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TaxTMI 
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2026 (4) TMI 104
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....and circumstances of the case & in law, the Ld. CIT(A) erred in rejecting the Transfer Pricing approach of the TPO on short charge by the assessee to its US AE? 2. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in rejecting the internal comparison made by the TPO wherein both the segments were involved in performing similar functions and utilizing same assets and undertaking similar risks? 3. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in accepting the transfer pricing approach of the assessee on short charge by Assessee from its US AE whereas in A.Y. 2007-08 the CIT(A) has upheld the adjustment albeit to the extent of Rs. 50000/-? 4 Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting the addition u/s 37(1) made by the AO by grossly ignoring the reasons advanced by the assessing officer and totally relying upon the submissions of the assessee? 5. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in holding that the assessee was not under no obligation to deduct tax on the payment of gateway charges mad....
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....h Court which is placed at pages 104 to 110 in assessee's own case for the A.Y. 2009-10. Referring to page 63 para 8 of the paper book which is order of the Tribunal for the A.Y. 2007-08 and 2008-09 in ITA No. 2692 and 4974/Del/2013 dated 22.06.2020 submitted that the Tribunal deleted the adjustment made by the TPO in respect of AMP expenses. The Ld. Counsel for the assessee further referring to page 75 para -20 submitted that the transfer pricing adjustment made in respect of ticketing charges and tours and travels packages services the Tribunal upheld the order of the Ld. CIT(A) in restricting the addition to Rs. 50,000/- as against the addition made by the TPO. 5. The Ld. DR strongly supported the orders of the authorities below. 6. Heard rival submissions and perused the orders of the authorities below. In so far as the TP adjustment in respect of AMP expenses and ticketing charges and tours and travel packages services are concerned, we observed that the issue is a recurring issue from the year to year starting from A.Y. 2005-06 to 2009-10 and we observed that the Tribunal for the A.Y. 2007-08 and 2009-10 vide order dated 26.02.2020 in ITA No. 2692 and 4974/Del/2013 whic....
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....r for the A.Y. 2010-11 the Department has accepted that it is not an international transaction. So far as the additional evidences filed before the CIT(A) are concerned, he submitted that these are only for the AMP expenditure and the documents are vital. Referring to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Virgin Securities and Credits P. Ltd., reported in 332 ITR 396, he submitted that the Hon'ble High Court in the said decision has held that before admitting the additional evidences, the CIT(A) had obtained a remand report from the AO. The additional evidence was crucial to the disposal of the appeal and had a direct bearing on the quantum of the claim made by the assessee. Rule 46A of the Income-tax Rules, 1962 permits the CIT(A) to admit additional evidences if he finds that the same is crucial for disposal of the appeal. He submitted that the ld.CIT(A) in the instant case has obtained a remand report from the AO. Therefore, the Revenue should not have any grievance since the AO was given due opportunity of being heard before admission of the additional evidence which is vital for determination of the case in hand. 10.1. Referring to the de....
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....ng to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Jubilant Food Works India Pvt. Ltd., reported in 271 CTR 227, he submitted that the Hon'ble High Court in the said decision has held that expenditure incurred by the assessee on advertisement expenses is revenue in nature since no permanent character or advantage is achieved via the same and such expenses for advertising the consumer products generally are a part of the process of profit earning and not in the nature of capital outlay. So far as the order of the CIT(A) in restricting the addition on account of transfer pricing adjustment in regard to ticketing and tours & travel package services to Rs. 50,000/- is concerned, the ld. Counsel submitted that the same addition was sustained by the CIT(A) on the basis of and without prejudice to the arguments taken by the assessee before the CIT(A). However, no addition is called for. 13. We have considered the rival arguments made by both the sides, perused the orders of the AO the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied upon by both the sides. We find, the TPO, in the instant case, ....
