TaxTMI 
TaxTMI 
2025 (3) TMI 2153
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....r for adjudication vide this composite order for the sake of brevity. 2. The grounds of appeal are as under: ITA No. 3568/MUM/2023 (A.Y. 2017-18) 1. On the facts and in the circumstances of the case and in law, the Ld. 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. 3. In the relevant year, the assessee earned Dividend of Rs. 56,85,150/- and Long Term Capital Gain of Rs. 81,38,388/- totalling Rs. 1,38,23,538/- which were claimed as exempt income u/s. 10(34) and 10(38) of the Act respectively. However, it had made suo motu disallowance of Rs. 52,39,217/- u/s. 14A of the Act in the computation of income. The AO observed that the computation was not as contemplated in the provisions of section 14Ar.w.s. rule 8D of the Income-tax Rules. Accordingly, the assessee was asked to explain as to why disallowance u/s 14A read with rule 8D should not be correctly made. In reply, the assessee vide letter dated 21.12.2019 submitted "without....
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....evenue has basically challenged the action of the ld.CIT(A) in not applying the amended provisions. We find the Hon'ble Delhi High Court in the case of Cheminvest Ltd. (61 Taxmann.com 118), CIT Vs. Holcim India Pvt. Ltd. (57 Taaxmann.com 28)and others Courts have consistently taken a consistent view that once assessee has not earned exempt income, disallowance u/s.14A cannot be made. The courts have held that if the assessee has earned exempt income, disallowance u/s.14A can be restricted to such exempt income. However, due to amendment brought to section 14A, the CBDT has given its clarification regarding intention of section even when no exempt income is earned and non-obstante clause was introduced to counter observation/decisions of various courts referred supra. 6.1 However, it may be stated here that the Hon'ble Delhi High Court in the case of PCIT vs. Era Infrastructure (India) Ltd. (2022) 448 ITR 674 (Delhi) after considering the amendment brought in section 14A of the Act, vide Finance Act 2022 has held the amendment as brought in by Finance Act 2022 is not retrospective in nature. The Hon'ble Madhya Pradesh High Court as well in the case of PCIT (Central) v....
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..... judgements. It was also submitted that ESOP expense is called as compensation cost because employee share based payment involves grant of shares at a concessional price. Such payments are borne by the employers to compensate employees for their services and to provide incentive to the employees for remaining in the employment with the company. Thus, ESOP expense will be covered by general provisions of Sec 37 of the Act. Sec. 37(1) grants deduction for expenses which are not covered in Sec. 30 to 36, which are not of capital or personal nature, and it should be laid out or expended wholly and exclusively for the purpose of the business. Thus, ESOP expenses claimed are allowable expense as the conditions required u/s 37 of the Act were duly satisfied. In case of CIT vs. Biocon Ltd. [2020] 121 taxmann.com 351 (Karnataka), Hon'ble Karnataka High Court held that Discount on issue of ESOPs was allowable as a deduction under section 37(1) as primary object was not to waste capital but to earn profits by securing consistent services of employees. However, the AO disallowed the deduction claimed. 9. The ld.CIT(A) allowed the claim by relying on the case of JM Financial Institution....
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....ong the companies for almost last two decades, has been to grant of ESOPs. In simple terms, it is an option and not an obligation, provided by a company to its employees, to purchase its shares at a future date at a pre-determined price, which is ordinarily less than the market price, on satisfaction of certain prescribed conditions. The hon'ble Karnataka High Court affirmed the ruling of the special bench of the Bangalore Income Tax Appellate Tribunal in the case of Biocon Ltd., wherein it was held that discount on issuance of ESOPs is an allowable business expenditure under Section 37(1) of the Act for the employer in Commissioner of Income Tax v. Biocon Ltd., ITA No. 653 of 2013 (Karnataka HC); (2013) 35 taxmann.com 335 (Bangalore - ITAT) (SB). In view of the foregoing, considering the fact that issue in hand was identical and recurring in nature and was also being consistently decided in favour of the assessee, respectfully following the decisions referred above, it is held that the disallowance was rightly deleted by the ld.CIT(A). In the result, above grounds no 1, 2 are dismissed. 11. In ground no.3, it is stated that the CIT(A) erred in holding that the disallowance ....
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....ACIT vs. Crompton Greaves Ltd. [2020] 181 ITD 40 (Mum) wherein the Hon'ble Mumbai Tribunal held that where no finding at all had been recorded by Assessing Officer as to incurrence of any expenditure by assessee for earning exempt income, no disallowance under section 14A was called for. After considering the facts of the case and examining the appellant's submissions, it was held by the ld.CIT(A) that it had not incurred any direct expenditure for earning the dividend income and no borrowings were utilized for investment in shares out of which dividend income was earned during the year under consideration. The AO disregarded the fact that the appellant is registered as NBFC with Reserve Bank of India (RBI) and company's operations are regularly monitored by the RBI. The borrowed funds on which interest expenditure incurred was utilized only for providing infrastructure loans which yielded taxable business income and not for any other purposes. Therefore, the interest paid on loan funds was directly connected to the interest received on infrastructure loans. Accordingly, there should not be any disallowance u/s 14A on account of interest expenses as there is a net inter....
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....ation of TDS credit in 26AS. The ld.CIT(A) has stated that the appellant should be granted the entire TDS credit available as per latest Form No. 26AS .. We do not find any infirmity in the direction given by him. The ground is therefore, dismissed. C.O. No.149/M/2024 (Arising out of ITA No. 3568/MUM/2023): "The Ground of Cross Objection Appeal is that on the facts and circumstances of the case and in law, the Ld. Deputy Commissioner of Income Tax, Circle 14(2)(1), Mumbai, erred in disallowing the claim of debenture issue expenses of Rs. 2,70,33,059/-. " 16. We notice that there is delay in filing of cross objection. In this regard, it is stated by the assessee that it received the copy of appeal for the captioned assessment year on 23-04-2024. As per the provisions of Sec. 253(4) of the Act, a cross-objection against the aforesaid order was required to be filed within 30 days from the receipt of the said order i.e. 23-05-2024. This cross-objection is filed on 31-07-2024. Thus, there is a delay in filing of 74 days. In this respect, it is submitted before us that on receipt of the appeal papers, the assessee-company forwarded the relevant documents to its consultant ....