IN THE ITAT HYDERABAD BENCH ‘B’
Assistant Director of Income-tax (Exemption) II, Hyderabad
v.
A.P. Forest Development Corporation
IT Appeal No. 875(Hyd.) of 2011
[Assessment Year 2005-06]
MAY 4, 2012
ORDER
Smt. Asha Vijayaraghavan, Judicial Member
This appeal filed by the Revenue is directed against the order of the CIT(A)-IV, Hyderabad dated 28.2.2011 for the assessment year 2005-06.
2. The only grievance of the Revenue in this appeal is against the relief granted by the CIT(A), by accepting the claim of the assessee for ex-emption of its income under S.11 of the Income-tax Act, and also for exemption of its agricultural income under S.10(1) of the Act.
3. Facts of the case in brief are that the assessee, for the assessment year 2005-06 filed return of income, claiming exemption under S.11 of the Act, and thereby declaring income at Rs. NIL. The assessment was re-opened on 26.3.2007 and re-assessment order was passed by the assessing officer on 31.1.2007, determining the total income of the assessee at Rs. 9,67,92,152. On appeal by the assessee, by way of order dated 15.8.2008, the CIT(A), allowed the appeal of the assessee for statistical purposes, with a direction to the assessing officer to re-examine the case, along the lines suggested by the ITAT in assessee’s own case for the assessment year 2003-04.
4. The assessing officer thereafter passed the consequential assessment order dated 31.12.2009, under S.143(3) read with S.250 of the Act, whereby in the first place the assessing officer noticed that the assessee corporation extended a loan to the Government of Andhra Pradesh, which is founder of the assessee-corporation and holding such advancing of money as violative of the provisions of S.13(1)(d) read with S.11(5) of the Act. Referring to the explanation of the assessee that it was appointed by the State Government as its agent for the payment of wages to the beedi leaf collectors and has utilised sometimes its “own funds” for effecting the sales of beedi leaves on behalf of the State Governments, the assessing officer taking serious cognizance of the harmful effects of smoking and incalculable damage to health of the people done by smoking, concluded that what is committed by the assessee is more than a mere violation of the provisions of S.13(1(d) read with S.11(5) of the Act. He also noted that the Forest Department as a wing of Government of Andhra Pradesh is getting a rent of Rs.10 per Ha upto financial year 2000-01 and Rs. 20 per Ha from the financial year 2001-02 for total extent of land of 84,654 Ha leased to the assessee, and even this transaction is directly hit by the provisions of S.13(1)(c)(ii) read with S.13(3)(a) and (b) of the Act. While arriving at such a conclusion, he found no merit in the plea of the assessee that what was collected was only a nominal rent and any exception can be taken and violation of the provisions of S.13(1)(c)(ii) read with S.13(3)(a) and (b) of the Act can be attributed, only if unreasonable amounts of rent are charged. Thereafter, he proceeded to complete the assessment, determining the income of the assessee at Rs. 11,38,73,120, rejecting the claim of the assessee with regard to even agricultural income claimed as exempt under S.10(1) of the Act, vide order of assessment dated 31.12.2009 passed under S.143(3) read with S.250 of the Act, in the following manner-