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....ry of MakeMy Trip or MMT brand since the trade mark 'MakeMy Trip' has been registered in the name of MakeMy Trip (India) Pvt. Ltd., w.e.f. 25th April, 2006. Event the TPO himself at various places of his order has accepted that MMT India is the owner of MMT brand. We find the ld. CIT(A) had also given a finding that neither the share premium received from incoming shareholders upon IPO listing nor steady value creation in the hands of founder/existing shareholders be deemed to qualify as any kind of benefit accruing to MMT Mauritius under the provisions of the Act. Further, he has also given a finding that the AMP expenses incurred by the assessee is wholly and exclusively for the purpose of business and not capital in nature. While admitting the additional evidence, he had also given justifiable reasons as to why he has accepted the same under Rule 46A of the IT Rules. The relevant findings of the CIT(A) from para 7 onwards read as under:- "7.0 Finding: 7.1 During the course of appellate proceedings, the appellant furnished a copy of agreement dated 01.04.2006 between appellant and MMT Mauritius. It also furnished a list of 3 new comparables viz. Thomas Cook, Cox....
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....is not applicable in the appellant's case. The said bright line test comes into operation in a situation where a business enterprise is incurring excessive AMP expenditure for promoting a brand owned by its foreign AE. Based on appellant's submissions and evidences placed on record, it is explicitly clear that the appellant is the sole beneficiary of the AMP expenses. A Special Bench of Hon'ble Delhi Tribunal in case of LG electronics India Pvt. Ltd. v ACIT ITA No. 5140/Del/2011 (judgment dated 23.01.2013) has taken a view that a tacit understanding could be assumed between brand owner and brand licensee regarding excess AMP spend by the licensee, but that assumption is applicable only in cases where the Indian entity promotes brand owned by its foreign affiliate. In appellant's case, it is the appellant who owns the brand. Therefore, provisions regarding arm's length price would not apply to the appellant's case. It has been found that MMT Mauritius has also got 'MakeMyTrip' mark registered in its name in Mauritius w.e.f. 19.07.2011 vide registration certificate dated 14.10.2011. The appellant has explained that it has been done to protect future business interests of the appe....
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....isposes of grounds of appeal no. 8 to 15." 15. We further find from the submissions made by the ld. Counsel that from A.Y. 2010-11 onwards, the Department has accepted that such AMP expenses is not an international transaction and no addition has been made by the AO. From the various details furnished by the assessee, it is seen that the following AMP expenses were incurred by the assessee from A.Y. 2010-11 to 2016-11 and the TPO has not considered the same as an international transaction:- Assessment Year AMP expenses Whether it was considered international transaction by TPO? 2010-11 461,907,373 No 2011-12 577,466,197 No 2012-13 807,126,413 No 2013-14 604,210,658 No 2014-15 811,585,225 No 2015-16 690,400,000 No 2016-17 4,741,800,000 No 16. So far as the ground raised by the Revenue relating to acceptance of additional evidence is concerned, we find that the ld.CIT(A), in the instant case, has called for a remand report from the AO and, thereafter, only has admitted the same and has given his finding on the basis of such additional evidence. The Hon'ble Delhi High Court in the case of Virgin ....
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....on in the Indian market for selling its products in India. A finding was returned that unless the assessee made its products known to the market, its business would suffer. Consequently, the Tribunal held the entire expenditure on advertising to be of a revenue nature and allowed the same. The Tribunal also noted the decision of the Supreme Court in the case of Empire Jute Co. Ltd. vs. CIT (1980) 17 CTR (SC) 113 : (1980) 124 ITR 1 (SC) wherein the Supreme Court held that there could be cases where the expenditure even if it was incurred for obtaining of a benefit of an enduring nature may, nevertheless, be on the revenue account and, in such cases, the test of "enduring benefit" may breakdown." 18. We find the Hon'ble Delhi High Court in the case of Jubilant Foodwork Pvt. Ltd. (supra) has held that the expenditure incurred by the assessee on advertisement expenses is revenue in nature since no permanent character or advantage is achieved via the same and such expenses for advertising consumer products generally are a part of the process of profit earning and not in the nature of capital outlay. Similar view has been taken by the Hon'ble Delhi High Court in the case of CIT ....
