THE DCIT, 2(1), BHOPAL vs. M/S. M.P. RAJYA VAN VIKAS NIGAM LTD., BHOPAL

आदेश /O R D E R

PER O.P.MEENA, ACCOUNTANT MEMBER 1. This appeal filed by the Revenue is directed against the order of Learned Commissioner of

Income-tax (Appeals)-I, Bhopal [in short “the CIT(A)”] dated 28.09.2016 pertaining to

Assessment Year 2013-14, which in turn has arisen from the order dated 25.02.2016 passed

by the ACIT 2(1)Bhopal (in short “the AO” ) under section 143 (3) of Income Tax Act,1961 ( in

short ‘the Act’). The assessee has taken following grounds of appeal:- 1. Whether on the facts and circumstances of the case, the Ld. CIT (A) was justified

in deleting addition of Rs. 63,44,181/- made by the AO on lease rent.

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in deleting addition of Rs. 2,69,08,343/- made by the AO on account of

disallowance of corporate expenses. 2. Succinctly, facts as culled out from the orders of lower authorities are that the

assessee is an MP Government undertaking engaged in business of forestry. The assessee

filed its return of income on 27.09,2013 declaring total income of Rs. 17,60,08,590/- which

was assessed at Rs. 83,73,38,110/- The AO noticed that Schedule J-1 of income and

expenditure incurred for first Forest Department showed “surplus –excess of revenue over

expenditure” in government account of Rs. 69,40,34,393/- which was termed as lease rent

payable to government of MP , Forest Department. The AO observed that in assessment

order of earlier years ,it had been consistently held that lease rent of Rs. 63,67,826/- is only

allowable which has been brought forward to tax since A.Y. 1997-98. Even though, CIT(A)

and tribunal had deleted the said addition but the Department has not accepted the

decision and challenged in appeal before the Hon`ble High Court, which is pending , hence,

to maintain consistency the AO made the said disallowance of Rs. 63,44,21,181/- for the

assessment year under consideration. 3. Being, aggrieved the assessee filed an appeal before the ld. CIT (A). During the

course of appellate proceedings, the Ld. counsel for the assessee submitted that the

assessee is a Government Company engaged in enriching the forest of the state of MP

through plantation and silvicultural working in degraded forest areas transferred to it by the

Government of Madhya Pradesh, Forest Department. In the initial years of the Nigam

(Appellant) though the land with existing forest growth were transferred by the Govt. of

Madhya Pradesh, the terms and conditions of such transfer / lease were decided on

14.11.1979 by Government of Madhya Pradesh. In the absence of such an agreement, the

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AO calculated a reasonable lease rent on the basis of recommendation of National

Commission on Agriculture (NCA). The Govt. of Madhya Pradesh vide order dated

14.11.1979 decided that the assessee shall get 2 % commission on gross sale and that the

entire sale proceeds of such project would belong to Govt. of Madhya Pradesh and similarly,

all expenses of such project was also to be borne by the Govt. of Madhya Pradesh. The net

surplus was termed as lease rent and the same belonged to Govt. of Madhya Pradesh. The

appellant was entitled to only 2% of the commission on such sales. It was contended that

the AO was not justified in making addition of Rs.69,40,34,393/- out of surplus lease rent. It

was also pointed out that this issue has been consistently decided in favour of the appellant

by the Ld. CsIT (A) as well as Hon'ble ITAT. The Hon'ble ITAT Indore Bench in appeal ITA

No.21/Ind/2011 for the A.Y. 2007-08 has recently allowed the claim of the appellant vide

order dated 31.10.2011. Thus, it was prayed that the addition of Rs.63,44,21,181/- made by

the AO on account of lease rent may please be deleted. The ld. CIT (A) observed as under:

“4.2 I have carefully considered the submission of the appellant and facts of the

case. It may be noted that the AO made this addition mainly to maintain

consistency in the assessment of the appellant. It is noticed that the first

appellate authority [CIT (A)] as well as the Hon'ble ITAT have deleted such

addition in earlier years. The Hon'ble ITAT, Indore Bench vide its order dated

31.10.2011 in ITA No.21/Ind/2011 for the A.Y. 2007-08 allowed the claim of the

appellant and dismissed the departmental appeal. The concluding para of this

order of Hon'ble ITAT reads as under :-

“5. If the conclusion drawn in the impugned order, the orders of the Tribunal for

earlier assessment years and un-controverted facts as above are kept in

juxtaposition and analyzed, we find that both the issues i.e. lease rent and

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corporate expenses are covered by the aforesaid decisions of the Tribunal,

which have been followed by the Ld. CIT (A) in the impugned order, therefore, in

the absence of any contrary facts, we find no infirmity in the stand of the Ld.

