TaxTMI 
TaxTMI 
2025 (4) TMI 137
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....nderlying transaction. 2.2 The learned AO and CIT(A) has erred in disallowing an amount of Rs. 1,58,74,888/ without appreciating the fact that ESOP expenses are not capital expenditure or a contingent liability but an ascertained revenue expenditure allowed under section 37(1) of the Act. 2.3 Further, the NFAC erred in not following the judicial discipline by disregarding the decision issued by the honorable High Court of Karnataka in the case of Biocon (Blacon Ltd.v. Dy. CIT [2013] 35 taxmann.com 335(Bang.) (SB), decision of honorable High Court of Delhi in the case of Lemon Tree Hotels (PCIT VS Lemon Tree Hotels Pvt Ltd (2019) 104 taxman.com 27(HC). Further, the fact that admission of SLP by Apex court cannot be a basis for the disallowance of the ESOP expenses under section 37(1) of the Act. Ground 3: Disallowance of Rs. 10,90,49,268 weighted deduction under section 35(2AB) of the Act 3.1 The learned AO and CIT(A) has erred in disallowing the weighted deduction under Section 35(2AB) of the Act without appreciating that Section 35(2AB)(1) of the Act prescribes the requirement of approval of the facility and not the expenditure. 3.2 The....
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....o the Book Profits under MAT provisions 5.1 The learned AO and CIT(A) has erred in adding back the adjustments amounting to INR 1,73,37,851 which were made under the normal tax regime to the MAT computation as well, without providing any reasons in the order for doing the same. 5.2 The learned AO and CIT(A) has erred in increasing the MAT income without giving any reasons in the show cause notice dated August 25, 2022. It is the Appellant's case that this is an inadvertent mistake which should be rectified. 5.3 The learned AD and CIT(A) grossly erred in disregarding the decision of Mumbai ITAT in the Appellants own case for the AY 2014-15 and other years wherein the AO was directed to delete the addition made to book profit computed under section 115JB of the Act on account of disallowance computed under section 14A of the Act. 5.4 The learned AO and CIT(A) has erred in disregarding the decision of Special Bench of the ITAT in the case of ACIT Vs. Vireet Investment Pvt. Ltd. [2017] ITA No. 502/ Del/2012 (Delhi Tribunal) and also ignoring the principles laid down by the Supreme Court in the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 (....
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....Chicago Pneumatic India Ltd. v. Dy. CAT (2007) 15 SOT 252 (Mumbai), CBDT Circular no. 14 (XL-35) dated April 11, 1955 and various other relevant judicial decisions, which are squarely applicable to the Appellant, wherein the principles emerge that the genuine claim of the Appellant should be granted even in case of alleged procedural lapses. Ground 9: Claim of the Appellant of Rs. Rs. 2,23,73,789 representing 1/5th of the Write down of Inventory and Other Assets disallowed in AY 2018-19 9.1 The learned AO and CIT(A) has erred in not giving the claim of an amount of Rs. 2,23,73,789/-without appreciating the fact that the amount was disallowed in the assessment order for AY 2018-19 and was mentioned that 1/5th will be allowed in the 5 subsequent years beginning from AY 2018-19. Ground 10: Non grant of TDS credit 10.1 The learned AO and CIT(A) has erred in not granting the credit of INR 14,512 related to Strides Emerging Market Limited (PAN AARCS5667D), which was merged during the year. Ground 11: Initiation of penalty proceedings under Section 270A 11.1The learned AO and CIT(A) has erred in law and facts in initiating penalty proc....
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....v/s CCIT-WP 3290 of 2024 has held that the law laid down by the High Court cannot be sidelined by the Revenue merely because an SLP has been filed against the High Court Ruling. * The CIT as well as the AO proceeded on an incorrect footing that there is no expenditure or that the same is notional. Further an illustration could be helpful, where suppose an assessee had issued Capital at fair rate and thereafter paid salary expenses out of the same, would the same be allowable or not? That is a question. As such both the authorities have erred in not granting the deduction. Further, the same ESOP expense has also been allowed in Earlier Years. Therefore, the same be allowed even on the principles of consistency and it prayed accordingly." 7.3 A chart of ESOP expenses incurred over the years has also been submitted by the Ld. AR to demonstrate that such expenditure has been allowed in several earlier years by the department as under: Assessment year Financial year Amount in INR Remarks AY 2011-12 FY 2010-11 - AY 2012-13 FY 2011-12 - AY 2013-14 FY 2012-13 26,21,996 AY 2014-15 FY 2013-14 1,01,51,37....
