TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 651
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....as 'the Act'] for the Assessment Year 2018-19, as per directions issued by CIT(Dispute Resolution Panel-1), Mumbai-2 [hereinafter referred to as 'the DRP'] under Section 144C(5) of the Act. 2. The Appellant has raised following grounds of appeal: "General Ground 1. On the facts and in law, The Deputy Commissioner of Income Tax, Circle - 6(1)(2), Mumbai, ("Ld. AO") erred in passing the impugned assessment order dated 23 June 2022 pursuant to the directions of the Hon'ble Dispute Resolution Panel ("Hon'ble DRP") and computed the total income of the Appellant for Assessment Year ("AY") 2018-19 as INR 114,164,810 as against the returned income of INR 111,667,070. Jurisdictional Ground 2. On the facts and in law, the Final As....
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....fer Pricing Documentation by application of "Other Method" as prescribed under Rule 10AB of the Income-tax Rules, 1962 ("the Rules") and determined the arm's length price as 'NIL" as against INR 2,497,737 by applying Comparable Uncontrolled Price Method ("CUP Method") without giving any cogent reasoning and without providing comparable uncontrolled transaction. 6. On the facts and in law, the Hon'ble DRP/ Ld. AO/ Ld. TPO erred in not providing adequate opportunity to the Appellant of being heard and in doing so the Hon'ble DRP/ Ld. AO/Ld. TPO has violated the "Principles of Natural Justice". Other Grounds 7. On facts and in law, the Hon'ble DRP/ Ld. AO/ Ld. TPO erred on the fact by disregarding that the effect o....
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....ions. 4. Vide, order dated 22/07/2021, the TPO passed order under Section 92CA(2) of the Act proposing transfer pricing addition of INR 24,97,737/- in respect of international transaction of reimbursement of Employee Stock Option Plan (ESOP) Expenses. The TPO determined ALP of the aforesaid ESOP expenses as 'Nil' using Comparable Uncontrolled Price (CUP) Method as according to the TPO the ESOP expenses were notional in nature. 5. In the Draft Assessment Order, dated 10.09.2021, the Assessing Officer incorporated the above transfer pricing adjustment of INR 24,97,737/-. The Appellant filed objections before the DRP against the aforesaid transfer pricing adjustment. However, the DRP declined to interfere and rejected the objections. Accordi....
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....unt of INR 26,53,078/- remitted to the AEs during the relevant previous year which pertained to vested grant expenses and included incremental gain of INR 10,16,057/- on the RSUs granted in 2015 and vested in Financial Year 2017-18. 10. On the basis of invoices raised by the AE on the Appellant, remittance of ESOP expenses of INR 26,53,078/- was made by the Appellant to its AE during the relevant previous year. 11. The ESOP expenses so remitted to the AE were debited to the profit and loss account as part of employee benefit expenses and treated as part of operating cost. Since the Appellant was compensated for it services at cost plus markup of 5%, the ESOP expenses of INR 26,53,078/- were recouped by the Appellant as compensation for se....
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.... income for the assessment year 2018-19. The same has been claimed as an expense in the assessment year 2019-20 on payment basis. However, the expenses on ESOP amounting to INR 24,97,737/- has been claimed in assessment year 2018-19." (Emphasis Supplied) 13. On perusal of above we find that the Assessing Officer and the TPO had failed to appreciate that the expenses for which deduction has been claimed by the Appellant pertain to RSUs granted in 2015 and exercised in the FY 2017-18. The ESOP expenses related to the RSUs granted and exercised were claimed as deduction by the Appellant over the vesting period. During the relevant previous year, the ESOP expenses of INR 26,53,078/- were also remitted outside India on the basis of invoices....