2022 (11) TMI 1164 - AT - Income Tax

Unexplained expenditure - HELD THAT - Revenue has not brought on record any material to show that there is any change in the facts or in nature of transactions in the impugned assessment year. The Commissioner of Income Tax (Appeals) in the impugned order has deleted the addition following its own order for assessment year 2011-12 - The CIT(A) has categorically mentioned that the facts are identical in both assessment years. Following the order of Co-ordinate Bench in assessee s own case, ground No. 1 to 3 of appeal by the Revenue are dismissed. Claim of ESOP expenses - Allowable revenue expenses u/s 37(1) - HELD THAT - The Delhi Bench placing reliance on Biocon Ltd. 2013 (8) TMI 629 - ITAT BANGALORE held that the discount under ESOP is allowable deduction u/s 37(1) of the Act. The CIT(A) in the impugned order deleted the addition following the order of CIT(A) in the case of M/s. Indiabulls Financial Services ltd (now merged with the assessee Co.) for the A.Y. 2011-12. The CIT(A) categorically observed that there is no change in the facts. The Revenue has not been able to rebut the above observations of the First Appellate Authority. We find no reason to interfere with the finding of the CIT(A) on this issue. Accordingly, ground No. 4 and 5 of the appeal are dismissed. Deduction of education cess - HELD THAT - We find that the Co-ordinate Bench has held that the Explanation 3 inserted by the Finance Act 2022 is effective retrospectively from 1st April 2005, hence, the assessee is not entitled for deduction of education cess. In light of above and the statement made by AR of the assessee, the Revenue succeeds on ground No. 6 of the appeal. Ground of appeal as emanate from the additions made in the assessment order passed under section 143(3) read with section 153A - claim of ESOP expenses - HELD THAT - A perusal of the assessment orderassed under section 143(3) read with section 153A of the Act, reveals that there is no discussion in respect of ESOP expenses. However, while computing total income, the AO has taken total income as determined in the assessment order passed u/s 143(3) - AR has pointed that in assessment order passed u/s 143(3) of the Act, the AO had made addition, the assessee carried the issue in appeal before CIT(A). The CIT(A) decided the issue in favour of assessee. Department has accepted the some as no further appeal was filed by the Department on this issue. We find that CIT(A) in the impugned order has granted relief to the assessee on the ground that the issue of ESOP expenditures stands concluded in proceedings arising out of original assessment order. The Department has not furnished any contrary material. Since, the issue does not emanate from assessment proceedings u/s 143(3) read with section 153 of the Act, ground No. 5 and 6 of appeal are liable to be rejected

Summary

Issues:
1. Unexplained expenditure deletion.
2. Reliance on Income Tax Settlement Commission decision.
3. ESOP expenses allowance.
4. Deduction of education cess.

Unexplained Expenditure Deletion:
The Revenue appealed against the CIT(A)'s deletion of unexplained expenditure totaling Rs.35,28,000. The Tribunal upheld the CIT(A)'s decision, citing similar findings in previous years. The Tribunal emphasized that the entries were duly recorded in the books of account and had been offered as income before the Settlement Commission. As no new material was presented, the Tribunal dismissed the Revenue's appeal on this issue.

Reliance on Income Tax Settlement Commission Decision:
The Revenue questioned the CIT(A)'s reliance on the Settlement Commission's decision regarding the Indiabulls Group entities. The Tribunal noted that the CIT(A) had deleted the addition based on similar grounds from a prior year. As the facts remained consistent, the Tribunal dismissed the Revenue's appeal, emphasizing the lack of change in circumstances.

ESOP Expenses Allowance:
The Revenue challenged the CIT(A)'s decision to allow ESOP expenses. The Tribunal referenced a previous decision in the group company's case and upheld the CIT(A)'s ruling. The Tribunal highlighted that the CIT(A) had followed precedent and that the Revenue failed to provide contrary evidence. Consequently, the Tribunal dismissed the Revenue's appeal on this matter.

Deduction of Education Cess:
The Revenue contested the deduction of education cess allowed by the CIT(A). The Tribunal acknowledged a prior decision against the assessee on this issue. Considering the retrospective effect of the Finance Act 2022, the Tribunal ruled in favor of the Revenue on this ground. The Tribunal noted the absence of contrary material and allowed the Revenue's appeal partially.

In summary, the Tribunal dismissed the Revenue's appeals regarding unexplained expenditure deletion and ESOP expenses allowance, citing consistent findings and lack of new evidence. However, the Tribunal ruled in favor of the Revenue on the deduction of education cess due to the retrospective effect of the Finance Act 2022. The decisions were based on legal precedents and the absence of material changes in circumstances.