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.... of the Companies Act, 1956 defines 'employees stock option' to mean option given to the whole time directors, officers or the employees of the company, which gives such directors, officers or employees, the benefit or right to purchase or subscribe at a future rate the securities offered by a company at a free determined price. In an ESOP a company undertakes to issue shares to its employees at a future date at a price lower than the current market price. The employees are given stock options at discount and the same amount of discount represents the difference between market price of shares at the time of grant of option and the offer price. In order to be eligible for acquiring shares under the scheme, the employees are under an obligation to render their services to the company during the vesting period as provided in the scheme. On completion of the vesting period in the service of the company, the option vest with the employees. 9. In the instant case, the ESOPs vest in an employee over a period of four years i.e., at the rate of 25%, which means at the end of first year, the employee has a definite right to 25% of the shares and the assessee is bound to allo....
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....inent to mention here that in the decision rendered by the Supreme Court in the aforesaid case, the Assessment Year in question was 1997-98 to 1999 2000 and at that time, the Act did not contain any specific provisions to tax the benefits on ESOPs. Section 17(2) (iiia) was inserted by Finance Act, 1999 with effect from 01.04.2000: Therefore, it is evident that law recognizes a real benefit in the hands of the employees. For the aforementioned reasons, the decision rendered in the case of Infosys Technologies is of no assistance to the revenue. The decisions relied upon by the revenue in Gajapathy Naidu, Morvi Industries and Keshav Mills Ltd. supra support the case of assessee as the assessee has incurred a definite legal liability and on following the mercantile system of accounting, the discount on ESOPs has rightly been debited as expenditure in the books of accounts. We are in respectful agreement with the view taken in PVP Ventures Ltd. And Lemon Tree Hotels Ltd. Supra." Moreover, the department has also allowed the deduction in several earlier years in similar facts and circumstances in assessee's own case. Also, Ld. AO while making the addition has duly noted the above ....
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.... (7) TMI 397- ITAT AHMEDABAD, DCIT. v. Serum Institute ITAT Pune 2022 (9) TMI 830-ITAT PUNE, et. al.] * For the balance amount of Rs. 194.18 Lakhs, it is prayed that the same be allowed u/s 35(1)(i) AO has simply stated the deduction is not allowable u/s 37 without even denying that the same is allowable u/s 35(1)(i). * In the alternative the said amount of Rs. 194.18 lakhs is allowable u/s 37. * Without prejudice to the above, even otherwise the entire amount of Rs. 7,26,99,513/- alleged to be unapproved by the DSIR, the same should be allowable as per the normal provisions of the Act u/s 35(1)(i) or 37 of the Act since admittedly the same are incurred for the purpose of business." 8.4 Ld. DR, on the other hand, argued that in view of the fact that expenditure of scientific research has to be quantified certified by the DSIR in Form 3CL, the assessee is entitled to claim expenditure only to that extent u/s 35(2AB) of the Act. In this regard, he pointed out the amendment made in Rule 6(7a) w.e.f. 01.o7.2016 after which the prescribed authority i.e. the Secretary, DSIR has to quantify the expenditure incurred on in-house R&D by the assessee which is eli....
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....pplication filed with DSIR (100%) (A) Total amount of expenses claimed in the return of income (150% of A) (B) Expenses reported by DSIR in Form 3CL (100%) (C) Expense not reported by DSIR in Form 3CL (100%) (D=A-C) Total revised claim u/s 35(2AB) and section 35(1)(iv) based on the DSIR report in Form 3CL (E=C*150%+D Revenue 43,78,54,513 65,67,81,769 36,51,55,000 7,26,99,513 62,04,32,013 Capital 1,13,38,848 2,83,47,120 1,13,38,848 Nil 1,70,08,272 Total 44,91,93,361 68,51,28,889 37,64,93,000 7,26,99,513 63,74, 40,285 In view of the amendment in Rule 6(7a) w.e.f. AY 2017-18, the amount allowable for deduction u/s 35(2AB) has to be quantified by the prescribed authority viz. Secretary, DSIR. In this regard, if there is any variation in Form 3CL in amounts claimed by the assessee, it has the option of making reference to the prescribed authority as per the provisions of section 35(3). In case the assessee or the revenue wishes to seek any variation in the amount quantified by the prescribed authority in Form 3CL, a reference is required to be made to the prescribed authority in terms of section 35(3)(b) whose decision....
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.... of I.T. Rules, 1962. According to the Ld. AO, disallowances contemplated u/s 14A shall be determined, in accordance with prescribed procedure provided under Rule 8D, whether or not the assessee has earned exempt Income for the year under consideration. It is the contention of the assessee that when, own funds are in excess of investments made in shares and securities, which yield exempt income, then no disallowances can be made towards interest expenditure under Rule 8D(2)(ii). The assessee further contended that insofar as, disallowances of other expenditure under Rule 8D(2)(lii), the said disallowances cannot shallow entire exempt income earned by the assessee for the year under consideration. In other words, for other expenses a reasonable amount may be disallowed considering nature of investments and expenditure incurred for the year. 29. Having heard both the sides, and considered material on record, we are of the considered view that insofar as the first arguments of the assessee that the AO has not recorded satisfaction as required u/s 14A(2) of the Act, on perusal of assessment order we found that the AO on the basis of suo-moto disallowance of expenditure, has ar....
