Tribunal decision: Assessee's appeal partly allowed, interest disallowed, penalty remanded for adjudication. ESOP expenses allowed.

The Tribunal partly allowed the assessee's appeal for statistical purposes, dismissing both appeals by the Revenue. The disallowed interest on delayed TDS payment was upheld, denying the deduction claimed by the assessee. The addition of penalty imposed by RBI was remanded for proper adjudication. Employees Stock Expenses (ESOP) were deemed allowable, and broken period interest on Held to Maturity (HTM) was also allowed as a deduction. The Tribunal's decision was pronounced on 3rd August 2023.

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Issues involved:
The judgment involves issues related to the disallowance of interest paid for delayed TDS payment and addition of penalty imposed by RBI in the case of the assessee for assessment years 2017-18 and 2018-19. The judgment also addresses the allowability of Employees Stock Expenses (ESOP) and broken period interest paid on Held to Maturity (HTM) in the context of business expenditure.

Disallowed Interest on Delayed TDS Payment:
The AO disallowed the interest paid for delayed TDS as business expenditure, which was confirmed by CIT(A) based on the decision of the High Court of Madras. The Tribunal upheld this decision, stating that interest paid on delayed TDS to the Central Government account is not eligible for allowance as business expenditure, thus denying the deduction claimed by the assessee.

Addition of Penalty Imposed by RBI:
The AO disallowed the penalty paid to RBI as business expenditure, which was remanded by CIT(A) for fresh adjudication. The Tribunal noted that CIT(A) had no jurisdiction to remand the issue to the AO and decided to remand it to the CIT(A) for proper adjudication, allowing the assessee's ground for statistical purposes.

Employees Stock Expenses (ESOP) Allowability:
The Tribunal dismissed the Revenue's challenge against CIT(A) holding ESOP as an allowable expense under section 37(1) of the Act. The CIT(A) allowed the deduction based on various decisions and precedents, finding no infirmity in the order.

Broken Period Interest on Held to Maturity (HTM):
The Tribunal also dismissed the Revenue's challenge regarding the broken period interest paid on HTM, allowing the deduction based on the Pune ITAT Benches' decision in a similar case. The Tribunal found no fault in CIT(A) following the precedent and dismissed the Revenue's grounds.

Conclusion:
The appeal of the assessee was partly allowed for statistical purposes, while both appeals by the Revenue were dismissed. The Tribunal pronounced the order in the open court on 3rd August 2023.

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