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TMI Blog2019 (12) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... We direct the Assessing Officer to allow the credit of tax deducted at source in the hands of the assessee, where the assessee produces the primary evidence of same being deducted tax at source out of the amount due to it. The ground of appeal no. 6 is thus allowed. Charging of interest u/s 234A - assessee had filed the return of income on 30.11.2015 which was the prescribed due date for filing the return of income by the assessee u/s 139(1) - HELD THAT:- We find merit in the plea of the assessee that where the due date of filing return of income was 30.11.2015 and since the assessee had filed return of income on 30.11.2015, then there was no merit in charging of interest u/s 234A Charging of interest u/s 234C - The said interest is to be computed on the returned income of the assessee and not the income assessed by the Assessing Officer. The Assessing Officer may verify the stand of the assessee in this regard and re-compute the interest chargeable u/s 234C - ITA No.5708/Del/2019 - - - Dated:- 23-12-2019 - Ms. Sushma Chowla, JM And Dr.B.R.R. Kumar, AM For the Appellant : Sh. Ajay Vohra, Sr.Adv., Sh. Neeraj Jain, Adv. Sh. Anshul Sachar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive any clarity on the aspect related to valuation of Goodwill . 3. That the Ld. AO/ DRP erred on facts and in law in not allowing the deduction of ₹ 14,99,05,312 claimed on account of reimbursement paid to the parent company towards ESOP for granting stock options to employees of the appellant. 3.2 That the Ld. AO/ DRP erred on facts and in law in proposing to hold that employees compensation expense claimed by the appellant was not allowable under section 37 of the Act alleging that the same was not incurred wholly and exclusively for the purpose of the business of the appellant company. 3.3 That the Ld. AO/ DRP erred on facts and in law alleging that the expenditure claimed did not represent a crystallized liability and being without any objective evidence for justification, the same was not allowable as deduction. 3.3 That the Ld. AO/ DRP erred on facts and in law in holding that ESOP is a part of salary and since the appellant did not deduct any tax at source on payment to the group company, the amount claimed was disallowable under section 40(a) of the Act. 3.4 Without prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities below. 5. We have heard the rival contentions and perused the record. Ground of appeal Nos. 1 7 raised by the assessee are not pressed and the same are dismissed as not pressed. 6. Ground of appeal Nos. 2 to 2.4 are against the disallowance of depreciation on goodwill. The Tribunal has already adjudicated this issue in the bunch of appeals with the lead appeal in ITA No.1308/Del/2015 relating to Assessment Year 2010-11, order dated 29.11.2019 and have decided the issue in line with ratio laid down by the Tribunal in assessee s own case relating to Assessment Year 2009-10. The relevant findings of the Tribunal are in paras 27 to 34. Reference is being made to the said paras but the same are not being reproduced for the sake of brevity. Following the same parity of reasoning, we allow the claim of the assessee of depreciation on goodwill. Hence, Ground of appeal Nos. 2 to 2.4 are thus allowed. 7. The issue raised by the assessee in Ground of appeal Nos. 3 to 3.6 is against the disallowance of ESOP expenses. Similar disallowance was made by the Assessing Officer in Assessment Year 2014-15. The Tribunal have decided the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered. V. It is a perquisite. VI. It is a deductible business expenditure u/s 37(1). 106. The Assessing Officer on the other hand did not allow the claim of the assessee alleging as under:- (a) Employees compensation expense claimed by the appellant was not allowable under section 37 of the Act since the same was not incurred wholly and exclusively for the purpose of the business of the appellant company. (b) Expenditure claimed did not represent a crystallized liability and being without any objective evidence for justification, the same was not allowable as deduction. (c) ESOP is a part of salary and since the appellant did not deduct any tax at source on payment to the group company, the amount claimed was disallowable under section 40(a) of the Act. 107. The Assessing Officer thus disallowed the said expenditure in the hands of the assessee, which disallowance was confirmed by the DRP and by the Assessing Officer in the final assessment order. 108. The assessee is in appeal against the order of the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icent Cayman has been accepted by the TPO to be at arms length. 113. We hold that the aforesaid payment under the ESOP scheme wherein the reimbursement was paid to the parent company, towards ESOP for granting stock options to assessee s employees is in the nature of employees compensation and is deductible as the expenditure incurred was wholly and exclusively for the purposes of business. 114. We further find that the issue stands covered by the decision of Hon ble Madras High Court in CIT vs M/s PVP Ventures Ltd. (supra) wherein it was held that the amount of difference between the market value of the shares issued under Employees Stock Option Scheme and the value at which they were allotted to the employees, which was debited to the P L account in accordance with SEBI Guidelines, is an ascertained liability, and thus, allowable as revenue expenditure under section 37(1) of the Act. 115. The said proposition has been applied by the Hon ble High Court in CIT vs Lemon Tree Hotels Ltd. (supra) and the claim of ESOP expenditure has been allowed as expenditure u/s 37 of the Act. 116. Further, the Special Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal No.6 is against incorrectly allowing credit of TDS. The Assessing Officer is directed to verify the claim of the assessee after allowing reasonable opportunity of hearing to assessee. Hence, Ground of appeal No.6 raised by the assessee is allowed. 8. Relying on the same parity of reasoning, we allow the claim of the assessee in Assessment Year 2015-16 also. Ground of appeal Nos. 3 to 3.6 raised by the assessee are thus allowed. 