The ACIT, 2(1), Bhopal V. M/s M.P.Rajya Van Vikas Nigam Limited, Bhopal

ITA 21/IND/2011

• Counselvise Citation: 2122714 RSA 2011
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 31-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 25-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.21/IND/2011 A.Y. 2007-08 ASSTT. COMMISSIONER OF INCOME TAX 2(1), BHOPAL ... APPELLANT VS M/S. M.P. RAJYA VAN VIKAS NIGAM LTD., BHOPAL PAN AACCM 1081 C ... RESPONDENT APPELLANT BY : SHRI ARUN DEWAN, SR. DR RESPONDENT BY : NONE DATE OF HEARING : 31.10.2011 DATE OF PRONOUNCEMENT : 31.10.2011 O R D E R PER JOGINDER SINGH THIS IS AN APPEAL BY THE REVENUE CHALLENGING THE O RDER DATED 16.12.2010 OF THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) ON THE FOLLOWING GROUNDS: 2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. FIRST APPELLATE AUTHORITY ERRED IN 1. DELETING THE ADDITION OF RS.23,18,45,832/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PROFIT OF GOVERNMENT ACCOUNT TERMED AS LEASE RENT, DESPITE THE FACT THAT THE NATIONAL COMMISSION ON AGRICULTURE EVOLVED THE FORMULA FOR DETERMINING THE LEASE RENT ALLOWABLE TO THE EXTENT OF RS.63,67,826/-. 2. DELETING THE ADDITION OF RS.1,34,29,673/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CORPORATE EXPENSES, DESPITE THE FACT THAT THE APPORTIONMENT OF THE CORPORATE EXPENSES DEBITING 40% TO THE NIGAM WAS DONE ONLY ON THE BASIS OF THE RESOLUTION OF THE BOARD OF DIRECTORS OF THE NIGAM WITHOUT ANY STATUTORY APPROVAL BY THE STATE GOVERNMENT, WHICH FACT HAD ALSO BEEN PRONOUNCED IN THE HON'BLE HIGH COURTS ORDER FOR THE A.Y. 1990-91. 2. DURING HEARING OF THIS APPEAL, AN APPLICATION HA S BEEN FILED BY THE LD. SR. DR THAT THE LD. CIT/DR IS ON L EAVE. HOWEVER, WE FIND THAT THE LD. CIT(A) BY FOLLOWING THE EARLIE R ORDERS OF THE TRIBUNAL THAT TOO ON THE IDENTICAL ISSUES, DECIDED IN FAVOUR OF THE ASSESSEE. THIS FACTUAL MATRIX WAS NOT CONTROVER TED BY THE LD. SR. DR. IN VIEW OF THESE FACTS, SINCE THE ISSUE S ARE COVERED, THEREFORE, THIS APPLICATION OF THE DEPARTMENT IS HA VING NO MERIT, CONSEQUENTLY, DISMISSED. 3 3. SO FAR AS THE MERITS OF THE CASE ON THE IMPUGNED ISSUES ARE CONCERNED, THE SUBMISSIONS PREFERRED BY THE ASS ESSEE BEFORE THE LD. CIT(A) ARE REPRODUCED HEREUNDER: THE NIGAM (APPELLANT) IS A GOVERNMENT COMPANY ENGAGED IN ENRICHING FORESTS OF THE STATE OF MADHYA PRADESH THROUGH PLANTATIONS AND SILVICULTURAL WORKI NG IN DEGRADED FOREST AREAS TRANSFERRED TO IT BY THE GOVERNMENT OF MP., FOREST DEPARTMENT .IN THE INITIA L YEARS OF THE NIGAM, THOUGH THE LANDS WITH EXISTING FORESTS GROWTH WERE TRANSFERRED BY THE GOVT. OF MP., TERMS AND CONDITIONS OF SUCH TRANSFER/LEASE WERE DECIDED