Tribunal ruling: Depreciation rates, mark to market losses, ESOP expenses allowed; 0.5% disallowance under section 14A upheld.

The Tribunal allowed the higher rate of depreciation on UPS batteries, deleted the disallowance of mark to market losses, and ESOP expenses. The disallowance under section 14A was partly allowed, directing computation at 0.5% against specific investments. The addition based on AIR entries was upheld. The revenue's appeal was dismissed, and the assessee's appeal was partly allowed. The Tribunal's decision was pronounced on 19th September 2018.

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Issues:
1. Depreciation on UPS Batteries
2. Mark to Market Loss of Rs. 7 Crores
3. Employees Stock Option Plan (ESOP) expenses of Rs. 2.64 Crores
4. Additional disallowance under section 14A and an addition based on Annual Information Return (AIR)

Depreciation on UPS Batteries:
The assessee claimed 80% depreciation on UPS and batteries, but the Assessing Officer (AO) restricted it to 15%, resulting in a disallowance of Rs. 66.47 Lacs. The Tribunal allowed the higher rate of depreciation based on previous decisions in the assessee's favor for earlier assessment years.

Mark to Market Loss:
The claim of Rs. 7 Crores for mark to market losses on future and option contracts was disallowed by the AO as a notional loss. However, the Tribunal deleted this addition by following its previous decisions for the relevant assessment years.

Employees Stock Option Plan (ESOP) expenses:
The AO disallowed Rs. 2.64 Crores claimed as ESOP expenses, considering it not a real expenditure. The Tribunal, following its decision for the relevant assessment year, deleted this addition, as the expenses were incurred for retention and remuneration purposes.

Additional Disallowance under Section 14A and AIR Addition:
The AO computed a disallowance of Rs. 327.19 Lacs under section 14A, which the assessee contested. The Tribunal directed the AO to compute the disallowance at 0.5% against strategic investments and stock-in-trade, excluding investments not yielding exempt income. The addition based on AIR entries amounting to Rs. 1.13 Lacs was upheld due to lack of reconciled data.

In conclusion, the revenue's appeal was dismissed, while the assessee's appeal was partly allowed concerning the disallowance under section 14A. The Tribunal's decision was pronounced on 19th September 2018.

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