TaxTMI 
TaxTMI 
2025 (3) TMI 1800
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....'ble Supreme Court in Maxopp Investment Ltd. wherein it is held that the dominant object of investing in shares is irrelevant for interpreting the words "in relation to "as contemplated in section 14A of the Income tax Act 1961 and Hon'ble Apex Court has assented that section 14A has been introduced to bifurcate the expenditure between taxable and non-taxable income and to disallow the expenditure relatable to exempt income and Expenditure incurred in respect of investment in shares for acquiring and retaining a controlling interest therein is hit by section 14A." 3. "Whether on the facts and circumstances of the case and in law, the CIT(A) erred in holding that the disallowance u/s 14A has to be made considering only those investments which yielded exempt income, ignoring the explanation amended to section 14A with retrospective effect which provides for disallowance u/s 14A even if no income is earned during the year." 4. "Whether on the facts and circumstances of the case and in law, the CIT(A) erred in holding that the disallowance u/s 14A has to be made considering only those investments which yielded exempt income, ignoring the CBDT circular 5 of 201....
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....contended that stock options were granted to the employees at the market price prevailing on the date of the grant of option (exercise price) but that stock options vest gradually over the vesting period as per the terms of ESOPs, which is normally from one to five years. On completion of the vesting period, the employee may exercise stock options at their discretion for issue of shares against options vested in them against exercise price. The fair value of option was determined based on excess of market value of the stock on the date of the grant and the exercise price. 3.3 The assessee contended that it was engaged in the investment banking and other financial service business where performance of an employee depends on his ability to successfully finalize deals/transactions with client and recover fees for his employer. Therefore ESOP were issued to employees for retention of such highly skilled resources, hence the expenditure incurred on discounting of shares to employees was in the interest of the business of the company. 3.4 The assessee referred to the decision of the Hon'ble special bench of the Income-tax Appellate Tribunal in the case of Biocone Limited Vs DCI....
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....h of the Tribunal in the case of the assessee for assessment years 2009-10, 2010-11 and 2011-12 held the expenditure on ESOP as revenue expenditure. 3.8 The learned Assessing Officer rejected the contentions of the assessee for two reasons. Firstly, the discount allowed to the employees while issuing shares though might be for retaining the employees, but it affects the capital of the company and leads to change in the amount of the share capital and number of the shares, accordingly it is shown in the balance sheet and not in the profit and loss account, hence it is a capital expenditure. Secondly, the special leave petition (SLP) filed by the Revenue against the order of the Hon'ble Karnataka High Court in the case of Biocone Ltd was pending before Hon'ble Supreme Court. 4. On further appeal, the Ld. CIT(A) following the finding of the Tribunal in the case of the assessee for assessment years 2009-10, 2010-11 and 2011-12, deleted the addition. 5. Before us, the Learned Departmental Representative (DR) made twofold arguments. Firstly, he submitted that the assessee debited total expenses of Rs. 7,66,75,028/- as share-based payment to employees which comprised of t....
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.... decided the issue in favour of the respondent and relevant portion is reproduced as under :- "5. We have carefully perused the orders of the authorities below and the decision of the Tribunal brought to our notice. The grievance of the assessee is that the Ld. CIT(A) erred in confirming the disallowance of Rs. 1,20,47,684/- claimed u/s. 37(1) of the Act towards Employee Stock Option Plan (ESOP) expenses as capital expenditure. An identical issue was considered by the Tribunal Special Bench Bangalore in the case of Biocon (supra) has held that ESOP expenses is an allowable deduction u/s. 37(1) of the Act. The same view was followed by ITAT Pune Bench in the case of Sandvik Asia (supra). Respectfully following the decision of the Co-ordinate Benches, we set aside the order of the Ld. CIT(A) and direct the AO to allow the ESOP expenses as revenue expenditure." 7.1 Therefore, in principle we agree with the contention of the assessee that the issue in dispute is covered in favour of the assessee, but, we also agree the concern of the learned departmental representative that actual amount which is allowable to the assessee following the decision of the earlier years has not ....
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....Delhi International Airport Private Limited (2022) 143 taxmann.com 209 (SC) held that where the assessee did not have exempt income, no disallowance under section 14A read with rule and the could be made. He also referred to the decision of Hon'ble Supreme Court in the case of PCIT Vs Oil Industry development Board 103 taxmann.com 326. Accordingly, deleted the addition. 9. We have heard rival submission of the parties and perused the relevant material on record. Before us the learned counsel for the assessee referred to the decision of the coordinate bench in the case of the assessee in ITA No.1738 and 1739/Mum/2023 for assessment year 2016-17 and 2017-18 passed on 10/08/2023, wherein also the Tribunal has deleted the addition in view of the exempt income earned. The relevant finding of the Tribunal is reproduced as under: "7. Heard both the sides and perused the material on record. The Id. Counsel has contended that assessee has not earned any exempt income during the year under consideration. The Hon'ble Delhi High Court in the case of Chem Investment Ltd. Vs. CIT (2015) 61 taxman.com 18 (Del) held that provision of Sec. 14A will not be applied in case no exem....
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....deduction claimed under section 80G of the Act on Corporate Social Responsibility ("CSR") expenses. 10. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee incurred CSR expenses of Rs. 2,25,71,775, and claimed donation under section 80G of the Act amounting to Rs. 2,21,41,893. The assessee was asked to show cause as to why the claim of deduction under section 80G of the Act of Rs. 1,10,70,947, against the CSR expenses should not be disallowed. The AO vide order passed under section 143(3) of the Act did not agree with the submissions of the assessee and held that the expenditure incurred by the assessee under the provisions of the Companies Act, 2013, cannot be claimed as a donation under section 80G of the Act. The AO further held that the expenditure under the aforesaid provisions of the Companies Act, 2013 is a mandatory contribution and not a voluntary contribution and this expenditure has categorically been disallowed under section 37 of the Act. The AO further held that if the tax deduction is allowed on CSR expenses then this would result in subsidising the expenses by one-third a....