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2016 (5) TMI 960 - AT - Income TaxAddition on account of ESOP - Held that - The Hon ble High Court of Madras in the case of PVP Ventures Ltd. 2012 (7) TMI 696 - MADRAS HIGH COURT has allowed such claim as business expenditure and the Hon ble High Court of Delhi in the case of Lemon Tree Hotels Ltd. 2015 (11) TMI 404 - DELHI HIGH COURT has followed the decision of the Hon ble High Court of Madras held that cost of ESOP could be debited in Profit and Loss account of the assessee. Treatment of entertainment tax exemption in respect of multiplexes as capital receipt - Held that - Treatment to the entertainment tax exemption in respect of Multiplexes as capital receipt, not eligible to tax confirmed. Disallowance of expenditure on prints treating it as capital expenditure - CIT(A) directed to treat the print cost as revenue expenditure - Held that - We have given a thoughtful consideration to the orders of the authorities below. Rule 9B of the Income Tax rules clearly and specifically provides that cost of prints cannot be included in the cost of acquisition of the exhibition rights in the film. Therefore, what can be carried forward are the cost of acquisition and not the cost of prints. In our considered opinion, the cost of prints has to be allowed in the year in which the expenditure is incurred. It is irrelevant as to what treatment the assessee has given in its books of accounts as held by the Hon ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. 1997 (7) TMI 4 - SUPREME Court .
Issues:
1. Addition of ESOP amount in the assessment. 2. Treatment of entertainment tax exemption as a capital receipt. 3. Disallowance of expenditure on prints as capital expenditure. Analysis: Issue 1: Addition of ESOP amount In the case of ITA No. 374/Ahd/2012 for A.Y. 2008-09, the dispute revolved around the disallowance of ?1,58,90,158/- on account of ESOP. The Assessing Officer (A.O) disallowed the claim of deduction as the assessee had not incurred any expenditure, stating that the allotment of shares to employees cannot be considered as an allowable expenditure. The assessee appealed to the ld. CIT(A) without success. However, the Tribunal, after considering relevant decisions, directed the A.O to allow the claim of deduction, citing precedents where similar claims were allowed by the High Courts. The Tribunal upheld the assessee's appeal on this ground. Issue 2: Treatment of entertainment tax exemption In ITA No. 523/Ahd/2012 for A.Y. 2008-09, the revenue challenged the treatment of entertainment tax exemption as a capital receipt. The A.O treated the entertainment tax as a revenue receipt based on findings from earlier years. The ld. CIT(A) directed the A.O to delete the addition, relying on past Tribunal decisions and the High Court's judgment. The Tribunal, following the High Court's findings, dismissed the revenue's appeal, stating that the issue had been settled in favor of the assessee in previous assessments. Issue 3: Disallowance of expenditure on prints The dispute in this regard arose in ITA No. 523/Ahd/2012 for A.Y. 2008-09, where the A.O disallowed ?69,30,298/- claimed as expenditure on prints, treating it as capital expenditure. The ld. CIT(A) directed to treat the print cost as revenue expenditure, emphasizing that the cost of prints cannot be included in the cost of acquisition of exhibition rights. The Tribunal upheld the ld. CIT(A)'s decision, stating that the cost of prints must be allowed in the year of expenditure, regardless of the treatment in the books of accounts. The revenue's appeal on this ground was dismissed. In conclusion, the Tribunal's judgment addressed the issues of ESOP addition, entertainment tax exemption, and expenditure on prints, providing detailed analysis and relying on precedents to make decisions in favor of the respective parties involved.
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