TaxTMI 
TaxTMI 
TaxTMI 
2024 (12) TMI 1584
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....rred to as 'Act'), against the order dated 25 February 2022 passed by the Additional /Joint / Deputy/ Assistant Commissioner of Income Tax/Income-tax Officer, of National Faceless Assessment Centre, Delhi, under section 143(3) read with section 144C(13) read with section 144B of the Act, in pursuance of the directions issued by Dispute Resolution Panel - I, Mumbai (hereinafter referred to as 'learned DRP"), on the following grounds, which are independent of and without prejudice to each other. On the facts and in the circumstances of the case and in law, the learned Assessing Officer (hereinafter referred to as the 'learned AO' learned Transfer Pricing Officer (hereinafter referred to as the 'learned TPO) erred and Hon'ble DRP further erred: Transfer pricing grounds - Adjustment under Section 92CA of the Act 1. In making an upward transfer pricing adjustment to the extent of Rs 19,80,000 by re-computing the Arm's Length Price (ALP) of the international transaction pertaining to provision of non-binding investment advisory and support services (IA services) by the Appellant to its associated enterprises (AEs), inter alia, on following grounds....
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.... Corporate tax grounds 3. In disallowing the amortization cost in respect of employee stock option plans (ESOP) granted to its employees [hereinafter collectively referred as 'ESOP cost'] amounting to Rs. 38,28,70,712 incurred by the Appellant, on the basis that the ESOP costs are notional/ contingent in nature. In disregarding the order of Hon'ble ITAT in the Appellant's own case for AY 2008-09, AY 2009-10, AY 2010-11 AY 2011-12, AY 2012-13, AY 2014-15 and AY 2015-16 where the amount of ESOP cost was allowed as a deductible expenditure in the year of amortization. Without prejudice to the above, where your Honours seek to uphold the action of the learned AO, a deduction with respect to the amount actually paid for the value of shares delivered should be granted to the Appellant. In this regard, the learned AO has erred in disregarding the directions of the Hon'ble DRP with respect to allowability of the amount actually paid by the Appellant for the ESOP cost during the year under consideration. 4. In disallowing 5% of the following eligible business expenditure which are debited to the profit and loss account amounting to Rs 3,79,50,079 (i.e. 5% of....
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....f section 43B of the Act and various judicial pronouncements in favour of Appellant. 8. In not granting a deduction of Rs. 5,96,20,000 under Chapter VI-A of the Act on account of the donations made under section 80G of the Act and disregarding the donation receipts submitted by the Appellant evidencing the eligibility for deduction under section 80G of the Act. Further, the learned AO failed to appreciate the fact that voluntary contribution is not a mandatory requirement as per the provision of section 80G of the Act and has erred in not providing an opportunity to the Appellant to file a submission in this regard. 9. In not granting the credit of Dividend distribution tax (DDT) paid by the Appellant amounting to Rs. 1,02,19,33,618 as claimed in the return of income by the Appellant and levying consequential interest under section 115P of the Act amounting to Rs. 62,33,79,507. 10. In levying the additional interest under section 234C of the Act without appreciating that the interest under section 234C of the Act is to be calculated on the returned income filed by the Appellant as per the provisions of the Act. 11. In computing the consequential interest under sectio....
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....e assessee submitted that Restrictive Stock Units are part of the compensation program of the employees of the assessee and under this plan, the award will typically vest to the employees over a no. of specified years, starting from the date of grant, subject to the fulfilment of the vesting conditions. Further, it was submitted that the Restrictive Stock Unit entitled the employees of the assessee, on fulfilment of certain conditions, to receive shares of Goldman Sachs Group Inc. and after the expiry of the vesting period, shares of the Goldman Sachs Group Inc. would be delivered to the employees, for which the assessee would be required to make a payment to the Goldman Sachs Group Inc. This payment by the assessee to Goldman Sachs Group Inc. is determined with reference to the value of the shares as on the date of delivery of the shares to the employees. The assessee further submitted that as per the accounting policy regularly followed by it and its group globally, the grant price on the date of the grant of Restrictive Stock Unit is amortized in the books of the assessee over the period of vesting of the award. At the end of each year, the outstanding shares are marked to marke....
