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2018 (4) TMI 1858 - HC - Income TaxDisallowance on account of the difference between purchase price of the Stock Appreciation Rights (SAR) and the sale price of such shares at the time of the exercise by the employees - HELD THAT - The Scheme is analogous to the Employee stock appreciation rights scheme 2007 and is covered in the favour of the assessee by the ruling of this Court in the case of Commissioner of Income Tax vs. New Delhi Television Limited 2017 (9) TMI 118 - DELHI HIGH COURT which had in turn relied on a previous judgment of Madras High Court in the case of Commissioner of Income Tax-III Chennai vs. M/s PVP Ventures Limited T. Nagar Chennai 2012 (7) TMI 696 - MADRAS HIGH COURT . Consequently no question of law arises on this aspect. Disallowance u/s 14-A - HELD THAT - ITAT here ruled that since no exempt income was earned during the year disallowance was impermissible relying upon the judgment of this Court in the case of Cheminvest Ltd. Vs CIT-VI 2015 (9) TMI 238 - DELHI HIGH COURT . For this reason this question of law too does not arise. Disallowance under Section 40 (a) (ia) - Revenue authorities including the CIT (A) disallowed certain amounts contending that the failure to deduct tax at source from the amount paid to other entities authorized the disallowance - HELD THAT - ITAT noted that the amounts were paid by way of reimbursement and that there was no finding to the effect that the reimbursement contained any income element. On account of these findings the court is of the opinion that no question of law arises on this aspect. Admit Did the ITAT fall into error in permitting the assessee expenditure claimed by it for the period April-2007 to June-2007 ( 93, 89, 552/-) having regard to the circumstance that it commences business from July-2007?
Issues:
1. Disallowance on account of the difference between purchase price of Stock Appreciation Rights (SAR) and the sale price of shares. 2. Disallowance under Section 14-A of the Income Tax Act. 3. Disallowance under Section 40(a)(ia) of the Act. 4. Consideration of preoperative expenses. Analysis: 1. The first issue raised by the Revenue pertains to the disallowance concerning the difference between the purchase price of Stock Appreciation Rights (SAR) and the sale price of shares. The Court found that the scheme in question is similar to the Employee Stock Appreciation Rights Scheme 2007, which had already been ruled in favor of the assessee in a previous case. The Court referenced the judgment of the Madras High Court, stating that no question of law arises on this aspect, thereby dismissing the Revenue's contention. 2. Moving on to the second issue, the disallowance under Section 14-A of the Income Tax Act was challenged. The ITAT had ruled that since no exempt income was earned during the year, disallowance was not permissible. Citing a previous judgment, the Court concurred with the ITAT's decision, concluding that this question of law does not arise in the present case. 3. The third issue raised concerns the disallowance under Section 40(a)(ia) of the Act. The Revenue authorities had disallowed certain amounts due to the failure to deduct tax at source from payments to other entities. However, the ITAT observed that the amounts were paid as reimbursement without any income element. Consequently, the Court held that there was no question of law arising on this aspect, thereby siding with the ITAT's findings. 4. Lastly, the Court addressed the fourth question regarding preoperative expenses. The Court deemed this issue necessitating consideration and admitted it for further examination. The specific question posed was whether the ITAT erred in permitting the assessee's expenditure claimed for a particular period despite the business commencing at a later date. The Court directed notice to the appellant/assessee limited to this question, to be returned on a specified date. In summary, the judgment delved into various tax-related issues raised by the Revenue, providing detailed analysis and referencing previous judgments to support its conclusions. The Court dismissed some contentions while admitting further consideration on the matter of preoperative expenses.
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