CIT(A). In the result, the appeal of the revenue is dismissed. ”

4.4. Respectfully following the decisions of my predecessor CsIT (A) as also the

Jurisdictional Hon'ble ITAT on this issue, the addition on account of

disallowance in respect of profit of government account termed as lease rent

amounting to Rs.63,44,21,181/- is hereby deleted. This ground of appeal is

allowed.”

The Ld. CIT (A) deleted the disallowance made by the AO by following the orders of ITAT in

I.T.A. No. 21/Ind/2011 for the assessment year 2007-08 dtd. 31.10.2011 and I.T.A. No. 558

& 559/ Ind/2013 for the assessment year 2010-11 and 2011-12 dtd. 04.08.2015 deleted the

addition so made. 4. Being, aggrieved the Revenue filed this appeal before the Tribunal. The Ld. CIT (DR)

submitted that the issue is recurring one and Department has not accepted the same and

appeal against the orders of tribunal is pending before the Hon`ble MP High Court. 5. On the other hand, the Ld. A.R. relied on the order of ld. CIT (A) and tribunal in

earlier years. 6. We have heard the rival submissions of both the parties and have perused the

material available on record. Looking to the facts and circumstances of the case, we find

that the ld. CIT(A) has followed the order of I.T.A.T. in assessee’s own case in I.T.A.No.

21/Ind/2011 for assessment year 2007-08. During the course of hearing, the Ld. Senior D.R.

could not produce anything contrary to the finding against the decision of the Tribunal.

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Therefore, respectfully following the same, we dismiss the Departmental appeal on this

ground. 7. Ground no. 2 relates to deletion of addition of Rs. 2,69,08,343/- made by the AO

on account of disallowance of corporate expenses. 8. The brief facts are that during the assessment proceedings, the Assessing Officer

noticed that the assessee has claimed corporate expenses of Rs. 2,69,08,343/- during the

year. The AO observed that the claim of the assessee Nigam has been disallowed in the

orders of earlier assessment years. Even though the addition made was deleted by the Ld.

CIT (A) as well as Hon'ble ITAT for earlier years in assessee’s own case but the department

did not accept the decisions of Hon'ble ITAT and challenged the same before the Hon'ble

High Court of Madhya Pradesh which is yet pending for decision. Accordingly, to maintain

consistency in the assessment for this year also and for the reasons mentioned in orders for

earlier assessment years, the AO disallowed a sum of Rs. Rs. 2,69,08,343/-on account of

corporate expenses. 9. The matter carried to ld. CIT(A). The ld. CIT(A) deleted the addition observing as

under :-

5.2. I have considered the submission of the Ld. AR as also the findings of the

Assessing Officer regarding this addition. It is noticed that the AO made this addition

for sake of consistency in the assessment. The first appellate authority and the

Hon’ble ITAT has consistently deleted such addition in earlier assessment years. The

Hon’ble ITAT. Indore Bench vide its order dated 13.03.2009 in ITA No. 537 for

A.Y.2004-05 allowed the claim of the appellant and dismissed the departmental

appeal. The operating para of the above order of Hon’ble ITAT is reproduced as under

:-

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“The learned counsel for the assessee at the outset submitted that both the issues are covered by earlier order of this bench in the case of the same assessee vide order dated 28lh December 2007for the assessment year 1997- 98 and 1998-99 in ITA Nos. 87 & 88 /1ND/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'h March 2008. Hence, following our earlier order, this appeal of the revenue is dismissed. ” 5.3. Similarly, as mentioned herein above, the Hon'ble ITAT Indore Bench had deleted the

similar addition in A.Y. 2007-08 in appeal ITA No.21/Ind/2011 order dated

31.10.2011 in appellant’s own case and dismissed the appeal of the revenue.

5.4. The facts of the appellant in the assessment year under consideration are exactly the

same as were in earlier years. Therefore, respectfully following the decisions of my

predecessor CslT(A) and also of the Jurisdictional Hon’ble ITAT in appellant’s own

case on this issue, the addition on account of corporate expenses amounting to Rs.

2,69,08,343/-is deleted. This ground is allowed.” 10. We have heard the rival contentions of both the parties. Looking to the facts and

circumstances of the case, we find that the ld. CIT(A) has followed the order of I.T.A.T. in

assessee’s own case in I.T.A. No. 21/Ind/2011 for assessment year 2007-08. 11. During the course of hearing, the Ld. Senior D.R. could not produce anything

contrary to the finding of the Tribunal. Therefore, respectfully following the same, we

dismiss the Departmental appeal on this ground. 12. In the result, appeal of the Revenue for the assessment year 2013-14 is dismissed. 13. The order pronounced in the open Court on 20.03.2017.

M.P. Rajya Vikas Nigam Ltd. / I.T.A. No. 1348/Ind/2016/A.Y.:2013-14 Page 7 of 7

Sd/- Sd/- (सी.एम.गग�) (ओ.पी.मीना) �या�यक सद�य लेखा सद�य (C.M. GARG) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER

DATED: 20th March, 2017