TaxTMI 
TaxTMI 
2026 (7) TMI 1799
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...., the initiation of assessment proceedings is invalid as the said notice was issued by Assessment Unit instead of National Faceless Assessment Centre (NFAC) in accordance with section 143(2) and section 144B of the Act read with CBDT Notifications¹. Ground 2: Final assessment Order is time barred On the facts and in circumstances of the case and in law, the learned AO erred in not passing the final assessment order within the time limit prescribed under section 153 of the Act which is the outer time limit for passing the final assessment order and hence, the final assessment order dated 23 October 2024 which is passed after 31 December 2023 (being the time limit as per the provisions of Section 153 of the Act) is time barred and liable to be quashed. Ground 3: Disallowance of expenditure claimed towards Employee Incentive Compensation Plan (EICP) On the facts and in circumstances of the case and in law, the learned AO erred on the following: 3.1 In disallowing the deduction for expense amounting to INR 3,33,56,983 incurred towards EICP claimed as deductible under section 37(1) of the Act, by not appreciating that the EICP cost is in....
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....40;. Ground 4: Initiation of penalty proceedings under section 270A of the Act On the facts and circumstances of the case and in law, the learned AO erred in initiating penalty proceedings under section 270A of the Act for the additions/ disallowances made in the Final Assessment Order. Each of the grounds of appeal referred above is separate and may kindly be considered independent of each other. 2.1. Ground no. 1 raised is not pressed and therefore dismissed as not pressed. Ground no. 2 raised by the assessee deals with jurisdictional issue on the aspect of limitation in terms of section 153 which is left open and not adjudicated upon, more particularly, in view of the amendment by Finance Act 2026, in this regard. Liberty is granted to the assessee to raise the same if circumstances so warrant, at appropriate forum. 2.2. The effective issues in the present appeal are vide ground nos. 3 and 4 in respect of disallowance of expenditure claimed towards Employee Incentive Compensation Plan (EICP) and transfer pricing adjustment in respect of international transaction of provision of IT and ITES services, respectively. 3. Brief facts of the case are....
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.... from the stock units and appropriate them over the life of stock units, i.e., between grant and conversion based on the market price of the underlying shares on the date of grant of the stock units. This provision debited to the profit and loss account over the life of the stock units (net of foreign exchange fluctuation gain) is disallowed while computing the total income which is duly reported in the tax audit report. Assessee makes payment to the MS entity based on the market price of the shares as on the date of allotment of shares to its employees, for which it claims a deduction in the year when assessee makes payment, which is also reported in the tax audit report. The shares allotted to the employees are taxable as perquisites in the hands of the employees for which appropriate TDS is done. Based on the above methodology, assessee has made a provision in its book of accounts of Rs. 7,51,85,000/- which it has added back and has claimed deduction of Rs. 3,33,56,983/- for the payment made by it on conversion of stock units/exercise of option which has been disallowed by the ld. Assessing Officer u/s. 37(1). 4.2. The issue is a legacy issue which has already been dealt by t....
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....ent Year under consideration on 04.04.2024, copy of which is also placed in the paper book. 5.1. Assessee has furnished the summary of transactions which are covered by the BAPA which amounts to 99.80% of the transaction for the AEs falling within the jurisdiction of USA. Only one entity which has the effect of balance of 0.20% is not covered under the said BAPA as its jurisdiction falls in United Kingdom. The details are tabulated below: Sr. No. Name of the Associated Enterprise Jurisdiction Amount(INR) AEs covered under BAPA vs. not covered Reference to Paper book 1 Morgan Stanley & Co. LLC USA 41,50,60,348 99.80% AEs covered under BAPA 2 Morgan Stanley Fund Services Inc USA 1,70,37,51,143 3 Morgan Stanley Investment Management Inc. USA 17,19,10,530 4 Morgan Stanley Services Group Inc. USA 28,60,39,02,838 5 Morgan Stanley & Co International PLC (MSIP) UK 6,27,96,190 0.20% AE not covered under BAPA Total 30,95,74,21,049 100.00% 5.2. In respect of the UK entity not covered under the BAPA, it was submitted that the transaction entered with ....