2023 (11) TMI 77 - AT - Income Tax

Short granting of TDS credit - because of late deposit of TDS by some of the customers, a further incremental TDS credit was reflected in Form No.26AS - CIT-A held that the credit available in Form No.26As should have been granted by AO - HELD THAT - We do not find any infirmity in the order of the Learned CIT-A in granting the total credit of TDS - It is not the case of the Revenue that the income comprising the TDS has not been offered by the assessee in its income in the impugned assessment year. Accordingly, we confirm the order of the Learned CIT-A on this issue and dismiss ground of the appeal of the Revenue. Disallowance of ESOP expenditure - allowable revenue expenditure u/s 37 or not? - CIT(A) deleted the addition - HELD THAT - Issue is squarely covered in favour of the assessee by the decision of Biocon Ltd. 2020 (11) TMI 779 - KARNATAKA HIGH COURT wherein it has been held that the above deduction is allowable to the assessee u/s 37(1) - CIT-A has further referred to the decision of PVP Ventures Ltd 2012 (7) TMI 696 - MADRAS HIGH COURT holding similar view. Employees Stock Option Scheme expenditure incurred by the assessee is reimbursed to the holding company with respect to the employees employed by the assessee. This is equivalent to the emoluments paid to the employees of the assessee company. Therefore, it is part of employees remuneration. This is a crystallised expenditure and not notional or contingent. No infirmity in the order of the Learned CIT-A in directing deletion of disallowance. Decided against revenue.

Summary

Issues involved:
The judgment involves issues related to the granting of TDS credit, disallowance of ESOP expenses, and the nature of ESOP expenditure.

Granting of TDS credit:
The appeal was filed against the appellate order allowing the assessee's appeal against the assessment order. The Assessing Officer raised grounds regarding the TDS credit reflected in Form 26AS, questioning the direction to give credit for all TDS amounts and the allowance of ESOP expenses. The CIT-A directed to grant credit for TDS amounts based on the latest Form 26AS, resulting in a total credit of Rs. 174,05,48,105. The Tribunal confirmed the CIT-A's order, stating that the income comprising the TDS had been offered by the assessee, dismissing the Revenue's appeal on this issue.

Disallowance of ESOP expenses:
The Assessing Officer disallowed the ESOP expenses, considering them as capital expenditure, notional, and contingent. However, the CIT-A referred to relevant court decisions and held that ESOP expenditure is revenue expenditure and not contingent. The Tribunal upheld the CIT-A's decision, stating that the ESOP expenses were part of employees' remuneration and not contingent, dismissing the Revenue's appeal on this ground.

Nature of ESOP expenditure:
The Tribunal further explained that the ESOP expenses incurred by the assessee were reimbursed to the holding company for the employees' remuneration, equivalent to emoluments paid to the assessee company's employees. Citing court decisions and coordinate bench rulings, the Tribunal confirmed the deletion of the disallowance of ESOP expenses, dismissing the Revenue's appeal on this issue.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT-A's decision on granting TDS credit and disallowance of ESOP expenses based on the nature of the expenditure and relevant legal precedents.