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.... in the order of the CIT(A) on this issue. We find, while restricting the addition to Rs. 50,000/- as against Rs. 1,47,43,024//- added by the AO/TPO, he has upheld the order of his predecessor for A.Y. 2005-06. The assessee had also given the break-up on the basis of the finding given by the CIT(A) in A.Y. 2005-06. Nothing substantial was brought to our notice either by the Ld. AR or by the ld. DR against the finding given by the ld.CIT(A) on this issue. We, therefore, uphold the same and the ground raised by the assessee and the Revenue on this issue are dismissed. Accordingly, ground of appeal Nos.1-7 filed by the Revenue and ground No.1 raised by the assessee are dismissed. 7. Respectfully following the order of the Tribunal in assessee's own case we reject ground No. 1 to 3 of the revenue's appeal. 8. Ground No. 4 and 5 are in respect of disallowance made u/s. 40(a)(ia) of the Act on payment to banks for payment gateway charges. 9. The Ld. Counsel for the assessee submitted that these grounds are also covered by the decision of the Tribunal for the A.Y. 2007-08 and 2008-09 in ITA No. 2307 and 4757/Del/2013 dated 22.06.2020 in para 27 to 34 of the order. 10. The Ld. ....
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....mstances of the case and in law, the Ld. CIT(A) failed to appreciate that the Appellant has been making payments to various banks on account of Payment Gateway charges from Financial Year 2000-01 onwards and no adverse inference has been drawn by the Income-tax department in this regard in the past and therefore payment made to banks should not be disallowed following the principles of Hon'ble Mumbai Bench of the Income-tax Appellate Tribunal in the case of CIT Vs Kotak Securities Limited (Appeal No 311 of 2009). The above grounds of appeal are without prejudice to and independent of one another. The appellant craves leave to add, supplement, amend, vary, withdraw or otherwise modify the grounds mentioned herein above at or before the time of hearing. The appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case." 27.1 Grounds of appeal filed by the Revenue read as under:- "1. Whether in the facts and circumstances of the case, the Ld. CIT(A) erred on the facts and circumstances of the case, in accepting the additional evidence u/s 46A when adequate opportunity was already prov....
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..... Grounds No.1 to 5 filed by the assessee and the ground No.8 filed by the Revenue relate to part relief granted by the CIT(A) on account of addition made by the AO for non-deduction of TDS on payment of gateway charges paid to HDFC and ICICI Bank. 30. Facts of the case, in brief, are that during the course of assessment proceedings, the AO noted that the assessee has claimed bank charges of Rs. 12,52,49,946/- in the P&L Account. From the details furnished by the assessee, the AO noted that the assessee has paid the following charges:- Nature of Expenses Amount (Rs. ) Payment of Gateway Charges 11,99,39,901/- Bank charges - General 53,10,044/- 31. It was further stated that no tax has been deducted on the above two payments on account of the following:- "1. that the assessee is a e-commence company and is using automated facility to charge a customer through its website using his debit/credit/prepaid card or bank account (Net banking) on-line. 2. that TDS provisions are not applicable to its case. 3. that the services provided by bank do not fall under the definition of 'Technical Services' as given in explanation 2 to ....
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....he Revenue and the assessee are in appeal before us. 34. We have heard the rival arguments made by both the sides and perused the record. It is the submission of the ld. DR that provisions of Explanation (2) to section 195 are applicable to the assessee according to which tax is required to be deducted from any payment made to a non-resident outside India. The assessee has the option to obtain a No-deduction Certificate from the AO which he has not done in the instant case. It is the submission of the ld. Counsel for the assessee that identical issue had come up before the Tribunal in assessee's own case for A.Y. 2009-10 and the Tribunal, vide order dated 26th September, 2017, has decided the issue pertaining to non-deduction of taxes on payment gateway charges in favour of the assessee with certain directions/observations. Further, the appeal filed by the Revenue was dismissed by the Hon'ble High Court. Under these circumstances and considering the totality of the facts of the case, we deem it proper to restore this issue to the file of the AO with a direction to decide the issue afresh in the light of the decision of the Tribunal in assessee's own case for A.Y. 2009-10 a....