ONLY ON 14/11/1979 BY THE GOVT. OF MP. IN ABSENCE OF SUCH A N AGREEMENT, THE AO CALCULATED A REASONABLE LEASE REN T ON THE BASIS OF RECOMMENDATIONS OF NCA [NATIONAL COMMISSION ON AGRICULTURE). THE GOVT. OF MP. VIDE O RDER OF GOVERNOR DATED 14/11/1979 [COPY ENCLOSED-ANNEXUR E- 1] DECIDED THAT THE NIGAM SHALL GET 2% COMMISSION O F GROSS SALE. THE ENTIRE SALE PROCEEDS OF PROJECT-I W AS TO BELONG TO GOVT. OF MP. SIMILARLY ALL EXPENSES ON TH IS ACCOUNT WAS ALSO TO BE BORNE BY THE GOVT. OF MP. [K INDLY REFER POINT NO. 4 OF LETTER DATED 14/11/979]. THE N ET SURPLUS WAS TERMED AS 'LEASE RENT' AND THE SAME BELONGED TO GOVERNMENT OF MP. THE NIGAM WAS ENTITLE D TO ONLY 2% COMMISSION. THE A. 0. DID NOT ACCEPT THE GOMP LETTER DT. 14-11- 79 AND ADDED BACK THE ENTIRE LEASE RENT, CALCULATED AS AFORESAID, AND ALLOWED ONLY A SUM OF RS. 63, 67,826 /- YEAR AFTER YEAR. THE GOMP LETTER WAS ACCEPTED BY THE CIT(A) AS WELL AS TRIBUNAL CONSISTENTLY SINCE THE INCEPTION OF NIGAM. HON'BLE ITAT IN THE APPEAL NO. ITA 537/IND/2007 FOR THE AY 2004-05 HAS RECENTLY ALLOWED THE CLAIM OF THE APPELLANT NIGAM PERTAINING TO 'LEASE RENT' AND 'COR PORATE EXPENSES' BY DISMISSING THE DEPARTMENTAL APPEAL [ANNEXURE-2]. OPERATING PARA OF THE ABOVE ORDER OF HON'BLE ITAT IS REPRODUCED AS UNDER: 'THE LEARNED COUNSELOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT BOTH THE ISSUES ARE COVERED B EARLIE R ORDER 0 THIS BENCH IN THE CASE 0 THE SAME ASSESSEE VIDE O RDER DATED ZS' DECEMBER 2007 OR THE ASSESSMENT EAR 1997-98 AND 1998-99 IN ITA NOS. 87 & 88/IND/2004. THE ABOVE ORDER HAS ALSO BEEN FOLLOWED BY THIS BENCH FOR THE ASSESSMENT YEAR 2001-02 & 2003-04 IN ITA NOS. 723 & 724 DATED 20 TH MARCH 2008. HENCE, FOLLOWING OUR EARLIER 4 ORDER THIS APPEAL OF THE REVENUE IS DISMISSED. ' THE ISSUE OF 'ADDITION ON ACCOUNT OF PROFIT OF GOVERNMENT ACCOUNT TERMED AS 'LEASE RENT' WAS RECENTLY DECIDED IN FAVOR OF THE APPELLANT NIGAM BY THE CIT [APPEALS)-L , BHOPAL VIDE HIS ORDER DATED 06-03-2009 [ANNEXURE-3] IN THE APPEAL NO. CIT(A)-I/BPLLIT-89/08-09 PERTAINING TO A.Y. 2006-07 AND THE ADDITIONS MADE BY THE AO ON TH IS ACCOUNT WERE DELETED IN TOTO. OPERATING PARA OF THE ABOVE ORDER OF CIT [APPEALS]-I, BHOPAL IS REPRODUCE D AS UNDER: '1 HAVE CONSIDERED THE ABOVE SUBMISSIONS AFTER PERU SING THE IMPUGNED ASSESSMENT ORDER. I HAVE DEALTH WITH T HE ISSUE IN DETAIL IN MY ORDER DATED 20-10-2008 IN APP EAL NO.CIT(A)-I/BPL/IT-171/2007-08 HOLDING THAT THE AO HAD ABSOLUTELY NO BASIS, WHATSOEVER, IN OBSERVING THAT THE GOVERNMENT'S LETTER DATED 14-11-1979 WAS A DEVICE T O OBTAIN REVENUE AT THE COST A INCOME-TAX AND RESTRIC TING THE APPELLANT'S CLAIM OF LEASE RENT TO RS. 63,67,82 6/- ONLY, WHICH WAS NOT