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..... We have noted that identical issue of deduction claimed on account of ESOP arose for consideration in assessee's own case for assessment year 2009-10 before the Tribunal in ITA No. 222/Mum./2014. The Tribunal vide order dated 30th November 2015, held as under:- "12.3. Before us, the Ld. Senior Counsel drew our attention to the decision of the Special Bench of the Bangalore Tribunal in the case of Biocon Ltd. 144 ITD 21 (Bang) wherein on similar facts the discount on issue of ESOP was allowed as deduction. 12.4. The Ld. DR could not bring any distinguishing decision in favour of the Revenue. Respectfully following the decision of the Special Bench (supra), we hold that discount on issue of employees stock options is allowable as deduction in computing the income under the head profits and gains of business of profession. Ground No. 5 & 6 are accordingly allowed." 72. No material difference in facts having been brought to our notice by the learned Departmental Representative, respectfully following the decision of the co-ordinate bench as referred to above, we allow assessee's claim of deduction and delete the addition made by the Assessing Officer." 9. We find t....
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....r option vesting of 40% of the stocks granted and the balance 60% vested after a period of 3 years i.e. in the year 2007 (20%) 2008 (20%) and 2009 (20%). Accordingly the assessee amortized 40% of the cost in the first year of the plan and the balance 60% cost is amortized over the vesting period of three years. As per the accounting policy the grant price on the date of grant of RSU is amortized in the books of assessee in accordance with vesting schedule as laid down in the plan. The method of accounting is in accordance with the accounting standards in India. The facts in the present case reveal that: * The Assessee pays a sum to GSGI upon the delivery of the RSUs (pertaining to shares of GIGI) to employees of the Assessee. * The sum payable by the Assessee to GSGI is determined with reference to the value of the shares of GSGI as on the date of vesting of the RSUs. * As the Assessee is required to pay aforesaid sum to GSGI on account of the grant of the RSUs to its employees, such payment being an actual expenditure for the Assessee is considered as part of the compensation cost of the employees in the year in which it is incurred in accordance with the method of acc....
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.... the applicability of TDS. In response, the assessee merely furnished the list of expenses. With regard to publication and subscription expenses of INR 12,59,46,040, the assessee stated that there is an increase in the publication and subscription-related expenses on account of an increase in employee headcount using these publications, multiple additions in the no. of vendors providing these publications, inflation in the expenses charged by vendors for the provision of publications and subscriptions. However, the assessee neither produced supporting documents/bills/vouchers nor any ledger extracts. With regard to the stock exchange settlement cost, the assessee submitted that it is registered as a stockbroker with SEBI and the stock exchange settlement cost includes the amount payable to the stock exchange in the normal course of business. It was further submitted that such expenditure is incurred in order to be able to trade on the stock exchange in the capacity of a stock broker. However, the assessee only gave the breakup of these expenses and did not produce any bills/vouchers or any other supporting evidence/documents. As regards the communication and technology-related expe....
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....do with the e-TDS returns of the assessee as it covers entire TDS deductions of the assessee for the full year. As discussed above on the issue of TDS and expenses, it was categorically asked to give a detailed note on the TDS deductions as made for each head of expenses as applicable under the law along with omissions if any, attracting provisions of I.T Act for disallowance U/s 40(a)(ia) etc. (iii) This clarification was not given by the assessee for all expenses or at least to the 4 major heads of expenses as applicable narrating nature of expenditure incurred under these heads and relevant applicability/ non- applicability of TDS provisions as the case may be. Hence on one side assessee could not give any sample bills and vouchers at least in few cases on other side assessee could not adduce any TDS provisions applicability/ non-applicability with e-TDS returns. Furthermore, now before Hon'ble DRP, assessee is reflecting contra adjustments against the overall ledger to arrive at grand total for each above major head of expenses involved in disallowance. Hence considering all these discrepancies, it is clear that assessee's submissions and claims are neither fully rec....
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....th bills/vouchers and other details pertaining to the expenditure debited to the profit and loss account. It is evident from the record that the learned DRP directed the AO to verify the expenses on a test-check basis. However, the AO, vide impugned order, sustained the addition primarily on the basis that the invoices/bills submitted by the assessee do not tally with the journal entries submitted before the learned DRP. The learned AR submitted that all the details pertaining to the expenditure debited to the profit and loss account are available with the assessee and if given an opportunity all these details will be produced before the AO for necessary examination. Having considered the submissions, we deem it appropriate to restore this issue to the file of the jurisdictional AO for de novo adjudication after the necessary examination/verification of the details pertaining to the expenditure incurred by the assessee. Needless to mention, no order shall be passed without affording reasonable opportunity of hearing to the assessee. Further, the assessee is also directed to produce any other information as may be sought by the AO for complete adjudication of this issue and also to ....
