2016 (7) TMI 1486 - HC - Income Tax

Disallowance of expenses debited as cost of ESOP in profit and loss account - Held that - In the present case the ITAT has by the impugned order restored the matter to the file of the AO for re-adjudication. The impugned order of the ITAT is consistent with what has been held by this Court in Commissioner of Income Tax v. Lemon Tree Hotels 2015 (11) TMI 404 - DELHI HIGH COURT . Consequently no substantial question of law arises as far as this issue is concerned. Nature of expenses - software expenses - revenue or capital - ITAT accepted it as revenue expenditure - Held that - The ITAT has in the impugned order placed reliance on the decision of this Court in CIT v. Asahi India Safety Glass Ltd. 2011 (11) TMI 2 - DELHI HIGH COURT . The Revenue has made a reference to the Special Leave Petition (SLP) filed by the Revenue against the said order 2012 (7) TMI 1075 - SUPREME COURT . Learned counsel for the Assessee has handed over a copy of the order dismissing the Revenue s SLP filed against the aforementioned judgment. - decided in favour of assessee.

Summary

Issues:
1. Condonation of delay in re-filing the appeals.
2. Disallowance of expenses related to Employees Stock Option Plan (ESOP).
3. Treatment of software expenses as capital or revenue expenditure.

Condonation of Delay:
The judgment addresses the delay of 592 days in re-filing the appeals, attributing it to the transition to e-filing. The Court deems the delay unacceptable, emphasizing that the practice directions for e-filing were adequately communicated and facilitated by the Court. Consequently, the applications for condonation of the delay are dismissed.

Issue 1 - Disallowance of ESOP Expenses:
Regarding ITA No.366/2016, the dispute revolves around the disallowance of expenses related to ESOP by the Assessing Officer. The ITAT overturned the AO's decision based on a precedent. The Court points out that a similar issue was previously settled in favor of the Assessee by the Court, affirming the ITAT's decision. The ITAT's order to send the matter back to the AO aligns with the Court's previous ruling, leading to the dismissal of the appeal on this issue.

Issue 2 - Treatment of Software Expenses:
In ITA No.367/2016, the question is whether software expenses should be treated as capital or revenue expenditure. The ITAT relied on a judgment by the Court in a similar case. The Revenue referred to a Special Leave Petition, which was dismissed by the Supreme Court, reinforcing the ITAT's decision. Consequently, the Court finds no substantial legal question arising from the ITAT's order on this matter, leading to the dismissal of the appeals on both delay and merits grounds.

In conclusion, the judgment dismisses the appeals due to the delay in re-filing and on the merits of the issues related to ESOP expenses and the treatment of software expenses. The Court's decision is based on the alignment of the ITAT's orders with previous Court rulings, emphasizing the lack of substantial legal questions in the matters at hand.