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.... Nos. 2755/2019, Cheminvest Limited v/s CIT (2016) 378 ITR 33 (Del) which is Affirmed in (2019) 264 Taxman 76 (SC). The sum and substance of ratio laid down by above judgments is that only those investments which yield exempt income needs to be considered for computation of average value of investments. In this case, we notice that the Assessee has himself disallowed an amount of Rs. 21,27,797/- which has not been found to be accepted by the AO or the DRP. Further, the facts with regard to total investments and investments which yield exempt income is not readily available before us. We, therefore, are of the considered view that ends of justice would be met if the disallowance is made after re-computing average value of investment by considering only those investments which yield exempt income. Hence, the matter is restored to the AO to re-work the disallowance in line of our discussions given hereinabove." 9.3 Respectfully following the decision of the co-ordinate bench, we remand back the issue to the Ld. AO to work out the disallowance afresh following the decisions in earlier years. 9.4 Related ground on this issue pertains to the addition of disallowance u/s 14A to the ....
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....4/-. The expenditure on business promotion relates to holding of conferences etc. and is therefore allowable u/s 37(1) of the Act. Ld. AR has also submitted breakup of these expenses which is as under: Particulars Amounts Business event accommodation + other expenses such as participation fees, delegate fees 44,22,230 Travel & other Reimbursement of Expenses for customers, employee and visitors 22,73,642 Sponsorship, Exhibition stall & Event Registration 19,04,618 Team meeting/conference expenses including room rent, sound system, shamiyana rent etc. 23,17,993 Advertisement expenses 25,55,000 Scientific & Virso Lebel & other die cut labels, Raricap Chit pad, daily Call Planner, Labels, I Pledge Cards and Medical Tribune & Product concept & design expenses, Greeting Cards, Posters, Certificates and other printed Visual Aids, Posters, Cards, visiting Cards, envelop and Visual Aids, ID Cards, sample dispenser etc. 99,473 Total 1,35,72,956 He, therefore, argued that the majority of expenses are incurred towards business exhibitions, sponsorship and product advertisements which is entirely allowable u/s 37(1) of the Act. 10.3 Ld. DR,....
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....SR expenses claimed u/s 80G of the Act was denied by the revenue in similar facts and circumstances as in the present case. While deciding the issue in favour of the assessee, the coordinate bench vide order dated 29.04.2020 observed as under: "We have perused submissions advanced by both sides in light of records placed before us. "10. Section 135 of Companies Act, 2013 requires companies with CSR obligations, with effect from 01/04/2014. Finance (No.2) Act, 2014 inserted new Explanation 2 to sub-section (1) of section 37, so as to clarify that for purposes of sub- section (1) of section 37, any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. 11. This amendment will take effect from 1/04/2015 and will, accordingly, apply to assessment year 2015-16 and subsequent years. 12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head Income form Business and Professi....
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....rch institutions or company also qualifies for deduction. In-house R&D is eligible for deduction, under this section. Section 35CCD provides deduction for skill development projects, which constitute the flagship mission of the present Government. Section 36 provides deduction regarding insurance premium on stock, health of employees, loans or commission for employees, interest on borrowed capital, employer contribution to provident fund, gratuity and payment of security transaction tax. Income Tax Act, under section 80G, forming part of Chapter VIA, provides for deductions for computing taxable income as under: Section 80G(2) provides for sums expended by an assessee as donations against which deduction is available. a) Certain donations, give 100% deduction, without any qualifying limit like Prime Minister's National Relief Fund, National Defence Fund, National Illness Assistance Fund etc., specified under section 80G(1) (i). b) Donations with 50% deduction are also available under Section 80G for all those sums that do not fall under section 80G(1)(i). Under Section 80G(2) (iiihk) and (iiihl) there are specific e....
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....ussion, in our view, authorities below have erred in denying claim of assessee under section 80G of the Act." In view of the above as well as other decisions on these lines, we hold that the assessee is eligible for deduction u/s 80G in respect of CSR expenses provided other conditions are satisfied. We, therefore, direct the Ld. AO to allow the deduction u/s 80G subject to verification of other prescribed conditions of this section. The issue is, therefore, restored for the limited purpose of such verification subject to which the assessee is entitled to claim deduction u/s 80G in respect of CSR expenses. 11.5 This ground is, accordingly, allowed for statistical purposes. 12. Ground No. 8: claim of deduction u/s 35DD of the Act - Rs. 30,00,000/- 12.1 The assessee has made a claim for deduction u/s 35DD of Rs. 30,00,000/- for the first time at the stage of appeal before the Tribunal. It has been submitted by the Ld. AR that this claim has been allowed by the Ld. AO from AY 2017-18 onwards and pursuant to the assessment order for 2017-18, this claim has been made for the first time before the Tribunal. He has, further, submitted that the same is admissible in view of the....