TaxTMI 
TaxTMI 
2026 (2) TMI 1459
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.... On the facts and circumstances of the case and in law, the CIT(A) erred in upholding the comparables taken by the Transfer Pricing Officer [TPO] vide his order dated January 23, 2014 passed under section 92CA(3) of the Act and confirming the adjustment made to the arm's length price in respect of back office support services. 2. Expenses apportioned against income exempted under section 10(15), 10(34) and 10(35)- Disallowance u/s. 14A: Rs.37,99,40,048 [Para 4.5, pages 28 and 29 of the CIT(A) order] On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the apportionment of expenses at Rs. 48,32,00,000 as against 10,32,59,952 made by the Appellant to the income exempt under section 10(15), 10(34) and 10(35) of the Act by applying provisions of Rule 8D(2)(iii) of the Income-tax Rules, 1962. 3. Disallowance of Provision for expenses - 133,74,36,609 [Para 9, pages 42 to 44 of the CIT(A) order] On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the disallowance of the amount of 133,74,36,609 in respect of provision for expenses created in March 2010 on whi....
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....iation on leased assets without appreciating the fact that the said transaction being a financial lease transaction, the assessee did not satisfy the legal requirement of ownership of the assets for the purpose of Section 32(1) of the I.T.Act, 1961 and therefore not entitled for claim of depreciation on the leased assets 8" On facts and circumstances of the case and in law the Ld CIT(A) erred in allowing the depreciation on leased assets without appreciating the fact that the leased assets in question were not in possession of the assessee and also not utilized by the assessee for its business purpose." 9 "On facts and circumstances of the case and in law the Ld CIT(A) erred in deleting the disallowance towards bad debts ignoring the fact that conditions laid down u/s.36(2)(v) of the Act were not fulfilled by the assessee." 10 "On facts and circumstances of the case the Ld. CIT(A) has erred in directing the AO to allow the amount of Rs. 79,21,46,381 being the difference between the exercise price and the market value of the ESOS, when the same is not an ascertained liability, is contingent in nature, quantum cannot be worked out precisely and is capital i....
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.... with such modifications, additions and disallowances to the returned income, the assessee preferred an appeal before the ld. CIT(A). The first appeal of assessee was partly allowed granting certain reliefs viz-a-viz confirming certain additions/disallowances as made by ld. AO. 5. Being dissatisfied with the impugned order of ld. CIT(A), confirming part disallowances / additions, the assessee has preferred an appeal, whereas for the reliefs granted to the assessee, the revenue is in Cross Appeal (CO) before the tribunal. 6. In order to adjudicate the grounds of appeal raised by both the parties, we are taking up respective grounds of the appeal of assessee as well as revenue, as under: 7. Ground No. 1 of assessee's appeal - T.P. Adjustment under section 92CA(3) of the Act. 7.1 The ld. AO has made a reference under section 92CA(1) of the Act on 08.10.2012 to the concerned TPO, for computation of Arms Length Price (ALP) in relation to the international transactions detailed in the Audit Report in Form-3CEB,. During the proceedings before the ld. TPO the first issue taken up was regarding provision of back-office support services. It is observed by the ld. TPO that the....
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....ssee's own case for AY 2007-08, 2008-09 and 2009-10 had already held that the aforesaid 7 companies namely i.e. (1) Assentia Technologies Ltd., (2) Acropetal Technologies Limited, (3) Cosmic Global Limited, (4) Cross domain Solutions (P) Ltd., (5) Infosys BPPO, (6) Eclerex Services Limited and (7) Tata Communications Transformation services, are to be excluded for the purpose of TP Analysis while bench marking the international. Remaining 2 companies i.e. (1) Nittany Outsourcing Services Pvt. Ltd and (2) Microgenetics Systems Limited, are agreed to be acceptable by the assessee and their net cost + margin percentage as suitable comparable has been averaged at 15.96%. The ld. AR furnished a chart showing comparables taken by the ld. TPO as against the comparable accepted by the company, the same, for the sake of completeness, extracted hereunder: Sr. No. Company Name Net Cost Plus Margin (%) as per TP order Net Cost Plus Margin (%) for accepted comparables Remarks 1 Assentia Technologies Ltd. 43.07 Excluded by ITAT in AY2007-08, AY2008-09 and AY2009-10 due to functional dissimilarity 2 Acropetal Techn....
