TaxTMI 
TaxTMI 
2016 (4) TMI 905
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.....38 crores. 2. The first Ground of appeal is about disallowance of Rs. 2.74 lakhs, made u/s. 14A of the Act. During the assessment proceedings the AO found that the assessee had claimed dividend income of Rs. 18.33 lakhs, that it had offered no disallowance u/s. 14A on account of expenses relating to dividend income. The AO applied Rule 8D of the Income tax Rules, 1962(Rules) and made a disallowance of Rs. 2, 74, 489/-(0.5% of average value of investment). 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before him, it was argued that the assessee had made investment in Mutual Funds only, that investment was made out of assessee's own funds, that no other expenditure was incu....
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.... find that in the case of Om Prakash Khaitan (supra), the Hon'ble Delhi High Court has held that in order to disallow the expenditure there must be a nexus between the expenditure incurred and the income not forming the part of the total income. Considering the above, we reverse the order of the FAA. Ground No.1 is decided in favour of the assessee. 6. Next Ground of appeal is about addition of Rs. 56.40 lakhs out of the expenditure incurred under ESOP(Employee Stock Option Scheme). During the assessment proceedings, the AO found that the assessee had debited an amount of Rs. 1.07 crores under the head cost of stock awarded to KF India Employees. Before the AO, the assessee stated that the expenditure was on account of ESOP. On perusal of ....
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....ifferent concepts, that the FBT would become payable upon vesting of the ESOP in the hands of the employees accordingly the assessee had paid FBT during the year, that assessee had made full payment of Rs. 1.07 crores to its parent company, that it had claimed the cost of stock awarded to its employees entirely based on ESOP Scheme governed by the SEBI Guidelines, that the ESOP expenditure was a measure in the nature of compensation cost and was fully deductible in computing the taxable income. The FAA , in his order, held that the assessee itself had not treated the entire amount as liability, that ESOP would be effective only on the discretion of the employees to opt for stocks, that payment for shares was either a provision or an investm....