TaxTMI 
TaxTMI 
2024 (6) TMI 359
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....he order, the assessee had filed an appeal before the first appellate authority which has been decided by the ld. CIT(A) vide the impugned order. The Revenue is in appeal us before us. 4. The Revenue has taken following grounds in this appeal: - "a) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in restricting the addition 0.20% instead of 0.77% without appreciating the approach adopted by TPO? b) Whether on facts and in the circumstances of the case and in law the Ld CIT(A) has erred in accepting ALP of the assessee determined by ignoring the ratio laid down by the Hon'ble ITAT, Mumbai in the case of Everest Kanto Cylinder Limited (ITA No. 542/Mum/2012) and Nimbus Communication Pvt. Ltd. (34 taxmann.com 299) & Hon'ble ITAT, 'D' Bench Ahmedabad in the case of M/s. Mastek Ltd (ITA Nos. 2931/Ahd/2017 & 1074/Ahd/2018)? c) Whether on facts and in the circumstances of the cases and in the Hon'ble ITAT has erred in accepting the ALP of the assessee determined by ignoring the guidelines laid down under the Act and Rules and thereby violating the ratio laid down by the Hon'ble Supreme Court in the case of Sap....
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....e TPO. Further, a markup of 0.25% was also applied by the TPO and the ALP rate of guarantee commission was determined by applying the rate of 0.77% (0.52+0.25). The ld. CIT(A) noticed that the guarantee commission of Rs. 1,02,181/- paid by the assessee to Indusland Bank was for a period of 822 days and, therefore, the proportionate rate applicable for 365 days was only 0.2% and not 0.52% as worked out by the TPO. Further, the bench mark of 0.25% as applied by the TPO was also not found correct as the internal CUP was worked by the TPO after considering assessee's transactions with the third-party bank. Accordingly, the ld. CIT(A) has confirmed the addition to the extent of rate of 0.2% only. 7. We do not find anything wrong with the order of the ld. CIT(A). The TPO had benchmarked the transaction on the basis of independent third-party transaction of the assessee. However, the TPO did not consider the fact that guarantee commission of Rs. 1,02,181/- was paid for the period from 20th June, 2016 to 19th Sep, 2018. The transaction for one financial year i.e. for 365 days cannot be benchmarked with the rate applicable for 822 days. Therefore, the CIT(A) had rightly worked out the ra....
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....val contentions and perused the material on record. The issue for consideration before us is that expenses of _ 22.65 lakhs were debited to the profit and loss account under the head ESOP expenses, being the difference between the market value of shares as computed under the guidelines of SEBI and the value at which these shares were issued to the employees. The contention of the Department is that no expenditure has been incurred by the company at the time of issuance of shares under the ESOP scheme and the expenditure has not crystallised till the date on which the employee exercises the option and hence any expenditure debited during the vesting period remains contingent in nature. The counsel for the assessee on the other hand contended that the liability had crystallised at the time of issuance of shares itself and only the quantification remained pending at the time of exercise of such option by the assessee. This issue has been discussed at length by the Karnataka High Court in the case of Biocon Ltd. [2020] 121 taxmann.com 351 (Karnataka), wherein the facts were that assessee floated Employees Stock Option Plans (ESOP) and provided shares to its employees at a discount disc....
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....sorbs the difference between the price at which it is issued and the market value of the shares would also be expenditure incurred for the purposes of section 37(1) of the Act. The primary object of the aforesaid exercise is not to waste capital but to earn profits by securing consistent services of the employees and therefore, the same cannot be construed as short receipt of capital. The tribunal therefore, in paragraphs 9.2.7 and 9.2.8 has rightly held that incurring of the expenditure by the assessee entitles him for deduction under section 37(1) of the Act subject to fulfilment of the condition. 11. The deduction of discount on ESOP over the vesting period is in accordance with the accounting in the books of account, which has been prepared in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. 8.1 The Delhi High Court in the case of PVR Ltd. [2022] 145 taxmann.com 331 (Delhi) has held that difference between price at which stock options were offered to employees of assessee-company under ESOP and ESPS and prevailing market price of stock on date of grant of such options was....
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....uction. The Assessing Officer disallowed said loss. The ITAT held that basically the Assessing Officer was of the view that it is a capital loss. It is not materialized in this year. It would happen only when option is exercised by the employees. All these aspects have been considered by the Special Bench of the Tribunal in Biocon Ltd. v. Dy. CIT [2013] 35 taxmann.com 335/[2014] 114 ITD 21 (Bang.) wherein it has been explained that share premium is a capital receipt and not chargeable to tax in the hands of the company. If a company issues shares to the public or to the existing shareholders at lesser than prevailing premium due to market sentiments or otherwise such share receipts of a premium would be a case of receipt of lower amount on capital amount. As the object of issuing such share at a lower price is nowhere directly connected with the earning of income but when the company undertakes to issue shares to its employees at a discounted premium at a future date the primary object of this exercise is not to raise the share capital but to earn profit by securing the consistent and concentrated efforts of dedicated employees during the vesting period, such discount is construed,....
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....ot find any infirmity with the order of the ld. CIT(A) which is based on the findings of the ITAT in the assessee's own case for A.Y. 2016-17 cited supra, wherein all the relevant decisions were discussed. The finding on this issue as given by the Co-ordinate Bench in that case was as under: - "13. We have heard the rival contentions and perused the material on record. Admittedly, during the year under consideration, the assessee did not earn any exempt income. 13.1 It is a well-settled law on the subject that no disallowance can be made under section 14A in case the assessee has not earned any exempt income. The Hon'ble Supreme Court in the case of State Bank of Patiala [2018] 99 taxmann.com 286 (SC) held that where High Court took a view that amount of disallowance under section 14A could be restricted to amount of exempt income only, SLP filed against said order was to be dismissed. The Hon'ble Supreme Court in the case of Chettinad Logistics (P.) Ltd.[2018] 95 taxmann.com 250 (SC) dismissed SLP against High Court ruling that section 14A cannot be invoked where no exempt income was earned by assessee in relevant assessment year. The Gujarat High Court i....