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....uninterrupted, continuous and exclusive use of the GDS system of Amadeus for four years with the expected business of sale of 6 million tickets. The agreement also provides for short fall recovery in case MMT books less than 4.5 million segments/tickets during the term of the Amadeus Agreement. * The loyalty signing bonus is paid in two installments INR 6.25 crores on signing of the Amadeus Agreement and the balance INR 6.25 crores on or before March 31, 2009, subject to the Successful Migration of the Amadeus GDS. Successful Migration of the Amadeus GDS, includes the condition that 100% of the tickets booked through appellant's website shall be booked through Amadeus GDS on or before March 31. 2009 and for the remainder of the term i.e. till the end of the period of the Amadeus Agreement i.e. till February 28, 2013. Thus the disbursement of installment of loyalty signing bonus subject to fulfillment of above condition is merely timing of payment and cannot be equated to the accrual of income as the obligation against above receipt is to be discharged over a period of 4 years in future. * If the Amadeus Agreement is terminated the Appellant shall be required t....
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....ccrues to an assessee shall be chargeable to tax in that particular year. An income is said to be accrued when a person acquires a legally vested right in it. It has been held in various case laws that mere receipt of an amount which has not accrued to the assessee in a given assessment year would not be considered as income for the year and cannot be subject to tax. 25.10 The Appellant has relied on the following rulings: * CIT vs Bank of Tokyo [1993] 71 TAXMAN 85 (CAL.) * CIT vs. Govind Prasad Prabhunath (171 ITR 417) (Allahabad High Court) * Amar Nath Khandelwal vs CIT (126 ITR 322) (Delhi) * ED Sassoon & Co. Ltd. Vs. CIT (26 ITR 27) (SC) * CIT vs M/s Shoorji Vallabhadas & Co. (46 ITR 144) (SC) * Shri Kewal Chand Bagri Vs CIT (183 ITR 207) (Calcutta High Court) The analysis of the various rulings clearly establishes the following principles on accrual of income : * No sum shall accrue as income until a legally vested right is acquired by the occurrence of all the events on which the remuneration depends. * Where such consideration is contingent upon the happening of an event, the said consi....
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....d period of the guarantee. In the given case, the Appellant is in receipt of the loyalty signing bonus/sign up fees which is contingent/conditional upon the fact that the Appellant should continue to use GDS system of Amadeus/exclusively assist in issuance of Apollo's travel insurance products for the period of 4/3 years. In case of non-compliance with this condition, the Appellant would be required to refund the entire/ pro-rata loyalty signing bonus/sign up fees to Amadeus/Apollo. 25.13 The Appellant also submitted that being a company, it is required to maintain its books of accounts on mercantile basis and is also required to comply with Accounting Standards issued by Institute of Chartered Accountants of India. The loyalty signing bonus received by the Appellant has been recognized in the books of accounts following mandatorily applicable Accounting Standard 9 ('AS 9') which provides that when recognition of revenue is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognized. Following the principles of AS 9, the loyalty signing bonus/sign up fees has been spread over the p....
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.... to the profit and loss account for AY 2009-10 and claimed as deduction. The Ld.AO accepted the aforesaid system of recognizing income on accrual basis for AY 2008-09 and also allowed the deduction in completing the assessment for AY 2009- 10. 25.17 Further, the Ld. AO has not given any direction for providing any consequential relief in subsequent years wherein the proportionate amount of income has been offered to tax in the respective assessment years by the Appellant. 26.0 Findings: 26.1 I have carefully gone through the submissions made by the Appellant and other material placed on record. My finding in respect of two agreements is as under. Amadeus Agreement 2.62 From perusal of the Amadeus agreement dated February 1, 2009, it is clear that the Appellant has received the entire amount of loyalty signing bonus during the year. As per clause 4, period of agreement shall be 4 years. As per clause 5.1, the MMT shall use Amadeus GDS as sole and exclusive GDS for its reservations requirements for a minimum period of 4 years. The Appellant has received one time loyalty signing bonus per clause 6 of the Amadeus Agreement. The loyalty signi....
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.... that the balance amount of INR 12,23,95,833 being a proportionate amount for the unexpired period of the agreement is not in the nature of accrued income for AY 2009-10. The amount of loyalty signing bonus is to be treated as income over the period of the agreement and happening of the conditions subject to which such amounts were received. The Appellant has correctly offered INR 26,04,167 as income for AY 2009-10 and the balance amount of INR 12.23.95,833 has been included as income for subsequent AYs. As a result, the addition made by the AO of INR 12,23,95,833 stands deleted. Apollo DKV Agreement 26.5 As per Apollo DKV agreement dated April 30, 2008, the Appellant has received the amount to provide all the commercial assistance and facilities for issuance of Apollo's travel insurance products (policies) to Appellant's customers through its website for a period of 3 years. The sign up fees has been received subject to the following conditions: * The Apollo Agreement has been entered for a period of three years; * The Appellant has received the signing up fees for issuance of Apollo's travel insurance products (policies) to Appellan....
