TaxTMI 
TaxTMI 
2024 (12) TMI 1584
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....53(1) of the Income-tax Act, 1961 (hereinafter referred 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 ....
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.... information: * MPS Limited * Manipal Digital Systems Private Limited j) Considering the MPS Limited with supernormal profits as comparable to the Assessee 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 th....
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....the due date of filing of return of income. 7. In disallowing an amount of Rs. 41,48,164 on account of employees' contribution to provident fund which was deposited before the due date of filing the return of income without appreciating the provisions of 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 ....
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....rd plan wherein the benefits of such plan are extended to the employees of the subsidiaries/associated companies. It was further submitted that during the year the assessee has debited an amount of INR 38,75,59,875 in the profit and loss account towards ESOP. As regards the deductibility of the expense, the 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 sub....
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....te bench of the Tribunal in assessee's own case in Goldman Sachs (India) Securities Pvt Ltd v/s ACIT, in ITA No. 6912/Mum./2012, vide order dated 22/07/2016, for the assessment year 2008-09, observed as under: - "71. We have considered the submissions of the parties and perused the material available on record. 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 acc....
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....e there is no change in the facts in the current year and hence amount debited to P & L account amounting to Rs:60,63,49,187/- was disallowed and added as income. 5.2.1 We have carefully considered the submission of the assessee. There are several types of RSU plans for instance in one of the plan issued during year 2006 (2006 year end plan) provides for 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....
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....rs as applicable to each head of expenses, to adduce its verifiability as claimed. Further, the assessee was asked to give complete details of TDS, as deducted against various heads of expenses, as debited to the profit and loss account to adduce the provisions of TDS claim as per the Act along with applicable disallowance on account of non-deduction of TDS, if any with relevant claims of such expenses involving 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 am....
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.... involving full details is neither reasonable nor acceptable. Hence nothing specific is submitted by the assessee even before Hon'ble DRP as claimed on the issues of expenses sought during the assessment proceedings. (ii) Further in the submissions, assessee claims that the learned AO failed in considering e-TDS returns filed by the assessee while disallowing 5% of referred business expenditure. AO has nothing to 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 ....
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....tality of full expenses claimed under these major heads as reasoned and discussed in the DAO and accordingly the same is added as non-verifiable expenses on test-check basis as per the directions of Hon'ble DRP." Being aggrieved, the assessee is in appeal before us. 15. We have considered the submissions of both sides and perused the material available on record. During the hearing, the learned AR filed the details of expenditure along with 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 i....
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.... of INR 94,42,316 on account of payment towards gratuity liability while filing its return of income. As per the assessee, it made a payment of INR 2,23,34,145 during the year under consideration on the basis of the actuary valuation report, which forms part of the paper book from pages 533-545. Further, the assessee made a payment of INR 57,67,700 during the assessment year 2018-19 but after the due date of filing the return of income for the assessment 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 ....
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....e the due date of filing the return of income. The learned DRP, vide its directions dated 24/01/2022, held that since the assessee had not paid the amount in question within the relevant previous year, i.e. 2016-17, therefore the claim cannot be allowed under section 43B of the Act. In conformity, the AO vide impugned final assessment order made an addition of INR 63,94,246 on account of leave encashment. Being aggrieved, the assessee is in appeal before us. 23. We have considered the submissions 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 ....
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....find that the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. v/s CIT, reported in [2022] 448 ITR 518 (SC) held that the payment towards employees' contribution to Provident Fund after the due date prescribed under the relevant statute is not allowable as a deduction under section 36(1)(va) of the Act. Therefore, respectfully following the decision of the Hon'ble Supreme Court cited supra, we find no merits in assessee's submissions. Accordingly, the disallowance made under section 36(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 a....
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....ocial 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 Profession'. Further, clarification regarding impact 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. Ther....
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....pended 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 exclusion of certain payments, that are part of CSR responsibility, not eligible for deduction u/s80G. 14. In our view, expenditure 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....
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....l in Societe Generale Securities India (P.) Ltd. vs. Principal Commissioner of Income-tax, reported in [2023] 157 taxmann.com 533 (Mumbai - Trib), while affirming the claim of deduction under section 80G of the Act in respect of CSR expenditure, observed as follows: - "6. After computing the business income, while computing the total income of the assessee, the assessee is invoking the benefit under Chapter VIA by claiming deduction of the sums under section 80G of the Act. According to the revenue, when once such sum went to satisfy the requirement of section 135 of the Companies Act, the benefit gets exhausted and such an amount is no more available for the purpose 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....
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....n claimed by the assessee under section 80G of the Act without verifying the conditions as laid down in the said section. Therefore, respectfully following the aforesaid decisions rendered by the coordinate bench of the Tribunal, we remit this issue to the file of the jurisdictional AO to verify the conditions necessary for claiming deduction under the said section. The assessee is also directed to file all the details for the purpose of claiming deduction under section 80G of the Act. We further direct that if the conditions as laid down in section 80G are found to be satisfied then deduction be granted to the assessee. With the above directions, the impugned final assessment order on this issue is set aside. Accordingly, ground no.8 raised in assessee's appeal is allowed for statistical purposes. 31. Ground no.9 raised in assessee's appeal pertaining to dividend distribution tax was not pressed during the hearing. Accordingly, the same is dismissed as not pressed. 32. The issue arising in ground no. 10, raised in assessee's appeal, pertains to the levy of interest under section 234C of the Act. 33. The brief facts of the case pertaining to this issue, as emanating from t....