2021 (4) TMI 911

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....IT(A) - 3, Hyderabad's order dated 17/11/2017 involving proceedings u/s 143(3) of the Act. 2. First, we take up the revenue's appeal wherein the revenue has raised the following grounds of appeal: "1. The order of the Ld.CIT(A) is erroneous on facts as well as in law. 2. The Ld.CIT(A) erred in deleting the disallowance of Employee Stock Expenditure (ESOP) of Rs. 26,59,559/-. 3. The Ld.CIT(A) erred in deleting the disallowance made u/s 43B towards Gratuity provision amounting to Rs. 1,28, 79,193/- which remained unpaid as on date of filing of the return of income. 4. The Ld.CIT(A) erred in deleting the disallowance of interest expenditure of Rs. 48,75,175/-. 5. Any other ground that may be urged at the time of hearing of appeal." ....

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....loyees. The assessee submitted that the loss suffered by the company is a revenue expenditure since ESOP is an incentive given to the employees which is on par with any perquisite or remuneration. However, the AO relying on the decisions of the Hon'ble Supreme Court in the case of Brooke Bond India Ltd., Vs. CIT 225 ITR 798 and CIT Vs. Punjab State Industrial Development Corporation ltd. 225 ITR 792, held that the expenditure claimed by the assessee cannot allowed as a revenue expenditure and disallowed the above amount of Rs. 26,59,559/- which was incurred by the assessee on account of ESOPs and added back to the total income of the assessee. 6.1 Before the CIT(A), the assessee made submissions elaborately along with various case law, wh....

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....nd the decisions of the Tribunal that the provisions made for contribution to approved gratuity fund should be allowed as deduction as per the provision of Section 40A(7)(b). The decisions of the Hon'ble ITAT in the case of Hinduja Exports vs. JCIT 9 SOT 349 (Bang), the decision of the Hon'ble ITAT, Jaipur in the case of Mewar Sugar Mills Limited vs. DCIT [65 lTD 163], CIT vs Commonwealth Trust Pvt. Ltd., (Ker.) [269 ITR 290], Chakola Spinning and Veaving Mills Ltd. vs. CIT (Ker.) [178 ITR 603] which have been referred to supra old merit. Respectfully following these judicial decisions, Ground No.3 in appeal is allowed." 7.2 We have considered the submissions of both the parties and perused the material on record as well as gone th....

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....s regards ground No. 4 of the revenue against the action of CIT(A) in deleting the disallowance of interest expenditure of Rs. 48,75,175/-, the AO noticed from the schedule 10 of the balance sheet of the assessee that the assessee had advanced an amount of Rs. 5,41,68,606/- to SKS Micro Finance Employees Benefit Trust. Since the assessee did not conclusively prove that the entire contribution made by it to the employees welfare trust was out of non interest bearing funds, the AO calculated the interest @ 9% on the loan outstanding of Rs. 5,41,68,606/-, which comes to Rs. 48,75,175/- and disallowed the same. 8.1 Before the CIT(A), the assessee furnished its submissions with case law and after considering the same, the CIT(A) allowed the gro....