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TMI Blog2022 (1) TMI 1221X X X X Extracts X X X X X X X X Extracts X X X X ..... S.A. No.167/Del/2021 Arising out of I.T.A. No.601/Del/2021 - - - Dated:- 4-1-2022 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For the Appellant : Sh. Ajay Vohra, Sr. Adv., Sh. Neeraj Jain, Adv. Sh. SaksheemSinghal , Adv. For the Respondent : Mrs. Meenakshi Singh, CIT- DR ORDER PER SUDHANSHU SRIVASTAVA, JM: This appeal is preferred by the assessee against final assessment order dated 31.3.2021passed u/s 143(3) read with section 144 (13) of the Income Tax Act, 1961 (in short 'the Act'). 2. Brief facts of the case are that the assessee is engaged in the business of developing packaged software. It provides software consulting services and other ancillary products and services primarily for the use of the telecommunication industry. The assessee is also carrying on business of trading in telecommunication testing equipment. The return of income for the year was filed declaring an income of ₹ 2,77,08,55,770/- and the case was selected for scrutiny under CASS guidelines. The total income of the assessee was computed at ₹ 3,46,90,96,220/- after making certain additions and disallowances, which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtronics and FSL with the appellant. 3.2 That the Ld. AO/ DRP erred DRP failed to appreciate that: (a) tax was not deductible on mere issuance of options and (b) no disallowance, in on facts and in law in alleging that the valuation of goodwill is unclear and the assessee had failed to ascribe a correct value to goodwill, i.e. the fair value of net assets. 3.3That the Hon ble DRP/Ld. AO erred on facts and in law in relying on the ITAT Ruling of DCIT vs. Toyo Engineering Ltd., ITA No.3279/Mum/2008 without appreciating that the same was reversed by the Hobble Mumbai Bench of the Tribunal. 3.4That the Id. AO erred, in law and on facts and circumstances of the case in proposing to disallow depreciation on Goodwill by alleging that the Supreme Court in the case of CIT vs. Smifs Securities Ltd.: 348 ITR 302 does not give any clarity on the aspect related to valuation of Goodwill . 4. That the Ld. AO/DRP erred on facts and in law in not allowing the deduction of ₹ 2,85,92,404 claimed on account of reimbursement paid to the parent company towards ESOP for granting stock options to employees of the appellant. 4.1That the Ld. AO/ DRP erred on facts and in law in prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Bench and submitted that as far as the issue of disallowance of depreciation on goodwill and disallowance of ESOP expenses was concerned, both these issues stood covered in favour of the assessee by the order of this Tribunal in assessee s own case. It was submitted that the disallowance of depreciation on goodwill was covered in assessee s favour by the orders of the Tribunal for assessment years 200809, 2009-10 vide order dated 26.7.2019 and also by Tribunal s orders for assessment years 2010-11 to 2014-15 vide order dated 29.11.2019 and by Tribunal order for assessment year 2015-16 vide order dated 23.12.2019. Copies of the same orders were placed on record. 3.1 In respect of disallowance of ESOP expenses, it was submitted that similar disallowance was made by the Assessing officer on identical facts during the assessment years 2014-15 and 2015-16, which was deleted by this Tribunal in ITA No. 7637/Delhi/2018 and ITA No. 5708/Delhi/2019 respectively. 3.2 With respect to non grant of deduction of profit on sale of assets amounting to ₹ 2,20,86,134/-, it was submitted that during the relevant assessment year, the assessee had earned aprofit of ₹ 2,20,86,134/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011-12, 2012-13, 2013-14, 2014-15 and 2015-16. For the sake of completeness and ready reference, we reproduce the relevant paragraphs from the order of this Tribunal in assessment year 2010-11 in ITA No. 1308/Del/2015, wherein, vide order dated 29.11.2019, it was held as under:- 33. Coming to the issue in hand, the Tribunal in Assessment Year 2008-09 (supra) had admitted the additional Ground of appeal vide paras 34 to 41 and then adjudicated the issue on merits vide para 42 onwards. The first aspect which was decided by the Tribunal was that all the facts in relation to creation of goodwill were available on record. Thereafter, looking into the aspects of amalgamation of two companies with assessee, under scheme of arrangement and amalgamation w.e.f 01.04.2007, which was approved by the Hon ble High Court and after taking note of salient features of the amalgamation in paras 47 to 50 at page 25 to 33 of the order, wherein Tribunal also took note of the methodology approved as part of scheme of amalgamation, for computation of goodwill arising on amalgamation of two concerns of the assessee company, observed that the said methodology was approved by tax auditor of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses on account of reimbursement paid to the parent company towards ESOP for granting stock auctions to the assessee s employees. Share incentive plan for the employees of Aricent Group was floated and under the scheme, as part of the employee compensation measure, an option to purchase the shares after the completion of the vesting period was granted to the employees of the company at a discounted price to the fair market value of the share. The difference between the fair market value of the shares and the amount paid by the employee on actual exercise of option represented employee compensation expenses. Since the option was granted to the employees during the relevant assessment year and assessee reimbursed the said amount to the group company, as the liability had accrued/crystallized and the same was recognized in the year itself as the assessee was following mercantile system of accounting. The aforesaid expense was claimed as deduction u/s 37(1) of the Act. It may be pointed out herein itself that the aforesaid payment to the Aricent 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 reim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ₹ 2,20,86,134/- on sale of fixed assets and that such profit had been duly credited in the Profit Loss account. It has been further submitted that for the purpose of income tax, in terms of provision 43(6) of the Income Tax Act, 1961, this sale consideration was reduced from the WDV of block of assets and, thus, the business profits were reduced by this amount. It has further been submitted that at the time of computing the taxable income of the assessee, this amount was not deducted by the Assessing officer thereby resulting in double taxation of the impugned amount. To evidence the claim of the assessee a copy of the Tax Audit report for the assessment year 2016-17 has already been filed, wherein, undisputedly the sale consideration of sale of fixed assets has been reduced from the WDV of block of assets. We have given a thoughtful consideration to the issue at hand and we remit this issue back to the file of the Assessing officer for rectifying the computation of income after verification of the claim of the assessee. Thus, ground No.5 stands allowed for statistical purposes. 5.7 Ground No.6 challenges the action of the lower authorities in not granting MAT credit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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