JUSTIFIED. FOR THE SAME DETAILED REAS ONS GIVEN IN THAT ORDER, THE IMPUGNED ADDITION OF RS. 20,05,11,008/- IS DELETED. ' ON THE BASIS OF FACTS ENUMERATED ABOVE, IT IS MOST HUMBLY REQUESTED TO DELETE THE ADDITION AMOUNTING T O RS. 23,18,45,832/- [ PROFIT OF GOVERNMENT ACCOUNT TERME D AS 'LEASE RENT'] AS WAS ALWAYS DONE IN PAST. THE LD. AR HAD MADE THE FURTHER FOLLOWING SUBMISSIO N BEFORE LD. CIT(A) AS UNDER ;_ THE NIGAM [APPELLANT COMPANY) WAS FARMED IN THE YEA R 1975 BASED ON THE RECOMMENDATIONS OF THE NCA. IMMEDIATELY AFTER THE INCORPORATION OF THE NIGAM, C ERTAIN FOREST AREAS WERE TRANSFERRED TO THE NIGAM BY THE G OVT. OF MP. ALONG WITH EXISTING FOREST GROWTH. THE NIGAM WAS REQUIRED TO CLEAR FILL THE EXISTING GROWTH AND TO D O PLANTATIONS ON THE ABOVE LAND ON SCIENTIFIC BASIS. THE NIGAM, IN THE INITIAL YEARS, CLEAR FILL THE EXISTIN G FOREST GROWTH AND DID EXTENSIVE PLANTATIONS AFTERWARDS ON CLEAR FELLED FOREST LAND. HOWEVER, DUE TO ECOLOGICAL CONSIDERATIONS AND INFOR MAL POLICY, THE GOVT. OF MP ORDERED TO STOP THE ACTIVIT Y OF CLEAR FELLING AND ALLOWED ONLY SILVICULTURAL OPERAT IONS IN THE TRANSFERRED FOREST AREAS. DUE TO CHANGE IN BUSI NESS CONDITIONS, IT WAS FELT NECESSARY BY THE BOARD OF D IRECTORS OF THE NIGAM THAT IT WOULD NOT BE PROPER TO LOAD EN TIRE 'CORPORATE EXPENSES' ON THE CLEAR FELLING ACTIVITY AND DECIDED TO CHARGE 40% OF 'CORPORATE EXPENSES' TO NIGAM'S OWN ACTIVITY. THE NIGAM IS CONSISTENTLY FAL LOWING THE ABOVE POLICY SINCE A.Y. 1990- 91 AND CHARGING 4 0% OF 'CORPORATE EXPENSES' TO ITS OWN ACCOUNT . 5 HON'BLE LTAT IN THE APPEAL NO. LTA 537/1ND/2007 FAR THE AY 2004-05 HAS RECENTLY ALLOWED THE CLAIM OF THE APPELLANT NIGAM PERTAINING TO 'LEASE RENT' AND 'COR PORATE EXPENSES' BY DISMISSING THE DEPARTMENTAL APPEAL [ANNEXURE- 2]. OPERATING PARA OF THE ABOVE ORDER OF HON'BLE ITAT IS REPRODUCED UNDER PARA- 3 OF THE GRO UND- 1 OF THIS SUBMISSION. THE ISSUE OF ALLOWABILITY OF CORPORATE EXPENSES W AS RECENTLY DECIDED IN FAVOUR OF THE APPELLANT NIGAM B Y THE CIT(APPEALS)-I, BHOPAL VIDE HIS ORDER DATED 06-03-2009 [ANNEXURE-3] IN THE APPEAL NO CLT(A)-I/BPL/LT- 89/08-09 PERTAINING TO A.Y. 2006-07 AND THE ADDITIONS MADE BY THE A0 ON TH IS ACCOUNT WERE DELETED IN TOTO. OPERATING PARA OF THE ABOVE ORDER OF CLT [APPEALS]-I, BHOPAL IS REPRODUCE D AS UNDER: 'I HAVE REVISITED THE ABOVE SUBMISSIONS AFTER PERUS ING THE IMPUGNED ASSESSMENT ORDER. THE ISSUE HAS BEEN EXAMINED IN GREAT DETAIL IN MY ORDER DATED 20-10-20 08 IN APPEAL NO. CIT(A) -I/BPL/IT-171/07-08 AND IT WAS HE LD THAT THERE WAS NO ILLEGALITY IN ALLOCATING THE CORP ORATE EXPENSES, WHICH WERE INCURRED MAINLY FOR THE APPELL ANTS OTHER ACTIVITIES AT THE RATE OF 40% TO THE ACCOUNT OF THE APPELLANT AND THE REMAINING 60% TO THE GOVERNMENT ACCOUNT. RESULTANTLY, THE IMPUGNED ADDITION OF RS. 1,28,46,510/- IS DELETED' ON THE BASIS OF FACTS ENUMERATED ABOVE, IT IS MOST HUMBLY REQUESTED TO DELETE THE ADDITION AMOUNTING T O RS. 1,34,29,673/- ON ACCOUNT OF DISALLOWANCE OF 'CORPOR ATE EXPENSES' AS WAS DONE IN PAST. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OFFERED BY THE LD. AR. THE LD. AR HAS GI VEN AN ELABORATE SUBMISSION AND HAS ALSO FURNISHED COPY OF THE ORDER OF HON'BLE ITA T AND THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: '8. FOLLOWING GROUNDS OF APPEAL HAVE BEEN TAKEN BY THE REVENUE:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT (A) HAS ERRED IN:- 'DELETING THE ADDITION MADE BY THE ASSESSING OFFICE R ON ACCOUNT OF PROFIT OF GOVERNMENT ACCOUNT TERMED AS L EASE RENT OF RS. 7,52,99,828/- AND CORPORATE EXPENSES DISALLOWED AT RS.1, 18,35, 616,/- WHICH WAS RIGHTLY ADDED BY THE ASSESSING OFFICER' 9. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT BOTH THE ISSUES ARE COVERED BY EARLI ER ORDER OF THIS BENCH IN THE CASE OF THE SAME ASSESSE E VIDE ORDER DATED 28 TH DECEMBER, 2007, FOR THE ASSESSMENT YEAR 1997-98 AND 1998-99 IN ITA NOS.87 & 88/LND/2004. THE ABOVE ORDER HAS ALSO BEEN FOLLOWED BY 6 THIS BENCH FOR ASSESSMENT YEAR 2001-02 AND 2003-04 IN ITA. NOS. 723 & 724/LND/2004 DATED 20 TH MARCH, 2008. HENCE, FOLLOWING OUR EARLIER ORDER, THIS APPEAL OF THE REVENUE IS DISMISSED. 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE CONCLUSION DRAWN IN THE ASSESSMENT ORDER, CONCLUDED AS UNDER: ON GOING THROUGH THE ORDER OF THE HON'BLE TRIBUNAL , IT IS EVIDENT THAT THE ABOVE ADDITION MADE IN THE EARLIER YEARS HAVE BEEN DELETED AND THE APPEAL OF THE REVENUE HAS BEEN DISMISSED ACCORDINGLY. RESPECTFULLY FOLLOWING THE ORDER OF THE APPELLATE TRIBUNAL, THE ADDITION MADE BY THE ASSESSING OFFICER STANDS DELETED AND BOTH THE GROUN D NOS. 1 & 2 ARE DECIDED IN FAVOUR OF THE APPELLANT. 5. IF THE CONCLUSION DRAWN IN THE IMPUGNED ORDER, T HE ORDERS OF THE TRIBUNAL FOR EARLIER ASSESSMENT YEARS AND UN CONTROVERTED FACTS AS ABOVE ARE KEPT IN JUXTAPOSITION AND ANALYS ED, WE FIND THAT BOTH THE ISSUES I.E. LEASE RENT AND CORPORATE EXPENSES ARE COVERED BY THE AFORESAID DECISIONS OF THE TRIBUNAL, WHICH HAVE BEEN FOLLOWED BY THE LD. CIT(A) IN THE IMPUGNED ORD ER, THEREFORE, IN THE ABSENCE OF ANY CONTRARY FACTS, WE FIND NO INFIRMITY IN THE STAND OF THE LD. CIT(A). 7 IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN IN THE PRESENCE OF LE ARNED SR. DR AT THE CONCLUSION OF THE HEARING ON 31.10.20 11. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31.10.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-