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..... CIT(A), stating the reasons that there was no additional financial cost incurred by the assessee to provide the comfort letter /undertakings on behalf of its Associated Enterprises (AE). Giving further reasoning that the assessee bank was not actually required at any point of time during the concerned year to make good any legality shortfall on behalf of the assessee. Further, there was no occasion arose for concerned monetary authority of Singapore to invoke the comfort letter / undertaking provided by the assessee. The ld. CIT(A) relied on the decision of ITAT, Delhi in the case of Bharti Airtel vs. ACIT (43 taxmann.com 150) and order of ld. CIT(A) for AY 2009-10. 8.2 Before us, the ld. AR of the assessee furnished a written note with respect to the aforesaid adjustment the same is culled hereunder for the sake of completeness and adjudication: "The above grounds challenge the deletion by the CIT(A) of the TPO's action of making an adjustment of Rs.34,64,640 with respect to the letter of comfort (LOC) issued by the Bank to Monetary Authority of Singapore on behalf of ICICI Securities INC (Singapore branch). The said adjustment was made by considering the LOC to ....
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....umbai in assessee's own case for AY 2009-10 and requested to direct the revenue authorities to adopt a commission rate of 0.04%. 8.4 Ld. CIT-DR who also had relied on the decision of ITAT, Mumbai in assessee's own case have contended to decide the issue on merits. 8.5 We have considered the rival submissions and perused the material available on record and the decisions relied upon by the parties. On perusal of the information furnished before us, without going into the merits of issue, in absence of any fresh information or decision to deviate from the view taken by the Tribunal in assessee's own case for AY 2009-10, which has fairly conceded by both the parties, the ld. AO / TPO is directed to scale down the rate of commission at 0.04% as per decision of this tribunal in assessee's own case for earlier year, instead of 1.08% adopted by the TPO. 8.6 In result, Ground No. 2, 3 & 4 of the revenue are partly allowed. 9. Ground No.2 of assessee's appeal: regarding disallowance under section 14A of the Act. 9.1 The aforesaid disallowance for Rs. 37,99,40,048/- was made by the ld. AO, invoking the provisions of section 14A r.w.r. 8D. The original disal....
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.....16 Total-a 4,630.69 Closing Investment Shares (equity and preference) 998.09 Subsidiaries and/or joint ventures 2,619.35 Venture funds 1,167.06 Total-b 4,784.49 Average Investment [(a+b)/2] 4,707.59 Section 14A Disallowances c) Administrative Expenses 23.54 Total 23.54 9.4 The ld. AR further placed her reliance on the following decisions: 1. Delhi High Court in Cargo Motors (P.) Ltd. v. DCIT [2022] (145 taxmann.com 641) 2. Delhi Tribunal Special bench in ACIT vs. Vireet Investment P. Ltd. [2017] (82 taxmann.com 415) 3. Mumbai Tribunal in Sajjan India Ltd. v. Addl. CIT [2018] (89 taxmann.com 21) 14A not applicable on stock in trade 1 Supreme Court in Maxopp Investment Ltd. v. CIT [2018] 402 ITR 640 (SC) 2 Delhi High Court in PCT v. PNB Housing Finance Ltd. [2023] 146 taxmann.com 445 (SLP dismissed by Hon'ble Supreme Court- [2023] 157 taxmann.com 465) ITAT order in own case for A.Y. 2009-10 and earlier years 9.5 It is submitted that the identical issue, when came up before....
