ACIT, CIRCLE-4(1), KOLKATA, KOLKATA vs. M/S KEVENTER AGRO LTD., KOLKATA

Before us the ld. DR relied on the order of the AO.

The ld. AR submits that the issue raised in ground no.1 by the revenue is covered by the order of this Tribunal in assesee’s own case involving A.Ys. 2001-02, 2003-04 and 2005-06 vide its order dated 30.06.2014 and referred to para no.26 and argued that the coordinate bench of this Tribunal by placing reliance in the case of Sahaney Steel & Press Works Ltd vs CIT 228 ITR 253 (SC) held that the sales tax remission is a capital receipt and the assesee is entitled to claim the same as capital receipt and supported the order of CIT(A).

Heard rival submissions and perused materials on record. We find that the issue is covered by the order of this Tribunal in assessee’s own case wherein the Tribunal on an examination of West Bengal Incentive Scheme 1993 and 1999 and opined that the said incentive scheme was introduced by the Government of West Bengal to encourage promotion of industries in the state of West Bengal and by placing reliance in the case of Sahaney Steel & Press Works Ltd vs CIT (supra) held that this is a capital receipt. The relevant portion of the Tribunal order dated 30.06.2014 is reproduced herein below :- “26. We have heard rival submissions and gone through facts and circumstances of the case. We find that the CIT(A) has considered the legal aspect as to whether the sales tax remission was a revenue or capital receipt in the hands of the assessee. He found that the sales tax remission given under West Bengal Incentive Scheme 1993 and 1999 was not for assisting the assessee in carrying out its business operation but incurred the promotion of industries in the State of West Bengal and consequently, following the decision of Hon 'ble Supreme Court in the case of Sahaney Steel & Press Works Ltd. Vs. CIT'228 ITR 253 holding the sales tax remission as capital receipt. Ld. counsel also drew our attention to- the fact that the sales tax remission under West Bengal Incentive Scheme, 1993/1999 was revenue or capital has already been examined and decided by ITAT, Kolkata Bench in the following appeal:

In view of the same we find no infirmity in the order of CIT(A). Accordingly ground no.1 raised by the revenue is dismissed.

Ground No.2 raised by the revenue is in relating to disallowance u/s 14A of the Act r.w.r. 8D(2)(iii) wherein we find that the AO disallowed expenditure under Rule 8D(ii) & (iii) wherein the CIT(A) on examination of cash flow statement of interest bearing funds found that the assessee incurred expenditure of interest and has direct nexus with the investments as made by the assesee during the year under consideration and confirmed the disallowance of expenditure under Rule 8D(2)(ii) of Rules. Further the CIT(A) by placing reliance in the decision of the Co-ordinate Bench of Tribunal in the case of REI Agro Ltd directed the AO to examine those investments that yielded dividend for the purpose of average investments made in two companies i.e. Metro Diary Ltd. And Birla Sunlife Mutual Fund in terms of expenditure to be disallowed under Rule 8D(2)(iii) of the Rules.

Before us, the ld. DR relied on the order of AO and ld. A%R supported the order of CIT(A).

Heard rival submissions and perused the material on record. The contention of the ld. AR was that the assessee earned dividend from two companies i.e. (i) Metro Diary Ltd and (ii) Birla Sunlife Mutual Fund which yielded exempt income of Rs.53,20,226/- and the average investment connected thereto is Rs.2,10,48,250/- but, not Rs.12,81,95,222/- as determined by the AO in his order. The CIT(A) by placing M/s Keventer Agro Ltd. A.Y.2011-12 reliance on the decision of Coordinate bench in the case of REI Agro Ltd which held that those investments which has given rise to the income which does not form part of total income shall have to be considered for the purpose of computing disallowance u/s 14A r.w. rule 8D of Income Tax Rules. In the present case, the AO found that the assessee earned dividend of Rs.53,20,226/- and has taken average value of investments as appeared in the balance sheet, which, according to ld. AR is wrong in pursuance of the decision of this Tribunal in the case of REI Agro Ltd supra. We find force in the arguments of ld. AR and no infirmity in the order of CIT(A). Ground no.2 raised by the revenue is dismissed.

In the result, the appeal of the revenue is dismissed. Order pronounced in the open Court on 04.04.2018.