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....ade by the AO of INR 3,18,41,669 stands deleted. 14. On careful perusal of the order of the Ld. CIT(A) we do not find any infirmity in the order passed by the Ld.CIT(A). 15. We further find the impact on taxes if entire income received from Amadeus and Apollo is recognized in A.Y. 2009-10 viz-a-viz recognized on deferred basis in subsequent years would be as under :- Particulars Reference Income offered on Deferred Basis (Actual Position) Entire income offered in AY 2009-10 AY 2009-10 AY 2010-11 AY 2011-12 AY 2009-10 AY 2010-11 AY 2011-12 Income from Amadeus and Appollo 1,07,62,468 3,41,33,439 12,01,04,093 16,50,00,000 - - Taxable Income under Normal provisions of the Income tax Act, 1961 (Refer Note 2) (A) (41,69,31,088) NIL NIL {26,26,93,556) NIL NIL Book Profits as per provisions of Section 115JB of the Income Tax Act, 1961 (Minimum Alternate Tax Provisions) (B) (57,59,60,178) (31,55,18,901) 4,04,73,767 (42,17,22,646) (34,96,52,340) (7,96,30,326) Taxable Income (Higher of (A) & (B) (C) (41,69,31,088) NIL 4,04,73,767 (26,26,93,55....
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....aid to MMT US as net income, being the commission income of sale of tickets to customers in US from sale of such tickets. * As the revenue is received by MMT India the cost of tickets issued to customers in US which tantamount to purchase of such tickets by MMT India is also required to be accounted for by MMT India. * As the tickets have been booked through MMT US, MMT India pays the cost of tickets to MMT US which in turn is passed on by MMT US to the foreign airlines * MMT US is separately compensated by ticketing service fees of 2% of the ticket cost for purchase of tickets. 28.4 MMT US acts as an agent of foreign airlines while selling tickets on behalf of such foreign airlines to be sold to third party customers in US. In effect, the amount of INR 33,32,45,829 represents income of foreign airlines in respect of sale of air tickets to think party customers in US. 28.5 The Ld.AO has disallowed the entire amount of INR 33,32,45.829 being purchase cost of tickets of foreign airlines purchased through MMT US alleging it is Fees for Technical Services ('FTS') and stating that TDS should have been deducted and disallowed the purch....
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....on in the India-US DTAA. The definition of FIS as per Article 12 of India-USA DTAA is as follows: For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (Including through the provision of services of technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. The meaning of 'make available' has been interpreted by Memorandum to the India-USA DTAA and various judicial authorities. The MOU states as follows "Generally speaking, technology will be considered 'made available' when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical know....
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....ant submitted that there is no liability to deduct TDS u/s 195 of the Act on payments amounting to INR 33,32,45,829 in respect of sale of air tickets to third party US customers. The Appellant also contended that the judicial principles laid down by the Apex Court in the case of GE India Technology Centre Private Limited v. CIT (327 ITR 456) have been completely disregarded as no disallowance can be made on account of non-deduction of tax under section 195 of the Act, when the amount is not chargeable to tax in India in the hands of the recipient in the first place. 29.0 Findings: 29.1 I have considered the elaborate submissions of the Appellant. From the facts stated above it is clear that the customers in the US, when log in for online purchases of tickets, get access to the MMT US website. Accordingly, when tickets are purchased by such customers, the revenue is received by MMT India directly through online banking channel and the ticket gets issued though MMT US. As the revenue is received by MMT India, the cost of tickets issued to customers in US which tantamount to purchase of such tickets by MMT India is also required to be accounted for by MMT India. ....