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.... to (supra), however for the purpose of verification are being set-aside to the file of ld. AO for verification of the working submitted by the assessee and re-computation of the disallowance under section 14A r.w.r. 8D in terms of decision of Special Bench of Delhi Tribunal in ACIT vs Vireet Investment P. Ltd .. 9.8 In result, Ground No.2 of the assessee's appeal stands allowed for statistical purposes. 10. Ground No.3 of assessee's appeal regarding disallowance of provisions for expenses. 10.1 On this issue the provision for expenses on which no tax has been deducted at source were considered to be non-entitled for deduction by the ld. AO and accordingly an addition of Rs. 133,74,36,609/- was made. The issue was carried before the First Appellate Authority (FAA), who had coincided with the findings of ld. AO, stating that as the provisions are for contingent and uncertain liabilities also no TDS is deducted, therefore the disallowances liable to be upheld. The issue is raised by the assessee before us, which was there before this Tribunal in the earlier years also. A breakup of such expenses was furnished before us at page 843A of the PB, the same is extracted as....
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....9;s own case for A.Y. 2008-09 (supra), similar relief was allowed to the assessee on the basis of decision of Karnataka High Court in Subex Ltd. vs DCIT in ITA No. 787 of 2017 and held that provision was made at the year end on estimate basis cannot be denied. We find that assessee is in a business of banking and all such provision are integral part of business activities. Thus, following the order of co-ordinate bench in A.Y. 2008-09 and the decision of Karnataka High Court in Subex Ltd. (supra), we direct the assessing officer to delete the entire addition. In the result, ground no. 3 of appeal of assessee is allowed." 10.3 The ld. CIT-DR per contra vehemently supported the orders of revenue authorities. 10.4 We have considered the rival submissions, perused the material available on record and case laws relied upon by the assessee. Admittedly, the issue is no more res-integra, which is already decided by the Co-ordinate Bench of ITAT, Mumbai in assessee's own case for AY 2008-09 and 2009-10 following the decision of Hon'ble Karnataka High Court in the case of Subex Ltd. (supra), we therefore in absence of any new material on the issue brought on record by the reven....
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....ve in the order of ld. CIT(A) which we affirmed. No contrary fact or law is brought to our notice to take other view. In the result, ground no. 7 of the appeal of revenue is dismissed." 11.2 Ld. CIT-DR supported the order of ld. AO. 11.3 We have considered the rival submissions and perused the material available on record and case laws relied by the assessee. As apprised by ld. AR that the issue is identical with the issues in assessee's own case for AY 2007- 08, 2008-09 and 2009-10, wherein the disallowance on account of Mark to Market Loss on forex derivatives was directed to be deleted by the ITAT following the decision of Hon'ble Supreme Court in the case of CIT vs. Woodward Governor (supra), therefore in the present case also in absence of any deviating fact, circumstances and decision, it would justify to be decided it in favour of assessee. The ld. CIT(A) in the impugned order has followed the decision of Hon'ble Apex Court in Woodward Governor (supra), we thus do not see any infirmity in the order of ld. CIT(A) to interfere with the same. 11.4 In result, Ground No.5 of the revenue, thus stands dismissed. 12. Ground No.6 of revenue: Regarding exemptio....
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....llowing the decision of Hon'ble Supreme Court in case of ICDS vs. CIT (supra), therefore the decision of ld. CIT(A) cannot be found at fault so as to revisit the same. We, thus do not find any substance in the ground of appeal no. 7 & 8 raised by the revenue in the present appeal, the same are accordingly dismissed. 14. Ground No.9 of the revenue's appeal: Disallowance of bad-debts (gross) written off 14.1 The aforesaid issue has been cropped up, as the addition of Rs. 32,51,44,22,114/- was made by ld. AO, observing that the assessee was unable to substantiate the claim as per the provisions of section 36(1)(vii) r.w.s 36(2) by furnishing complete details. It was held that the assessee failed to justify the condition requisite for allowance of debt as bad-in-law under section 36(1)(vii) of the Act. The ld. AO observed that the similar issue is sub judice for the previous year also. 14.2 The assessee carried the matter before the ld. CIT(A), who had taken cognizance of the decision in the case of TRF Ltd. (230 CTR 14) and Vijaya Bank (323 ITR 166) and accordingly held that that there is no ambiguity left for allowance of deduction on account of bad-debts as the Hon&....
