT Ahmedabad held that proportionate disallowance u/s 35AD of the Income Tax Act is justifiable as only one godown is used for non-agricultural purposes, whereas, other four go-downs are used for agricultural purposes only.

Facts- The assessee company is engaged in the business of warehousing agricultural products. During the course of assessment proceedings, AO observed that the assessee had claimed deduction u/s. 35AD being 150% of the amount capitalized on the date of commencement of its operation.

AO observed that the assessee had constructed several go-downs and had leased the same to various parties from various dates as mentioned in the respective agreements. AO observed that from the reply from one of the parties i.e. Banas Dairy, the items stored in the go-down is skimmed milk powder. AO was of the view that the said item is not an agricultural produce.

AO was of the view that the assessee was not carrying out the specified business in respect of go-down leased to Banas Dairy, since Banas Dairy was using the go-down for storing skimmed milk powder, which was not an “agricultural produce”.

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