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....S under Article 12(4) of the India-USA DTAA. In present case, simple purchase of air tickets does not entail acquiring or application of technical know-how, skill etc. MMT US is in business of booking tickets and acts as a mere agent on behalf of the airlines for issuing tickets to third party customers of the Appellant. No technical or consultancy service is being provided in the process. Further, even if it is assumed that there is any element of technical or consultancy service, "make available clause needs to be satisfied. From conduct of the parties concerned, it can not be said that these is transfer of any technical knowledge, experience, skill, know-how, or processes from MMT US to the appellant. 29.6 Impugned payments in hands of MMT US are undoubtedly in nature of business income which is not taxable in India as MMT US does not have PE in India. 29.7 In light of the discussion above, I hold that the payment made for purchase of ticket cos by the appellant to MMT US is not chargeable to tax in India in the hands of MMT US and r tax is deductible u/s 195 of the Act on such payments made by the appellant to MMT US. Hen no disallowance u/s 40(a)(i) of the Ac....
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....he facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the levy of interest under section 234D of the Act and withdrawal of interest under section 244A of the Act. The above, grounds of appeals are without prejudice to and independent of one another. The appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the grounds stated herein above, either before or at the time of hearing of this appeal. The appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case. 21. The Ld. Counsel for the assessee submitted that in so far as ground Nos. 2 and 3 which are in respect of depreciation on computer peripherals, the issue is covered against the assessee in assessee's own case for the A.Y. 2009-10 by the Tribunal. 22. In view of the submissions of the Ld. Counsel ground No.2 and 3 of grounds of appeal are dismissed. 23 Coming to ground Nos. 4 and 5 which are relating to disallowance of Advertisement and publicity expenditure as capital expenditure, the Ld. Counsel for the assessee submitted that the Ld. CIT(A) held that out of disa....
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.... A finding was returned that unless the assessee made its products known to the market, its business would suffer. Consequently, the Tribunal held the entire expenditure on advertising to be of a revenue nature and allowed the same. The Tribunal also noted the decision of the Supreme Court in the case of Empire Jute Co. Ltd. vs. CIT (1980) 17 CTR (SC) 113 : (1980) 124 ITR 1 (SC) wherein the Supreme Court held that there could be cases where the expenditure even if it was incurred for obtaining of a benefit of an enduring nature may, nevertheless, be on the revenue account and, in such cases, the test of "enduring benefit" may breakdown." 18. We find the Hon'ble Delhi High Court in the case of Jubilant Foodwork Pvt. Ltd. (supra) has held that the expenditure incurred by the assessee on advertisement expenses is revenue in nature since no permanent character or advantage is achieved via the same and such expenses for advertising consumer products generally are a part of the process of profit earning and not in the nature of capital outlay. Similar view has been taken by the Hon'ble Delhi High Court in the case of CIT vs. Monto Motors Ltd. (supra). 19. In view of the....
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....ither before or at the time of hearing of the appeal. 30. Coming to appeal of the revenue in ITA No. 1387.Del/2017 for the A.Y. 2011-12 it is observed that ground No.1 in respect of AMP expenses and this ground is similar to ground Nos. 1 to 3 of grounds of appeal of the revenue for the A.Y. 2009-10 and the decision taken therein shall apply mutatis mutandis for the A.Y. 2011-12. Ground No.1 of revenue's appeal is rejected. Ground No. 2 and 3 of grounds of appeal of revenue's appeal is dismissed. 31. In the result, the appeal of the revenue is dismissed. ITA No. 1457/Del/2018 for A.Y. 2012-13 32. Coming to ITA No. 1457/Del/20178 for the A.Y. 2012-13 of revenue's appeal. The revenue has raised following grounds of appeal :- 1. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting the disallowance of Rs. 187,23,65,435/- u/s 40(a)(ia) of the Act made by the AO for payments made to MMT US by ignoring the findings of the Assessing Officer (the AO) that the said payments were not in the nature of reimbursement of expenses, as claimed by the assessee, but was fee for technical services as per the provision of Section 9(1)(v....
