TaxTMI 
TaxTMI 
2022 (1) TMI 1221
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....ed for scrutiny under CASS guidelines. The total income of the assessee was computed at Rs. 3,46,90,96,220/- after making certain additions and disallowances, which are as under:- i) Disallowance of depreciation on goodwill amounting to Rs. 66,96,48,045/- claimed u/s 32(1)(i) of the Income Tax Act, 1961. on the Written Down Value (WDV) of goodwill at Rs. 2,67,85,92,179/- arising out of the amalgamation of Flextronics Software Limited (Flextronics) and Futures Software Limited (FSL) into the assessee company on the ground that the assessee had not assigned a fair value of other assets while computing the goodwill. ii) Disallowance of ESOP Expenses amounting to Rs. 14,99,05,312/- claimed on account of reimbursement paid to the parent company towards ESOP for granting Stock option to the assessee's employees. iii) Non granting of deduction on profit on sale of assets amounting to Rs. 2,20,86,134/- thereby resulting in double taxation of same amount. 2.1 The assessee is before this Tribunal challenging the above mentioned additions / disallowances by raising the following grounds of appeal:- "1. That the Ld. assessing officer (AO)/ Dispute Resolution Panel (DRP) erred on facts....
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....anting stock options to employees of the appellant. 4.1That the Ld. AO/ DRP erred on facts and in law in proposing to hold that employees compensation expense claimed by the appellant was not allowable under section 37 of the Act alleging that the same was not incurred wholly and exclusively for the purpose of the business of the appellant company. 4.2 That the Ld. AO/ DRP erred on facts and in law alleging that the expenditure claimed did not represent a crystallized liability and being without any objective evidence for justification, the same was not allowable as deduction. 4.3 That the Ld. AO/ DRP erred on facts and in law in holding that ESOP is a part of salary and since the appellant did not deduct any tax at source on payment to the group company, the amount claimed was disallowable under section 40(a) of the Act. 4.4 Without prejudice, that the Ld. AO/ any case, can be made under section 40(a) of the Act on account of alleged non-deduction of tax on payments made in the nature of 'emoluments' to employees. 4.5That the Ld. AO/ DRP erred on facts and in law in failing to appreciate that the appellant had merely reimbursed the expenses to its group company and the s....
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....sessment year, the assessee had earned aprofit of Rs. 2,20,86,134/- on sale of fixed assets and that the said profit had been duly credited in the profit and loss account. It was further submitted that for the purpose of computing the income tax in terms of provisions of section 43(6) of the Act, the amount on sale consideration received on the sale of fixed assets was reduced from the Written Down Value (WDV) of the block of assets, and consequently the business profit were reduced by the amount of profits i.e. Rs. 2,20,86,134/-. It was further submitted that in the final assessment order, the income from business and profit was incorrectly computed without allowing the deduction of this amount which has resulted in double taxation of the amount of Rs. 2,20,86,134/-. Our attention was also drawn to the copy of the tax audit report for assessment year 2016-17 evidencing that the same consideration on sale of fixed assets was duly reduced from the WDV of block assets. It was submitted that, in view of this factual matrix, the Assessing officer should be directed to delete the impugned addition. 3.3 With respect to the ground No.6 of the appeal, it was submitted that the Assessing o....
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....d by tax auditor of the assessee company. In para 52 onwards, the contention of the DRP was noted and one of the contentions was that exercise had to be carried out to determine the valuation of the assets and vide para 53, it was held that the said contention of the Ld. DR was not acceptable and it was observed as under:- 53. "This contention of the DR is not acceptable as the Hon'ble High Court in its order giving effect to the scheme of amalgamation mentioned elsewhere has clearly stated that the difference in the net asset value of FSSL and FSL and the consideration paid by the assessee shall be towards goodwill." 34. The Tribunal vide paras 54 to 63 dealt with all other aspects of the issues and the arguments of the DRP on different facets of goodwill acquired in business reconsideration and held that the assessee to be entitled to claim depreciation on goodwill, as per the rates applicable for the year under consideration. We are referring to the findings of the Tribunal in paras 54 to 63, but not reproducing the same for the sake of brevity. However, following same parity of reasoning, we allow the claim of the assessee of depreciation on goodwill. The Ground of appeal N....
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....me wherein the reimbursement was paid to the parent company, towards ESOP for granting stock options to assessee's employees is in the nature of employees compensation and is deductible as the expenditure incurred was wholly and exclusively for the purposes of business. 114. We further find that the issue stands covered by the decision of Hon'ble Madras High Court in CIT vs M/s PVP Ventures Ltd. (supra) wherein it was held that the amount of difference between the market value of the shares issued under Employees Stock Option Scheme and the value at which they were allotted to the employees, which was debited to the P&L account in accordance with SEBI Guidelines, is an ascertained liability, and thus, allowable as revenue expenditure under section 37(1) of the Act. 115. The said proposition has been applied by the Hon'ble High Court in CIT vs Lemon Tree Hotels Ltd. (supra) and the claim of ESOP expenditure has been allowed as expenditure u/s 37 of the Act. 116. Further, the Special Bench in Biocon Ltd. vs DCIT (supra) held that discount on issue of ESOP, i.e. the difference between the market price of shares on date of exercise was deductible as business expenditure, since th....