2018 (11) TMI 647 - HC - Income Tax

Penalty u/s 271(1)(c) - ESOP claim u/s 37 - Held that - It is pointed out that the ITAT granted relief in this regard for A.Y. 2007-08 and that order was upheld by this Court in Principal Commissioner of Income Tax-6 Vs. New Delhi Television Ltd. 2016 (7) TMI 1486 - DELHI HIGH COURT The judgment of this Court shows that the substantive addition under Section 37, was held to be not unwarranted. The Court had approved the ITAT order which had in turn relied upon the ruling of the Tribunal in Biocon Limited v. DCIT 2013 (8) TMI 629 - ITAT BANGALORE . Besides, the Madras High Court had taken a similar view in CIT Chennai v. PVP Ventures Ltd. 2012 (7) TMI 696 - MADRAS HIGH COURT . Furthermore, we notice that the assessee s ESOP claim under Section 37 for the previous year 2006-07 too had been upheld by the Tribunal which was affirmed by this Court. In these circumstances no question of law arises in this matter.

Summary

Issues:
1. Penalty imposition by Assessing Officer on ESOP expenses under Section 37 of the Income Tax Act.
2. Justification of penalty imposition by the Revenue.
3. Interpretation of ESOP expenses deduction under Section 37.
4. Comparison with previous judgments on similar issues.

Analysis:
1. The case involved a dispute regarding the penalty imposed by the Assessing Officer on ESOP expenses claimed by the assessee for the assessment year 2007-08 under Section 37 of the Income Tax Act. The CIT(A) considered the ESOP expenditure as a debatable issue, citing the Supreme Court judgment in Commissioner of Income Tax v. Reliance Petroproducts (2010) 189 Taxman 322, and held that the penalty was not justified. The ITAT upheld this decision, leading to the Revenue seeking to set aside the ITAT order and restore the Assessing Officer's order.

2. The Revenue argued that the penalty was justified as the ESOP expenses could not be deducted under Section 37. However, the Assessing Officer contended that the substantive addition made on account of ESOP deductions was upheld, and the revenue position was not approved. The ITAT had granted relief for the assessment year 2007-08, and this relief was upheld by the High Court in a previous case involving Principal Commissioner of Income Tax-6 Vs. New Delhi Television Ltd. (ITA 107/2017).

3. The High Court referred to its judgment in ITA No.107/2017 (New Delhi Television Ltd.), where the substantive addition under Section 37 was deemed justified. This decision was based on the ITAT order, which relied on the ruling of the Tribunal in Biocon Limited v. DCIT [2013] 144 ITD 21 (Bang) (SB). Additionally, the Madras High Court had a similar view in CIT Chennai v. PVP Ventures Ltd. [TC(A) 1023/2005 decided on 19.06.2012]. Moreover, the Tribunal had upheld the assessee's ESOP claim for the previous year 2006-07, a decision affirmed by the High Court in ITA 366/2016.

4. Considering the consistency in judgments and the previous rulings upholding ESOP claims under Section 37, the High Court concluded that no question of law arose in the matter. Therefore, the appeal was disposed of accordingly, affirming the decision of the ITAT and rejecting the Revenue's plea to set aside the order.