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TMI Blog2014 (10) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has not justified before the AO the reasons for not excluding the other income while working out the exemption u/s.10B and since nothing is coming out of the records as to what has happened finally in the preceding assessment years, therefore, the matter is to be remitted back to the AO for passing a speaking order – Decided in favour of assessee. - ITA No. 114/PN/2013 - - - Dated:- 12-9-2014 - Shri Shailendra Kumar Yadav And Shri R. K. Panda,JJ. For the Petitioner : Shri Sharad Shah For the Respondent : Smt. M. S. Verma ORDER Per R. K. Panda, AM : This appeal filed by the assessee is directed against the order passed u/s.143(3) r.w.s.144C(13) of the I.T. Act for the Assessment Year 2008-09. 2. Ground of appeal No.1 by the assessee reads as under : 1.1 The DRP erred in directing the AO and the AO erred in treating the entire expenditure of special bonus claimed by the assessee company amounting to ₹ 18,45,25,000/- as inadmissible as per the provisions of section 37(1) of the Income Tax Act, 1961 1.2 The DRP erred in not considering the expenditure by way of special bonus amounting to ₹ 18,45,25,000/-, though extra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id in pursuance with the acquisition of the majority stake of the company by the GSCP Fund VI. The Board resolution approving the special bonus payment clearly spells out the purpose for declaration of bonus. This bonus was paid over and above the regular bonus which is paid based the performance of the company and individual employee. The special bonus was paid only to the selected people and amount were determined by the directors based on various criteria viz. number of years spend by them with company, designation and the current etc etc., the details of the bonus has been enclosed in Appendix A. The special bonus was paid in order to retain the key people with the company. The expenditure is allowable under section 37 as it neither is personal nor capital in nature. Further, it is purely in the course of business and from commercial expediency. It is supported by the supreme Court decision of CIT Vs Walchand Co. Pvt. Ltd 65 ITR 381 and J L Wooler manufacturing Vs CIT 72 ITR 612. 3. However, the Assessing Officer was not satisfied with the explanation given by the assessee. On being asked by the Assessing Officer the assessee filed the Board Resolution declaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to create goodwill in human resources of the Company and to avoid attrition and this normally happens when changeover of management takes place also substantiates the fact that the cost of special bonus is incurred by the assessee in its course of operations as directed by the AEs/shareholders. c) The assessee has also not produced the entire copy of share acquisition agreement titled Acquisition of Sigma Electric Group by GS capital partners VI funds from Sajjan Kumar Agarwal and other selling shareholders - closing date 15/10/2007 to support its contention that the payment of bonus was not a liability of shareholders. e) In view of the above facts, it can be concluded that the special bonus was paid by the assessee on behalf of shareholders [either old (seller) or new (purchaser)] and such cost shall be recovered by the assessee from these non-resident shareholders. In this case, the assessee has paid ₹ 1845.25 lakhs on behalf of AE/non-resident shareholders; however, as the jurisdictional AO has not referred this transaction for computation of arm s length price, its arms length price is not determined separately . The assessee approached the DRP but without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses) basis. 5.1 Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings observed that the assessee company has offered an amount of ₹ 1,29,06,460/- as other income, the details of which are as under : Interest income : ₹ 1,05,47,629/- Sale of Scrap : ₹ 23,58,831/- He noted that the assessee has claimed exemption u/s.10B on the above. According to the Assessing Officer, for the purpose of computing the quantum of eligible exemption u/s.10B, only those receipts which are directly derived from export of articles or things are to be included. The Assessing Officer, therefore, asked the assessee to explain as to how the above income, which are regularly disallowed, should not be excluded while computing the exemption u/s.10B. Although the assessee submitted the details of regular disallowance, however, no detailed submission was made justifying the computation made. Following the stand of the Revenue in the preceding assessment years the Assessing Officer excluded the above income for working out the exemption u/s.10B. 5.2 Aggrieved with such order of the Assessing Officer the assessee is in appeal b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Disallowance of ₹ 1,00,750/- u/s 14A read with Rule 8-D 9.1 The Ld. Counsel for the assessee did not press this ground due to smallness of the amount. The Ld. Departmental Representative has no objection for the same. Accordingly, this ground by the assessee is dismissed. 10. The assessee has taken the following additional ground : Without prejudice to our claim of allowability of special incentive bonus, if it is to be disallowed, the Assessing Officer to be directed to allow proportionate additional deduction u/s.10B . 10.1 After hearing both the sides and considering the fact that the above ground is a legal one, the same is admitted for adjudication. 10.2 We find the above ground is correlated to the ground of appeal No.1 of the assessee. Since the said ground has been restored to the file of the Assessing Officer for fresh adjudication in the light of the directions given therein, therefore, we restore this ground also to the file of the Assessing Officer with a direction to adjudicate the same afresh in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The additional ground raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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