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2021 (8) TMI 561 - AT - Income TaxDisallowance of Employee Stock Option Scheme Compensation - CIT-A deleted the addition - HELD THAT - We find that CIT(A) while deciding the issue in favour of the assessee has noticed that her predecessor in assessee s own case for A.Y. 2011-12 2012-13 had allowed the claim of the assessee. Before us, no fallacy in the findings of CIT(A) has been pointed out by the Revenue. Revenue has also not placed any material on record to demonstrate that the order of CIT(A) for A.Y. 2011-12 2012-13 has been set aside by higher judicial forum. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of the Revenue is dismissed. Disallowance u/s 14A r.w.r.8D - CIT-A deleted the addition - HELD THAT - We find that CIT(A) while deciding the issue in assessee s favour has given a finding that AO has applied the provisions of Rule 8D mechanically and has not demonstrated as to how the suo moto disallowance made by the assessee was incorrect or inadequate. He has further given a finding that the suo moto disallowance made by the assessee was in accordance with the decision of Jurisdiction High Court. Before us, no fallacy in the findings of CIT(A) has been pointed out by the Revenue. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the grounds of the Revenue are dismissed.
Issues:
1. Disallowance of Employee Stock Option Scheme Compensation 2. Disallowance under section 14A read with Rule 8D of the Act Issue 1: Disallowance of Employee Stock Option Scheme Compensation The Revenue appealed against the deletion of the disallowance of Employee Stock Option Scheme Compensation amounting to ?1,46,46,000. The Assessing Officer (AO) disallowed the amount, considering it as not an actual expenditure but a notional loss towards raising share capital. The Commissioner of Income Tax (Appeals) (CIT(A)) allowed the claim of the assessee, citing precedents and jurisdictional High Court decisions. The Revenue challenged this decision before the tribunal. The tribunal noted that the CIT(A) had correctly relied on previous decisions in favor of the assessee and found no fault in the CIT(A)'s reasoning. As the Revenue failed to demonstrate any error in the CIT(A)'s order for previous years, the tribunal dismissed the ground of the Revenue. Issue 2: Disallowance under Section 14A read with Rule 8D of the Act The second set of grounds related to disallowance under section 14A read with Rule 8D of the Act. The AO computed a disallowance of ?1,59,43,221 after considering the exempt income and the suo moto disallowance made by the assessee. The CIT(A) found fault with the AO's mechanical application of Rule 8D and directed to restrict the disallowance to the amount of suo moto disallowance made by the assessee. The CIT(A) also noted that the AO had not identified any expenditure related to earning exempt income. The tribunal observed that the CIT(A)'s findings were reasonable and in line with jurisdictional High Court decisions. As the Revenue failed to point out any errors in the CIT(A)'s decision, the tribunal dismissed the grounds raised by the Revenue. In conclusion, the tribunal upheld the decisions of the CIT(A) in both issues, resulting in the dismissal of the Revenue's appeal.
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