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....o. 9 of the revenue's appeal. 15. Ground No.10 of revenue's appeal: Disallowance of Employees Stock Option Cost (ESOS) Expenses. 15.1 During the assessment proceedings the assessee vide letter dated 21.02.2014 had claimed a deduction of Rs. 79.21/- Crore, being the difference between exercise price and market value of the stock options offered by it to its employees. As the claim has been made during the course of assessment proceedings, the ld. AO denied the same following the decision of Hon'ble Apex Court in the case of Goetze India Pvt. Ltd. [284 ITR 323]. 15.2 The issue was raised before the FAA relying upon the decision of Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. vs. CIT [187 ITR 688] and Hon'ble Bombay High Court in the case of Pruthvi Brokers & Shareholders [2012] 349 ITR 336. Such claim of assessee was allowed by the ld. CIT(A) following the decision of ITAT, Bangalore in the case of Biocon Ltd. reported in (2013) 25 ITR (Trib.) 602. In the case of M/s Biocon Ltd. (supra), it was held that the difference between the exercise price and market price of the ESOS can be claimed as deductible expenditure by the tax payer. ....
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....ee. In the context of aforesaid ground raised by the revenue, we find that the identical issue has come up before Mumbai Tribunal in the case of Kotak Mahindra Bank vs. DCIT (supra), wherein it is categorically held that the discount of issuance of ESOPs is allowable business expenditure under section 37 of the Act. The relevant findings from the said decision are culled out as under: "27. Rewarding employees through share-based benefit schemes has been an effective tool for the companies to not just recognize their contribution to the company but also retain them by imbibing a sense of belonging and ownership. One such scheme, popular among the companies for almost last two decades, has been to grant of Employee Stock Option Plans ("ESOPs"). In simple terms, an ESOP 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. Recently, the 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 t....
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.... to allow proportionate expenditure on the issue of discount bonds. This is the 8th year of bonds, following the decision of Tribunal prorate expenses is allowable in the current year. As recorded that similar relief was allowed to the assessee in AY 2007-08 & 2008-09. Thus, the assessing officer is directed to follow the order of Tribunal in A.Y. 2007-08 and 2008-09. Resultantly, this ground of appeal is also dismissed." 16.2 In terms of identical facts and circumstances, without any contrary material to dislodge the aforesaid findings by the Tribunal in the assessee's own case for earlier years, we find that the ld. CIT(A) had rightly allowed the claim of assessee qua the expenses on issue and discount of rupees and foreign currency bonds, we therefore concur with the decision of ld. CIT(A). 16.3 In result, ground no. 11 of the revenue in absence of any substantial material to convince us to deviate from the decisions of Tribunal stands rejected. 17. Ground No. 12: disallowance of Club Expenses. 17.1 Claim for such expenses are covered by assessee's own case for AY 2009-10 and earlier years. During the year under consideration, the ld. AO has made a disallowan....
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....r under consideration. We have submissions advanced by both sides in the light of the records placed before us. 26. In assessee's own case for assessment in 2007-08 (supra), this Tribunal followed the ratio of Hon'ble Bombay Court in case of Otis elevators company India Ltd (supra). We therefore do not find any infirmity in the view taken by the Ld.CIT(A) and the same is upheld." 17.4 Since the aforesaid issue has been discussed and decided in favour of the assessee, thus sans any new fact, material or decision to contravene the aforesaid finding of Tribunal, which is followed by the ld. CIT(A), we do not find any infirmity in the decision of ld. CIT(A) in deleting the Club Expenses incurred and claimed by the assessee, so as to disturb the same. Accordingly Ground No. 12 of the revenue in present appeal stands dismissed. 18. Ground No. 13 of the revenue and disallowance on Business Loss and other Expenses. 18.1 The aforesaid issue is also covered by the finding of ITAT, Mumbai in assessee's own case for AY 2009-10, wherein the Tribunal has held as under: "39. We have considered the rival submissions of both the parties and the order ....