TaxTMI 
TaxTMI 
2010 (12) TMI 1263
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....rs, the assessee claimed expenditure on allotment of 54,000 equity shares at Rs. 100/- each amounting to Rs. 54 lakhs for the assessment years 2003- 04. and allotment of 17,700 shares at Rs. 100/- each amounting to Rs. 17.70 lakhs under the employment scheme for the assessment years 2004-05 and The said expenditure has been claimed under the head 'Staff Welfare Expenses' and u/s 37(1) of the IT Act. The same was disallowed by the lower authorities. On account of the same lapse penalty was levied in the assessment years 2004-05 at Rs. 19.25 lakhs and the same was confirmed by the CIT(A). Against the quantum addition confirmed by the CIT(A), the assessee is in appeal before us. The penalty levied by the assessing officer was deleted by the CIT(A). Against this the revenue is in appeal before us. 3. The learned authorised representative for the assessee submitted that the shares were allotted to the ESOP scheme on account of service rendered by the assessee's employees. It is nothing but staff and welfare expenditure and is allowable u/s 37 of the IT Act. He drew our attention to the Circular No. 7 & 10 dated 24.2.1995 issued by the CBIT under section 17(2)(iii) as per which the comp....
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....hing of inaccurate particulars of income or concealing of income and for this lapse, the provisions u/s 271(1) (c) cannot be applied. According to him the claim of assessee is bona fide and it is based on judicial precedents. He submitted that the judgement delivered by the Chennai Bench of this Tribunal in the case of SSI Ltd. cited supra is in favour of the assessee, as such the penalty cannot be leviable. 5. The learned departmental representative submitted that expenditure incurred by the assessee towards ESOPS cannot be considered as revenue expenditure, at best it can be capital expenditure and that it cannot be allowed as revenue expenditure. He submitted that similar issue was considered in favour of the department by the order of this Tribunal in the case of Ranbaxy Laboratories Ltd. Vs. CIT (124 TTJ 721) and also he relied on the order of this Tribunal, Mumbai Bench dated 17.9.2010 in the case of VIP Industries Ltd. in ITA No.1742/M/2008 for the assessment years 2005-06. 6. We have heard both the parties and perused the materials available on record. We have also carefully perused the case laws cited by the learned representatives of both the sides. In our opinion, the ....
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....of Rs. 595/- per share from its employees. Thus the assessee was entitled to receive Rs. 585/- towards premium on issue of shares. The market price at Rs. 738.95 per share would have resulted in realization of higher share premium. The assessee has not accounted for the difference between Rs. 738.95 and Rs. 10 as its income during the year. Thus there is no loss of income held to be taxable. What is loss to the assessee is by way of short receipt of share premium amount and not by way of any expenditure or incurring any liability for such expenditure. By issuing shares at below market price, the same does not result in incurring any expenditure. By issuing shares below the market price, the same does not result into incurring any expenditure rather it results into short receipt of share premium which the assessee was other wise entitled to. Though the guidelines of SEBI requires the assessee to account for short receipt of share premium as employees compensation expense, for claiming such expense as allowable, the assessee has to qualify that expenses are incurred and the same are wholly and exclusively for the purpose of business. By issuing shares at lesser than market price, the....
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.... (SB) 917: (2008) 1 DTR (Del.) SB (Trib) 247 and TVS Finance & Services Ltd. Vs. JCIT (2009) 23 DTR (Mds.) 33 applied." 8. At the time of hearing before us, the learned counsel for the assessee has made an attempt to point out that certain aspects have not been considered by the tribunal while rendering its decision in the case of Ranbaxy Laboratories Ltd. (supra) on the similar issue. In our opinion, the said aspects pointed out by the counsel for the assessee, however, are not material enough to have any direct bearing on the well considered and well reasoned decision rendered by the Tribunal. As held by the Tribunal, any short receipt of share premium would only be a notional loss to the assessee and not an actual loss. As further held by the Tribunal, any benefit or income forgone by the assessee cannot be considered as expenditure and since the assessee had not incurred any expenditure but had merely received lesser amount of premium, the same could not amount to expenditure within the meaning of section 37. In our opinion, the issue involved in the present case as well as all the material facts relevant there to are thus similar to the thereto are thus similar to the case of....