2022 (1) TMI 1221 - AT - Income Tax

Depreciation on goodwill - HELD THAT - As decided in assessee's own case 2019 (12) TMI 370 - ITAT DELHI the arguments of the DRP on different facets of goodwill acquired in business reconsideration and held that the assessee to be entitled to claim depreciation on goodwill, as per the rates applicable for the year under consideration. Following same parity of reasoning, we allow the claim of the assessee of depreciation on goodwill. Deduction incurred on account of reimbursement paid to the parent company towards ESOP for granting stock options to the employee of the assessee - HELD THAT - As relying on assessee own case 2019 (12) TMI 370 - ITAT DELHI we direct the Assessing officer to delete the impugned disallowance of ESOP. Non granting deduction of profit on sale of assets - HELD THAT - We have given a thoughtful consideration to the issue at hand and we remit this issue back to the file of the Assessing officer for rectifying the computation of income after verification of the claim of the assessee.

Summary

Issues Involved:

1. Disallowance of depreciation on goodwill.
2. Disallowance of ESOP expenses.
3. Non-granting of deduction on profit on sale of assets.
4. Non-granting of Minimum Alternate Tax (MAT) credit.
5. Short credit of Tax Deducted at Source (TDS).
6. Charging of interest under sections 234B and 234C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Goodwill:

The Tribunal addressed the disallowance of depreciation on goodwill amounting to ?66,96,48,045/-. The assessee argued that this issue was covered in its favor by previous Tribunal orders for assessment years 2008-09 to 2015-16. The Tribunal agreed, referencing its earlier decisions which recognized the goodwill arising from the amalgamation of Flextronics Software Limited and Futures Software Limited. The Tribunal reiterated that the methodology for computing goodwill was approved by the tax auditor and upheld by the Hon'ble High Court. Consequently, the Tribunal allowed the depreciation claim on goodwill, citing consistency with previous rulings.

2. Disallowance of ESOP Expenses:

The Tribunal examined the disallowance of ?14,99,05,312/- claimed as ESOP expenses. The assessee contended that similar disallowances were deleted by the Tribunal in previous years (2014-15 and 2015-16). The Tribunal agreed, referencing its earlier decisions which held that ESOP expenses represent employee compensation and are deductible under section 37(1) of the Act. The Tribunal cited the Hon'ble Madras High Court's ruling in CIT vs. M/s PVP Ventures Ltd. and the Special Bench decision in Biocon Ltd. vs. DCIT, affirming that ESOP expenses are an ascertained liability and allowable as business expenditure. Thus, the Tribunal directed the Assessing Officer to delete the disallowance.

3. Non-granting of Deduction on Profit on Sale of Assets:

The Tribunal considered the non-granting of deduction on profit from the sale of assets amounting to ?2,20,86,134/-. The assessee argued that this profit was included in the profit and loss account and should be reduced from the Written Down Value (WDV) of the block of assets as per section 43(6) of the Act. The Tribunal noted the factual matrix and remitted the issue back to the Assessing Officer for verification and rectification of the computation of income, thus allowing the ground for statistical purposes.

4. Non-granting of Minimum Alternate Tax (MAT) Credit:

The Tribunal addressed the issue of non-granting of MAT credit amounting to ?29,10,99,501/-. The Tribunal directed the Assessing Officer to verify the claim and grant the MAT credit as per the rules, thus allowing the ground for statistical purposes.

5. Short Credit of Tax Deducted at Source (TDS):

The Tribunal examined the issue of short credit of TDS amounting to ?2,69,530/-. The assessee claimed TDS of ?27,04,10,498/- in its return, but the Assessing Officer allowed only ?27,01,40,968/-. The Tribunal directed the Assessing Officer to allow the balance TDS credit after due verification, thus allowing the ground for statistical purposes.

6. Charging of Interest under Sections 234B and 234C:

The Tribunal noted that the charging of interest under sections 234B and 234C is consequential in nature and does not require specific adjudication. Thus, no specific directions were issued for this ground.

Final Result:

The appeal of the assessee was allowed in terms of the directions mentioned above. The Stay Application became infructuous and was dismissed. The order was pronounced on 04.01.2022.