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....of grounds of appeal of the Revenue for A.Y. 2009-10 and the decision taken therein shall apply mutatis mutandis for the appeal for the A.Y. 2012-13. Ground Nos. 1 to 3 are rejected. 35. Coming to ground No.4 of grounds of appeal of the revenue which is in respect of disallowance of Advertisement Marketing and Publicity (AMP) expenses, the same is identical to the ground No. 1 to 4 of grounds of appeal for the A.Y. 2009-10 and the decision taken therein shall apply mutatis mutandis for the appeal for the A.Y. 2012-13. Ground No. 4 of revenue's appeal is dismissed. 36. Coming to ground No. 5 of grounds of appeal of the revenue which is in respect of deleting disallowance on account of expenditure on Employees Stock Option benefits the Ld. Counsel for the assessee submits that this issue is covered in favour of the assessee in assessee's own case for the A.Y. 2011-12 by the order of the Tribunal dated 21.02.2025 in ITA No. 2661/Del/2017 wherein the Tribunal considered whether ESOP expenditure is allowable expenditure in the hands of the assessee and the revision proposed by the Ld. PCIT u/s.263 was rejected with observation that even the Ld. PCIT could not find fault with the s....
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....rk force. The primary object of this exercise was not raise share capital but to earn profit by securing the consistent and concentrated efforts of its dedicated employees during the vesting period and such discount was nothing but a part of package of remuneration. I find that the appellant has distinguished the facts of the case as relied upon by the AO in Ranbaxy Laboratories Ltd with the facts of the present case. Further, various case laws also were relied upon by the appellant in its submission. In the case of CIT vs. Lemon Tree Hotels Ltd., the expenses related to ESOP were held to be allowable as business expenditure. The Hon'ble Delhi High Court in the case of CIT vs. Lemon Tree Hotels Ltd. has held that:- "The question sought to be projected by the Revenue is whether the ITAT erred in deleting the addition of Rs. 1,28,19,169/- made by the Assessing Officer ('AO') by way of disallowance of the expenses debited as cost of Employees Stock Option ('ESOP') in profit and loss account? The Court has been shown a copy of the decision dated 19th June 2012 passed by the Division Bench of Madras High Court in CIT-III Chennai v. PVP Ventures Ltd. (TC(A) N....
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.... before the AO u/s 195(2), 195 (3) and 197 of the Act? 11. Whether on facts and in circumstances of the case, Ld. CIT(A) is legally justified in deleting the disallowance of Rs. 14,04,88,264/- on account of expenditure on advertisement, marketing and publicity (AMP) by ignoring the findings of fact recorded by the AO that the expenditure was incurred to generate intangibles by way of building and promotion brand 'Make My Trip? 12. Whether on facts and in circumstances of the case, Ld. CIT(A) is legally justified in deleting the disallowance of Rs. 3,84,61,066/- on account of expenditure on Employee's Stock Option exercise under employees' benefits by ignoring the findings of fact recorded by the AO that the said expenses failed to satisfy the test of revenue expense and commercial expediency during assessment proceedings? 13. Whether on facts and in circumstances of the case, Ld. CIT(A) is legally justified in allowing relief to the assessee on the basis of earlier order(s) in the assessee's own case despite the fact that principle of res-judicata is not applicable to Income Tax proceedings as each assessment year is a separate proceedings....
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.... assessee's claim of ESOP expense fail on both these counts. It is therefore clear that the assessee is shifting part of its profits outside India under this context? 4. That the appellant craves leave to add, alter, amend or forgo any ground/s) of appeal either before or at the time of hearing of the appeal. 45. Ground No.1 which is in respect of deletion of disallowance u/s.40(a)(i) for non deduction of payments to MMT US and this ground is identical to ground No.7 of grounds of appeal of the revenue in the A.Y. 2009-10 and the decision taken therein shall apply mutatis mutandis for the appeal for the A.Y. 2014-15. Ground No. 1 of revenue appeal is dismissed. 46. Coming to ground No.2 of grounds of appeal for the revenue which is identical to ground Nos. 1 to 4 of grounds of appeal for the A.Y. 2009-10 and the decision taken therein shall apply mutatis mutandis for the appeal for the A.Y. 2014-15. Ground No. 2 of revenue's appeal is dismissed. 47. Coming to ground No. 3 which is in respect of deleting ESOP expense the same is identical to ground No.5 of grounds of appeal of the revenue for the A.Y. 2013-14 and the decision taken therein shall apply mutatis m....