9. The limited issue raised in Ground of appeal No.4 is against non-grant of foreign tax credit (partly) by the Assessing Officer. The Ld.AR for the assessee had stressed that out of total claim of ₹ 4.52 crores of foreign tax credit, the Assessing Officer in the order passed u/s 154 of the Act allowed the claim at ₹ 3.58 crores. The balance foreign tax credit which has not been allowed is ₹ 88,67,811/-. The Ld.AR pointed out that the details are placed at page 39; however, till date the assessee has not received the certificate for the balance foreign tax credit, which is not allowed to the assessee. 10. The Ld. DR for the Revenue strongly opposed as the assessee had failed to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom whose income, such deduction was made. Further, in terms of section 205 of the Act, the assessee could not be held liable for payment of tax which was deducted at source by the deductor. In other words, once the tax has been deducted at source by the deductor, the tax could not be collected from the deductee and it was immaterial whether the deductor had deposited the tax so deducted to the credit of Central government or not. It was further stressed that since elaborate provisions are enshrined in the Act, for recovery of tax deducted at source from the person who had deducted such tax, then necessary credit should be allowed to the deductee. Reliance was placed on various decisions in this regard. It was further stressed that where the parties who had deducted tax at source, at the time of making payment to the assessee, had deducted and deposited tax at source and TDS certificates evidencing the same were furnished to the assessee; merely because credit of the said amount was not reflected in the records of the Tax Department, the assessee could not be denied the TDS credit claimed by it. 15. The Ld. DR for the Revenue pointed out the while allowing the cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, it is further provided that where the tax had been deducted at source by the deductor out of payments due to the deductee, then such deductee cannot be held liable for payment of such tax which was deducted at source by the deductor. In other words, under the provisions of the Act, it is provided that there is liability upon the person making the payments, to deduct tax at source in line with the provisions of Chapter XVII of the Act. Once such tax had been deducted then the deductor is liable to deposit the same into the credit of the Central Government. Such amount which is withheld by the deductor out of the amount due to the deductee i.e. person to whom the payments are made, then the said deduction shall be treated as payment of tax on behalf of the person from whom such deductions was made, as per the provisions of section 199(1) of the Act. Further there are provisions under the Act dealing with the recovery of tax at source from the person who have withheld the same. In terms of section 205 of the Act, the assessee/deductee cannot be called upon to pay tax, to the extent to which tax had been deducted from the payments due. Consequently, it follows that credit for such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the employee was terminated. The employee filed the return of income claiming credit of TDS of ₹ 6.66 lakhs. The Assessing Officer issued intimation under Section 143(1)(a) of the Act denying credit of TDS of ₹ 6.66 lakhs on the ground that such amount was not deposited by the employer. This Court in such background after referring to Section 205 of the Act held and observed as under: 20. From the language of Section 205, it is clear that once the tax is deducted at source, the same cannot be levied once again on the assessee who has suffered the deduction. Once it is established that the tax has been deducted at source from the salary of the employee, the bar under Section 205 of the Act comes into operation and it is immaterial as to whether the tax deducted at source has been paid to the Central Government or not, because elaborate provisions are made under the Act for recovery of tax deducted at source from the person who has deducted such tax. 21. In the present case, the petitioner assessee has furnished monthly pay slips and bank statements to show that from his salary tax was deducted at source by the employer responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the employer may not issue TDS certificate to the employee does not mean that the liability of the employer ceases. The liability to pay income tax if deducted at source is upon the employer. 23. As held by the Gauhati High Court in the course of Omprakash Gattani (supra), once the mode of collecting tax by deduction at source is adopted, that mode alone is to be adopted for recovery of tax deducted at source. Although it is obligatory on the part of the person collecting tax at source to pay the said TDS amount to the credit of the Central Government within the stipulated time, if such person fails to pay the TDS amount within the stipulated time, then, Section 201 of the Act provides that such person shall be deemed to be an assessee in default and the revenue will be entitled to recover the TDS amount with interest at 12% p.a. and till the said TDS amount with interest is recovered there shall be a charge on all the assets of such person or the company. Penalty under Section 221 of the Act and rigorous imprisonment under Section 276B of the Act can also be imposed upon such defaulting person or the company. Thus, complete machiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent revenue, measures can always be initiated against such payers. 23. Applying the same parity of reasoning, we direct the Assessing Officer to allow the credit of tax deducted at source in the hands of the assessee, where the assessee produces the primary evidence of same being deducted tax at source out of the amount due to it. The ground of appeal no. 6 is thus allowed. 24. Now, coming to the next issue raised in Ground of appeal No.8 which is against the charging of interest u/s 234A of the Act. 25. The Ld.AR for the assessee pointed out that the assessee had filed the return of income on 30.11.2015 which was the prescribed due date for filing the return of income by the assessee u/s 139(1) of the Act. 26. We find merit in the plea of the assessee that where the due date of filing return of income was 30.11.2015 and since the assessee had filed return of income on 30.11.2015, then there was no merit in charging of interest u/s 234A of the Act. The ground of appeal no. 8 is thus allowed. 27. The Ground of appeal No.9 is raised against charging of interest u/s 234B and 234C of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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