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TMI Blog2021 (11) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... ences, we have come to a conclusion that the queries raised by the CIT(A) would be answered in proper prospective and the interest of justice would be well served by admitting the additional evidences. Since, the revenue did not have the benefit of going through the evidences, we hereby remand the matter to the file of the CIT(A) to take into consideration the evidences filed and to pass a speaking order in accordance with the provisions of the Act. Appeal of the assessee is allowed. - ITA No. 7187/Del/2017 - - - Dated:- 1-11-2021 - SH. AMIT SHUKLA, JUDICIAL MEMBER AND DR. B. R. R. KUMAR, ACCOUNTANT MEMBER For the Assessee : Sh. S. Vasudevan, Adv. For the Revenue : Sh. Ajay Kumar, Sr. DR. ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT(A)-15, New Delhi dated 17.12.2015. 2. Following grounds have been raised by the assessee: 1. That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) (hereinafter referred to as Ld. CIT(A) ) erred on facts and in law by confirming the disallowances made by the Ld. Assessing Officer (hereinaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 hereinafter referred to as the Act ) in as much as by undertaking to issue shares at discount premium, the Appellant does not pay anything to its employees, but incurs obligation of issuing shares at a discounted price on future date in lieu of their services, which is nothing but deductible expenditure u/s 37(1) of the Act. 2.6. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating that such disallowance of expenditure would result in taxation of such amount twice, once in the hands of the employees as perquisite and secondly in the hands of the appellant. 3. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred on facts and in law in upholding the disallowance made by the Ld. AO of business product and research development expenses (hereinafter referred to as R D expenditure ) incurred by the Appellant amounting to Rs. 64,59,150/- that the same is not in the nature of revenue expenditure and further the said expenditure is also not capital expenditure. 3.1. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred on facts and in law confirming the finding arrived at by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... numbering 77950. The assessee claimed the value of such vested options amounting to Rs.96,30,345/- which was in the nature of employee compensation and claimed the same as revenue expenditure. The Assessing Officer disallowed the expenditure holding that they are the notional expenses and capital in nature and hence not allowable u/s 37 of the Income Tax Act, 1961. The Assessing Officer held that the ESOP discount is not a deductible expenditure. 5. The ld. CIT(A) affirmed the action of the Assessing Officer holding that the assessee has not furnished evidence of vesting done with respective employees in F.Y. 2012-13, and also on the fact that no evidence of TDS on the payment of exercise price. The ld. CIT(A) has also held that the assessee has failed to furnish the evidences of the list of total number of employee. The ld. CIT(A) relied on various case laws which have been perused by us. 6. The Co-ordinate Bench of ITAT in the case of DCIT Vs. Integrated Cleanroom in ITA No. 428/Hyd./2020 vide order dated 17.09.2021 dealing with the similar issue held as under: 23. We have considered the rival submissions as well as the relevant material on record. There is not dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iple accordingly. As regards the quantum of allowance, the appellant has calculated the ESOPs on the basis of market value of Rs. 505 and has charged the employees Rs. 100 (face value being Rs. 10 and security premium Rs. 90). The difference has been considered as an expense and the relevant perquisite has been ITA No. 428/Hyd/2020 AY 201718 DCIT vs. M/s Integrated Cleanroom Technologies Pvt. Ltd. accounted for in the hands of employees and the same have been taxed in their hands and due TDS has been deducted by the appellant. The Assessing Officer however has taken the value as per book value by considering the value around Rs. 335/- and the Assessing Officer has commented that the valuation taken at Rs. 505/- is very high. The appellant has followed the DCF method and no fault has been found in the same by the Assessing Officer with regard to the parameters considered for the said valuation and the AO simply brushed aside that it is based on future projections. DCF method is a method prescribed by the Income Tax Act and the valuation requires future projections, therefore, the act of the AO in not examining and not finding anything improper and merely rejecting the value wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... option was given and exercised by the employee, the liability in this behalf got ascertained. This was recognized by SEBI and the entire Employees Stock Option Plan was governed by guidelines issued by SEBI. On the facts thus found, the Tribunal held that it was not a case of contingent liability depending on the various factors on which the assessee had no control. The expenditure in this behalf was an ascertained liability, thus the expenditure incurred being on lines of the SEBI guidelines, there could be no interference in the relief granted by the Assessing Authority for the expenditure arising on account of Employees Stock Option Plan. This expenditure incurred as per SEBI guidelines and granted by the Officer could not be considered as erroneous one calling for exercise of jurisdiction under Section 263 of the Act. 8. In the case of CIT Vs. Lemon Tree Hotels Ltd. in ITA 107/2015 order dated 18.08.2015, the Hon ble Jurisdictional High Court allowed the ESOP expenditure as expenses has revenue expenditure. The relevant portion of the order is as under: 2. The question sought to be projected by the Revenue is whether the ITAT erred in deleting the addition of Rs. 1,28,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory deduction under law. It is submitted in this regard that the abovementioned issues were not even raised by the Ld. AO inasmuch as the genuineness of the expenditure was not doubted by it. Neither did the Ld. CIT(A) raised these issues during the course of hearing before it and the same is apparent inasmuch as there is no recording of a statement in the order by the Ld. CIT(A) in its order that the Appellant was asked to submit the answers/details on the abovementioned points. That by mentioning the above points with respect to the expenditure incurred by the Appellant on R D, the Ld. CIT(A) has nothing but doubted the genuineness of the expenditure without even affording it an opportunity of being heard. It is in this regard that when there was no specific question as to the genuineness of the expenditure incurred that the Appellant had no opportunity to adduce the documents as evidence challenging the grounds on which disallowance has been made by the Ld. CIT(A). Therefore, the Appellant had no occasion to furnish all the relevant evidences to factually counter the allegations and unexpected disallowance to the returned income. We, therefore, now request this Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue under consideration, the Ld. CIT(A) passed the order. Additional Evidence Therefore, it has become necessary and imperative for the Appellant to furnish the following documentary evidence in support of its grounds of appeal against the action of the Ld. CIT(A). The particulars and the Page No. of the Paper Book at which the document has been enclosed is indicated below: Sl. No. Particulars Pg. No. in Paper Book 2. Copy of Form 15CA for the FY 2012-13 relevant to AY 2013-14 as evidence of making payment of the research fee and 2-7 3. As proof of outcome of the research:deduction of tax at source 8-14 - Copy of the receipt generated from filing of the application for grant of patent 8-9 - Copy of the relevant extract of the application filed in the US for grant of Patent 10-11 - Copy of the relevant extract of the application filed in Europe for grant of Pate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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