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TMI Blog2018 (11) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance and taken a possible view in accordance with the law. It is settled law that every loss of revenue as a consequence of a view taken by the Assessing Officer cannot be treated as prejudicial to the interest of the revenue - where two views are possible and the Income-tax Officer has taken one view with which the Commissioner (PCIT) does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. - Decided in favour of assessee. - ITA No.2263/Mum/2016 - - - Dated:- 19-9-2018 - Shri Pawan Singh, Judicial Member And Shri N.K. Pradhan, Accountant Member For the Assessee : Shri J.D. Mistri (AR) For the Revenue : Shri N.S. Jangpangi (CIT DR) ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. This appeal by assessee under section 253 of Income Tax Act is directed against the order of Principle Commissioner of Income Tax-2 ( ld. PCIT) dated 8th February 2016 for Assessment Year 2009-10. The assessee has raised the following ground of appeal: (i) On the facts and in the circumstances of the case and in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under section 37 of the Income tax Act and requested the assessing officer that disallowance on account of ESOP expenses of ₹ 6.16 crore is not called for. The assessee further contended that the assessing officer took the details relating to the ESOP on record and has not passed order rectifying the purposed mistake, despite laps of more than one year. The assessee further contended in its reply that the assessing officer has taken one of the possible views and that the learned PCIT have no jurisdiction to interfere with such a view while exercising power under section 263. The assessee prayed that ESOP discount is an allowable expenditure under section 37(1) of the Income tax Act which has been recognised by legislature and has been settled by various legal decisions. 4. The contention of assessee was not accepted by learned PCIT holding it that the assessment order passed by assessing officer is erroneous and so far as prejudicial to the interest of revenue as the assessing officer has not verified whether the claim of assessee for Employees Stock Option Amortisation Expenses ( ESOP ) is allowable, and if so, how the claim has been calculated. The assessee has not bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned AR of the assessee relied upon the decision of Hon ble Supreme Court in case of Malabar industrial Co Ltd Versus CIT 243 ITR 83(SC), CIT Versus Max India [2007 ] 295 ITR 282 (SC ), decision of Hon ble Bombay High Court in case of CIT versus Gabriel India Ltd 203 ITR 108(Bombay), decision of Delhi High Court in case of CIT versus Escort Ltd [2011] 338 ITR 435(Delhi), Calcutta High Court in Russell properties Private Ltd Versus ACIT (109 ITR 229 (Calcutta). 6. On merit the ld AR for the assessee strongly relied upon the decision of Special Bench of Bangalore Tribunal in case of Bicon Ltd Versus DCIT (35 taxmann.com 335) wherein it was been held that discount on ESOP is an allowable expenses under section 37 during the year of vesting. The assessing officer on the basis of information available on record issued notice under section 154. The assessee filed its reply, which was taken on record and the assessing officer has not passed order rectifying the proposed mistake; therefore, the assessing officer accepted the contention of the assessee. The assessing officer was satisfied with the contention of the assessee therefore; the order passed by assessing officer while pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the revenue recourse cannot be had to section 263 (1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the AO, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principle of natural Justice or without application of mind. The phrase prejudicial to the interest of revenue is not an expression of art and is not defined in the Act. Understood it is ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provision of the Act and this task is entrusted to the revenue. If due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of revenue. The phrase prejudicial to the interest of revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO, cannot be treated as preju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner, he would have estimated the income at a figure higher than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P scheme. It is also mentioned in the notice that it was seen from the cash flow statement that an amount of ₹ 6,61,09,445/- was accounted as employee stock option amortization expenses which is obviously the discount amount treated as employee cost. Thus, from the perusal of the notice under section 154 it is clear that all the details related with ESOP discount were available with the assessing officer. The assessee file its reply vide reply dated 28.01.2015, copy of which is filed on record vide page No. 11 to 18 of PB. In the reply the assessee explained the legislative history ESOP and relied on the decision of Special Bench in Biocon Limited (supra), wherein it was held that discount on ESOP is an allowable deduction under section 37(1) during years of vesting on basis of percentage of vesting during such period, subject to adjustment at time of exercise of option. The ld AR for the assessee while making submissions submitted that after taking the reply of assessee and the details relating to the ESOP, the assessing officer has not conveyed his decision on proposed rectification and the contention of the assessee is deemed to be accepted as allowable expenses under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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