TaxTMI 
TaxTMI 
2021 (9) TMI 1168
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....ignoring the fact that the issue of allowability of ESOP expenditure has not reached finality and the SLP filed against the order of Hon'ble High Court of Delhi in the matter in the case of Mis. Lemon Tree Hotels Pvt. Ltd has been admitted by the Hon'ble Supreme Court. 4. Whether the CIT(A) is correct in relating the disallowances to exempt income earned during the year when Sec. 14A does not use world "income of the year" but "income under the Act" and in light of the clarification issued by the CBDT that Rule 80 r.w.s. 14A provides for disallowance of expenditure where the tax payer in a particular year has not earned any exempt income. Rs. 4,57,543/- 5. Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in deleting the addition u/s. 14A r.w.r. 8D(2)(ii) is whereas disallowance in rule 8D(2)(ii) is linked to investment, income from which does not or shall not form part of total income and upheld by the Tribunal in the case on M/s. Bellwether Micro Finance Funds Vs. ITO 6. Any other ground that may be urged during the course of appellate proceedings. At the outset the ld. DR drew our attention t....
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....owance u/s. 14A; case law relied on by the ld. AR is not applicable and is distinguishable on facts of the case on hand. 4. On the other hand ld. AR relied on the order of the CIT(A) and submitted that the CIT(A) has rightly decided the issue after considering all submissions made before him. 5. After hearing rival contentions and material placed on record, case laws cited, we observe that the CIT(A) has decided the appeal on both issues in favour of the assessee, the relevant part is reproduced here under. "6. The Decision: The appellant has claimed a sum of Rs. 2,31,02,825/- as ESOP expenses which were disallowed by the Assessing Officer. The appellant stated that the expenses have been claimed as per ICAI guidelines and also SEBI has given the mandate for the payment of the same as per their rules. In view of the same, the expenses should be allowed. The appellant relied on the decision of Hon'ble ITAT in the case of Mindspeed Technologies vs. ACIT which relied on the special Bench decision of Bengaluru Bench of Tribunal in the case of Biocon Limited vs. ACIT. The Assessing Officer relied on the decision of Ranbaxy Laboratories vs. Addl. CIT ....
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....Employees Stock Option ('ESOP') in profit and loss account? http://www.itatonline.org ITA No. 107/2015 Page 2 of 23. The Court has been shown a copy of the decision dated 19th June 2012 passed by the Division Bench of Madras High Court in CIT-III Chennai v. PVP Ventures Ltd. (TC(A) No. 1023 of 2005) where a similar question was answered in favour of the Assessee by holding that the cost of ESOP could be debited to the profit and loss account of the Assessee. This Court has also in its decision dated 4th August 2015 in ITA No. 2 of 2002 (CIT v. Oswal Agro Mills Ltd.) held that the expenditure incurred in connection with issue of debentures or obtaining loan should be considered as revenue expenditure. 4. In the circumstances, the impugned order of the ITAT answering the question in favour of the Assessee is affirmed. The Hon'ble ITAT Delhi in the case of Ranbaxy Laboratories has also decided the issue subsequently in the favour of the assessee for AY 2008-09 in ITA No. 196/Del/2013 vide order dated 25-4-2016 as reported in 68 taxmann.com 322. Thus, the Hon'ble ITAT of Hyderabad, the jurisdictional Bench has already decided the issue holding ESOP exp....
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....xpenditure. In view of the above the ground No. 1 is allowed. The ground No. 2 relates to addition on account of section 14A of Rs. 13,45,717/- being 1% of the investments made of Rs. 13,45,71,770/-. The appellant has stated that it does not have any exempt dividend income and therefore the disallowance ix], 14A is not called for. There is a jurisdictional ITAT decision in the situation, wherein the disallowance u/s. 14A cannot be made if the appellant has not earned any exempt income. The extract of the decision in the case of DCIT Vs. Maheshwari Mega Ventures Limited, Hyderabad in ITA No. 367/Hyd/2013 dated 03.02.2017 is reproduced as below: "22. Considered the rival submissions and perused the material facts on record. As per the P & L account and balance sheet submitted before us, the assessee had not earned any exempt income. The provisions of section 14A will be applied to find the expenditure relating to exempt income. In the absence of such exempt income, no expenditure can be disallowed in relation to exempt income. Accordingly, we uphold the decision of CIT(A) and dismiss the ground raised by the revenue." In view of the above, as there is no ex....