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2016 (11) TMI 245 - ITAT HYDERABADDisallowance u/ 14A - Held that:- As per section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income, which is exempt from tax. The relevance is the expenditure in relation to income. The quantification has to be undertaken in relation to the exempt income. The investment which has not generated exempt income should be excluded from the calculation of ratio to determine the disallowance. Similarly, for the administrative expenses, 0.5% of average investments from which the exempt income is received should be considered instead of average of the total investments.Considering the above discussion, we direct the AO to recalculate the disallowance as per rule 8D as per the above guidance. Accordingly, ground raised by assessee is allowed. Disallowance of commission payment - genuity of expenditure - AR submitted that the commission was paid through banking channels and properly credited in the account of Shri C.P. Sharma and since, Mr. Sharma does not have any PAN, at the rate of 20% was deducted and credited in the central govt. account - Held that:- The genuineness of the transaction should be provided beyond doubt. There has to be live link with the business of the assessee and the expenditure incurred, the assessee should also be in a position to prove the expenditure with proper records beyond doubt. The assessee has submitted before us the details of commission payment (Refer page 37 of the paper book). From the above statement, we have noticed that assessee had paid 15% of freight as commission payment and deducted 20% as TDS out of the commission. Considering the high value transaction, and such person does not have PAN, it does raise eye brows. The assessee has to prove that such persons exists and why he does not have PAN even though having high value transaction. Unless assessee proves the genuineness of existence of such person, it cannot be held as genuine merely because it paid relevant TDS. Accordingly, we are bound to accept the findings of the DRP and hence, ground raised by the assessee is rejected. Disallowance of share expenses - claim maid u/s 35D - Held that:- The term public issue has wider meaning. It cannot be restricted to issue of shares/debentures to retail investors, it also applied to institutional investors. Even to issue shares to institutional investors, it involves expenditure. It has to be treated similar to the expenses incurred on issue of shares to retail investors. See DCIT vs. Deccan Chronicle Holdings Ltd., [2015 (8) TMI 914 - ITAT HYDERABAD] - Decided in favour of assessee Disallowance of expenses relating to the shipping division - said expenses should be considered as expenses pertaining to the shipping division as computed under the provisions of section 115VG - Held that:- From the record, it is clear that the direct expenditures relating to shipping divisions are recorded in their books properly, but, the management of the company has not allocated any share of head office expenditure to this division. The allocation of expenditure to the various divisions is subjective matter, it involves various factors like the involvement of management time, personnel etc. These informations are not available on the record. We have noticed from the financial statement of the shipping division that no management personnel expenditures or management related expenses were debited to P & L A/c. It is a fact that management time and personnel involve running of any business activity. The assessee has not brought anything on record to prove that the shipping division can function independently without any management involvement. In absence of such information and for the sake of clarity and justice, we find it appropriate to remit this issue to the file of the AO to determine the share of head office expenditure for this division as the assessee also not clear with the quantum of expenditure adopted to allocate the share of expenditure by the AO in the first place. We direct the assessee also to submit the relevant details of expenditure and extent of management involvement in running of this division. In the result, this ground of assessee is allowed for statistical purposes. Disallowance of Employees Stock Option Expenses - Held that:- The revenue authorities denied the deduction of ₹ 60,48,569/- towards ESOP expenses because of the revised return not being filed by the assessee. However, the assessee filed a letter dated 18/03/2015 before the AO claiming the said expenses. According to the ld. AR, the ESOP expenses are allowed from the AY 2012-13 on wards without any dispute as claimed by the assessee, but, for AY 2011-12 the above was not allowed by the AO on the plea that such claim can only be made through a revised return and not by way of a letter. Following the said decision of the Hon’ble Delhi High Court in the case of Principal CIT Vs. Western India Shipyard Ltd.[2015 (10) TMI 539 - DELHI HIGH COURT ] we remit the issue to the file of the AO to accept the letter filed by the assessee for claiming the ESOP expenses and decide the issue in accordance with law after providing reasonable opportunity of hearing to the assessee. Accordingly, this ground is allowed for statistical purposes.
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