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TMI Blog2022 (3) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... -3-2022 - Shri Challa Nagendra Prasad, Judicial Member And Shri Anadee Nath Misshra, Accountant Member For the Appellant : Sh. Sh. Anil Bhalla, CA For the Respondent : Ms. Yagya Saini Kakkar, CIT- DR ORDER PER ANADEE NATH MISSHRA, AM: (A) This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-13, New Delhi, [Ld. CIT(A) , for short], dated 07.05.2018 for Assessment Year 2013-14. Grounds taken in this appeal of Assessee are as under: 1. That on the facts and in the circumstances of the appellant company and in law, the learned Commissioner of Income Tax (Appeals) has erred in upholding the action of the learned Assessing Officer in disallowing Employees Stock Option Expenses (ESOP) amounting to ₹ 4,99,46,617/-. 1.1 That on the facts and in the circumstances of the appellant company and in law, the learned Commissioner of Income Tax (Appeals) has erred in holding that ESOP expenses did not represent expenditure incurred, by alleging that the same was not spent, that is to say, paid out or away, and erred by not considering the fact that the appellant company was following mercantile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of exercising the option. The assessee claimed this expenditure as a business expenditure u/s 37(1) of Income Tax Act. The Assessing Officer rejected this claim and made the addition of aforesaid amount of ₹ 4,99,46,617/-. (B.1) The Assessing Officer further made an addition of ₹ 2,63,907/- u/s 14A of Income Tax Act read with Rule 8D of Income Tax Rules, in the aforesaid assessment order dated 24.02.2016, holding that this amount represented expenditure incurred by the assessee to earn exempt income by way of dividend. (B.1.1) The Assessee contested both the aforesaid additions of ₹ 4,99,46,617/- and ₹ 2,63,907/- in the appeal filed before the Ld. CIT(A). Vide impugned appellate order dated 07.05.2018, the Ld. CIT(A) upheld the aforesaid addition of ₹ 4,99,46,617/-. Regarding the aforesaid addition of ₹ 2,63,907/-, the Ld. CIT(A) confirmed the amount of ₹ 14,823/- and directed the Assessing Officer to verify the remaining amount of ₹ 2,49,084/-. (C) Aggrieved, the assessee has filed this present appeal in Income Tax Appellate Tribunal. In the present appeal, the assessee has appealed against the impugned appellate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of the decision of the Hon'ble Delhi Tribunal in the case of New Delhi Television Limited [2020] 117 taxmann.com 212 (Delhi-Trib) 17. Copy of letter dated Januarry 04, 2016 filed before Dy. Commissioner of Income Tax Circle 5(2), New Delhi in reply to notice u/s 142(1) of the Income Tax Act, 1961. 18. Copy of the order dated 07.05.2018 of Commissioner of Income Tax (Appeals)-13 for AY 2013-14 19. Copy of consolidated order in the case of Indiabulls Real Estate Limited in ITA No.6602/Del/2016 and 6603/Del/2016 for AY 2012-13. 20. Copy of oreder in Aricent Technologies (Holdings) Limited [TS-17-ITAT-2022 (Del) 21. Copy of order in the case of Oxygen Services India (P) Ltd. in ITA No.3831/Del/2016 for AY 2011-12 22. Copy of order in People Strong HR Services (P) Ltd. [2022]134 taxmann.com351 (Delhi-Trib.) (C.1) In connection with the aforesaid addition of ₹ 4,49,46,617/-; a synopsis was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OP Cost (ESOP Cost recorded during the year) 5,37,00,784 2 Deferred ESOP Cost Dr 37,54,167 To ESOP Cost Ac (Reversal of ESOP as Employees left Co. and grant cancelled) 37,54,167 3 Net ESOP expenses recorded in Books (₹ 5,37,00,784 - ₹ 37,54,167) 4,99,46,617 1.9 The company claimed ₹ 4,99,46,617/- as employee compensation under ESOP plan as expenditure in its Profit Loss Account of the relevant previous year ended 31.03.2013. PB 159 note 22. 1.10 Detailed analysis of the ESOP expense claimed ₹ 4,99,46,617/-. PB 18-23. 1.11 During the assessment proceedings the assessee company was asked to justify its claim of deduction of ESOP expenses in the computation of income for AY 2013-14. PB 231. 1.11.1 The assessee company had submitted its reply vide letter dated 4.1.2016. PB 228. The assessee company explained ESOP cost was claimed by debiting Profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons put forth by CIT(A) in his order while confirming the addition on account of ESOP claim stood already answered and covered by the Special Bench decision in Biocon 35 taxmann.com (Bang.) (PB 58-81) which has been approved by subsequently by the Karnataka High Court in 121 taxmann.com 351 (Karnataka) (refer para 6 to 12) attached to this Synopsis at page 9. 2.4 CIT(A) referred to the SEBI guidelines and was of the misunderstanding that appellant has not brought out that tire treatment in the books was in accordance with SEBI Guidelines. 2.4.1 He was unable to understand that tire assesse company's claim was merely that the treatment given by the assesse company in the books of accounts was in accordance with the SEBI guidelines (para 5.22 and 5.23 of CIT(A) order). 2.4.2 It may be mentioned that this so was categorically stated before CIT(A) - para 1.1. of written submission before CIT(A) PB 1. 2.4.2.1 Reference is also drawn to note (n) on PB 148 - which confirms that SEBI Guidelines was followed while accounting. 2.4.3 CIT(A) misunderstood and presumed that the company was attempting to overrule the provisions of Income Tax Act, by referri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [2022] 134 taxamann.com 351 (Delhi Trib.). The Ld. Counsel for the assessee strongly contended that the issue in dispute is squarely covered in favour of the assessee by the aforesaid decisions and submitted that the aforesaid amount of ₹ 4,99,46,617/- should accordingly be deleted. (C.1.2) The Ld. CIT-DR relied on the impugned appellate order dated 07.05.2018 of the Ld. CIT(A) and the aforesaid assessment order dated 24.02.2018 of the Assessing Officer. (C.2) We have heard both sides. We have perused materials on record. We find that Co-ordinate Bench of ITAT Delhi has already taken view in favour of the assessee in the case of ACIT vs. People Strong HR Services (P.) Ltd. (supra). Neither side, in the present appeal before us, has brought any relevant facts or circumstances for our consideration to distinguish the present case before us from the facts and circumstances of ACIT vs. People Strong HR Services (P.) Ltd. (supra). The relevant portion of the order in the case of ACIT vs. People Strong HR Services (P.) Ltd. (supra) is reproduced as under: 6. After considering the rival submissions and going through the material placed on record, we find that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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