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....t year 2017-18, therefore claimed during the year under consideration. The assessee vide submission dated 13/09/2024 provided the computation of the amount of INR 94,42,316 claimed during the year under consideration by the assessee towards gratuity payment, which is as follows: - Particulars Amount Reference Payment made during AY 2017-18 2,33,34,145 Reference Refer table 6 of actuarial valuation report on page 540 of the Paperbook. We have re-attached the same as Annexure 2, refer table 6 on page 9 Add: Payment made during AY 2018-19 but upto the due date of filing return of AY 2017-18 57,67,700 Refer page 556 of the Paperbook where total payment of INR 83,56,556 is mentioned, out of which a deduction of INR 25,88,856 was claimed as a deduction in AY 2018-19 and balance of INR 57,67,700 is claimed in AY 2017-18. We have re-attached the copy of COl along with ROl for AY 2018-19 as Annexure 3, refer page 2 where such amounts have been explained. Total payment made 2,91,01,845 Less: Allowance claimed in the return of AY 2016-17 (1,99,79,254) Refer page 547 of the Paperbook where the computation of income for AY 2016-17 along with the ROI is attached. ....
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....bmissions of both sides and perused the material available on record. As per the assessee, the payment towards leave encashment amounting to INR 63,94,246 was made by the assessee on or before the due date of filing the return of income. It is evident from the record that the lower authorities denied the deduction claimed under section 43B of the Act on the basis that the assessee has not paid the amount in question during the relevant previous year. It is the plea of the assessee that as per section 43B(f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee is allowable only in computing the income of that previous year in which such sum is actually paid. By placing reliance upon the provisions of first proviso to section 43B of the Act, the learned AR submitted that this section is applicable to any sum which is actually paid by the assessee on or before the due date applicable in its case for furnishing the return of income under section 139(1) of the Act in respect of the previous year in which the liability to pay such sum was accrued. Thus, as per the assessee, since the payment of INR 63,94,246 towards leave encashment was made o....
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....(1)(va) of the Act is upheld. As a result, ground no.7 raised in assessee's appeal is dismissed. 26. The issue arising in ground no.8, raised in assessee's appeal, pertains to the denial of deduction claimed under section 80G of the Act on Corporate Social Responsibility ("CSR") expenses. 27. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that during the year under consideration, the assessee claimed the deduction of INR 5,96,20,000 on account of donations made under section 80G of the Act. As per the assessee, it claimed the deduction of INR 5,96,20,000 under section 80G of the Act on account of donations amounting to INR 11,92,40,000 paid to the entities eligible for deduction under section 80G(1)(ii) of the Act and accordingly, the deduction for 50% of the qualifying amount was claimed under section 80G of the Act. In support of the aforesaid submission, reference was also made to the donation receipts, which form part of the paper book on page 656. The learned DRP directed the AO to verify that the donations were eligible for deduction under section 80G(1)(ii) of the Act, and if found to be so, al....
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....pact of Explanation 2 to section 37(1) of the Income Tax Act in Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as under: "The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditure cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clare that for the purposes of section 37(1) 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 have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sec....
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....penditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession", whereas monies spent under section 80G are claimed while computing "Total Taxable income" in the hands of assessee. The point of claim under these provisions are different. 15. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under section 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, "Income from Business and Profession". 16. For claiming benefit under section 80G, deductions are considered at the stage of computing "Total taxable income". Even if any payments under section 80G forms part of CSR payments( keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, "Income form Business and Profession". The effect of such disallowance ....
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....se of claiming deduction under section 80G of the Act. There is no express provision to support the contention of Revenue. On the other hand, section 80G (2) (iiihk) and (iiihl) of the Act expressly provide that such sums donated for Swatch Bharath Kosh and Clean Ganga Fund shall be the amounts other than the sums spent by the assessee in pursuance of CSR, meaning thereby the donations made towards Swatch Bharath Kosh and Clean Ganga Fund spent as a part of CSR are not qualified for deduction under section 80G of the Act. Out of so many entries under section 80G(2) of the Act, only donations in respect of two entries are restricted if such payments were towards the discharge of the CSR. The Legislature could have put a similar embargo in respect of the other entries also, but such a restriction is conspicuously absent for other entries. The irresistible conclusion that would flow from it is that it is not the legislative intention to bar the payments covered by section 80G(2) of the Act which were made pursuant to the CSR, and other than covered by section 80G(2)(iiihk) and (iiihl) of the Act. As stated above, clue can be had from the restrictions by way of section 80G (2) (iiihk) ....