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2024 (2) TMI 887 - AT - Income TaxAddition / variations on account of commission, brokerage and discount expenses - HELD THAT - In consonance with the view taken in Assessment Year 2017-18 2024 (1) TMI 157 - ITAT DELHI the impugned additions made on account of commission, brokerage, discount expenses is not sustainable in law and facts. Disallowance u/s 14A - As pointed out assessee has declared exempt income by way of dividend to the extent of Rs. 6,97,835/- while suo motu disallowance itself stands at Rs. 7,30,000/- which is in excess of exempt income - HELD THAT - As in Assessment Year 2017-18 2024 (1) TMI 157 - ITAT DELHI it is well settled law that disallowance under Section 14A can be made only in respect of those investments which have yielded tax free income during the year as held in Caraf Builders 2018 (12) TMI 410 - DELHI HIGH COURT and ACB India Ltd. 2015 (4) TMI 224 - DELHI HIGH COURT - The AO is thus directed to delete the disallowance under Section 14A made over and above the disallowance offered by the assessee. Disallowance of ESOP expenditure - HELD THAT - As decided in Assessment Year 2017-18 2024 (1) TMI 157 - ITAT DELHI addition made towards ESOP expenses are allowed as held expenses are incurred with a view to retain the talent / staff for the benefit of the company and consequently such expenses are allowable as business expenditure. TP Adjustment on account of commission on standby letter of credit - HELD THAT - As identical issue in assessee s own case in Assessment Year 2017-18 2024 (1) TMI 157 - ITAT DELHI wherein held as no cost has been borne by the assessee company and in the absence of any rebuttal to the assertion that actual bank commission charges incurred has been fully recovered from the AEs, we hardly see any justification in the Transfer Pricing Adjustment on this score. We thus are not inclined to address the alternative plea of excessive estimation.
Issues Involved:
1. Validity of the assessment order. 2. Addition on account of commission, brokerage, and discount expenses. 3. Disallowance under Section 14A of the Income Tax Act. 4. Disallowance of ESOP expenses. 5. Adjustment on account of commission on standby letter of credit. Summary: 1. Validity of the Assessment Order: The assessee did not press Ground No.1, which challenged the validity of the assessment order as invalid and non-est in law. 2. Addition on Account of Commission, Brokerage, and Discount Expenses: The Tribunal addressed the addition/variation of Rs. 10,98,98,889/- on account of commission, brokerage, and discount expenses. The assessee argued that these payments were made to overseas agents for services rendered outside India and thus were not subject to TDS under Section 195 of the Act. The Tribunal found that similar issues were decided in favor of the assessee in the previous assessment year (2017-18) and directed the AO to reverse the additions, as the commission payments were not taxable under the Act. 3. Disallowance under Section 14A of the Income Tax Act: The Tribunal addressed the disallowance of Rs. 64,28,401/- under Section 14A. The assessee had already made a suo motu disallowance of Rs. 7,30,000/-, which exceeded the exempt income declared. Citing precedents, the Tribunal held that no further disallowance was permissible and directed the AO to delete the disallowance. 4. Disallowance of ESOP Expenses: The Tribunal addressed the disallowance of Rs. 74,92,596/- on account of ESOP expenses. The assessee argued that these expenses were incurred to retain talent and were allowable as business expenditure. The Tribunal referred to previous judgments, including the jurisdictional High Court's decision in Lemon Tree Hotels Ltd., and allowed the ESOP expenses, directing the AO to reverse the disallowance. 5. Adjustment on Account of Commission on Standby Letter of Credit: The Tribunal addressed the adjustment of Rs. 45,23,261/- on account of commission on standby letter of credit. The assessee contended that the actual bank commission charged was recovered from the AEs, and no additional cost was borne. The Tribunal found no justification for the Transfer Pricing Adjustment and allowed the ground, directing the AO to reverse the adjustment. Conclusion: The Tribunal allowed the appeal of the assessee on Grounds 2, 3, 4, and 5, providing relief as claimed, and dismissed Ground 1 as not pressed. The order was pronounced in the open Court on 16/02/2024.
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