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TMI Blog2025 (1) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... two decisions are binding on the authorities below as well as for us. After the decision of higher wisdom, still the authorities are not respecting the same. It is clearly disrespecting the principles of judicial precedents and judicial discipline. Violating the principles of judicial discipline - Assessing Officer has applied his lower wisdom and rejected the claim of the assessee without considering the higher wisdom of Hon ble High Court and ITAT Special Bench. The coordinate Bench felt that this issue needs examination and gave one opportunity to the Revenue, but lower authorities does not care for the opportunity and in order to keep the issue alive since the ESOP issue was pending before Hon ble Supreme Court, they have grossly rejected the claim of the assessee. Therefore, respectfully following the decision of Hon ble High Court in Biocon Ltd. [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] , we direct the Assessing Officer to allow the claim of the assessee - Shri S.Rifaur Rahman, Accountant Member And Shri Yogesh Kumar Us, Judicial Member For the Assessee : Shri K.M. Gupta, Advocate, Ms. Shruti Khimta, AR For the Revenue : Shri Dayainder Singh Sidhu, CIT(DR) ORDER PER S.RIF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses. He further noted that in the instant case, the ESOP expenses are being claimed on account of issuance of shares at below market price, which will result in receipt of lesser amount towards share premium only. However, this will not result into incurring of any expenditure as short receipt of such share premium will only be a notional loss and not actual loss for which any liability is incurred. Therefore, the AO concluded that such notional losses are not allowable under the provisions of the Act and accordingly disallowed the claim. 5. Aggrieved with the aforesaid action of the AO, assessee preferred an appeal before the ld. CIT (A) and ld. CIT (A) concluded that Revenue is in appeal on the issue of allowability of ESOP expenditure before the Hon ble Supreme Court and in view of pendency of the same, the claim for deduction of ESOP expenditure is not allowable. He further observed that claiming Rs. 38,90,90,948/- as ESOP expenditure after nine years of filing the return of income by filing a cross objection before the ITAT on Revenue s appeal on leasehold expenditure is not in accordance with law. A limited company s books of accounts and Annual Report published to the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear under consideration before the Hon ble Tribunal during the original appellate proceedings as well as during the course of remand proceedings before the AO and such calculations are in conformity with manner of computation as prescribed in the case of Biocon Limited vs. DCIT 35 Taxmann.com 335 (SB). 7. At the time of hearing, ld. AR of the assessee, on the merits of the case on the grounds no. 3 4 relating to deductibility of ESOP expenditure, submitted that ITAT in principle accepted the allowability of ESOP as a business expenditure. The only reason for remanding the issue to the assessing authorities was to verify the amounts claimed and not to opine on the allowability thereof. He further submitted that the assessee had two ESOP schemes i.e. ESOP 2007 and ESOP 2011 in force during the captioned AYs. The assessee, being a listed entity on the National Stock Exchange, had formulated such schemes in compliance with the SEBI guidelines and the applicable disclosures under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. During the year, he submitted that the employees were allotted equity shares upon e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time. However, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option. No accounting principle can be determinative in the matter of computation of total income under the Act. The question before the special bench is thus answered in affirmative by holding that discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head 'Profits and gains of business or profession'. 10. He further submitted that the Hon ble Karnataka High Court has affirmed the findings of the Special Bench of the Tribunal in the case of CIT vs Biocon Ltd. [2020] 121taxmann.com 351 (Karnataka). It was also submitted that assessee had duly deducted tax at source on perquisite value on exercise of such ESOPs in the hands of the employee on the amount of discount being the difference between market price on the date of exercise by the employee and exercise price at the time of grant in accordance with provisions of the Act. It is submitted that one of the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred an appeal before the ld. CIT(A). The assessee filed the submissions and information as required by the ld. CIT(A). The ld. CIT(A) passed an order dated April 23, 2024, wherein the ld. CIT(A) exceeded its jurisdiction in evaluating the scope of the aforementioned cross objection on additional claim of ESOP expenditure while the same was already decided in favour of the Assessee in principle by the Tribunal. It was further submitted that the aforesaid observations of the ld. CIT(A) / AO is contrary to the principle of judicial discipline. The ld. AR further submitted that the above observation should be expunged from its order. To support his contention, he relied upon the judgment of the Hon ble Supreme Court in case of UOI Vs. Kamlakshi Finance Corporation Ltd [1992] 1992 taxmann.com 16 (SC) wherein it was held that : 6 .It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order, of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low must yield to the higher wisdom of the court above. This is the strength of the hierarchical judicial system. 14. Ld. AR further placed reliance on the following decisions where the Hon ble Courts have echoed the view of the Hon ble Supreme Court: (a) Bank of Baroda Vs. N.G. Srivastava Another (256 ITR 385), (b) HDFC Bank Ltd. v. DCIT (2016) 383 ITR 529 (Bom.)(HC) (c) Tejraj Chopada vs. Income-tax Officer [2008] 26 SOT 14 (Jodhpur) (URO)[22-07-2005] (d) Bhartiya International Ltd. v. DCJT [2024] 158 taxmann.com 239 (Delhi - Trib.) (e) Smt. Angoori Devi v. Chief Commissioner (Admn.) [2005] 145 Taxman 64 (Allahabad) [20-11- 2004] 15. Ld. AR further submitted that the Tribunal is final fact-finding authority, thus it is entrusted with duty to determine the correct total income of the taxpayer chargeable to tax under the provisions of the Act. In this regard, the ld. AR placed reliance on the decision of the Hon ble Supreme Court in the case of National Thermal Power Corporation Ltd. v. CIT [(1998) 229 ITR 383 (SC)]. He further submitted that with respect to the fresh/additional claim in the Cross Objections, the same is also not res-integra in view of the interim decision in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98) 229 ITR 383 (SC)] which did categorically observe that we fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier even though undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised Quite clearly, therefore, the powers of the Tribunal are not restricted to decide only the issues which have been considered by the authorities below. The narrower view of the powers of the Tribunal, as adopted in the judicial precedents cited by the learned Departmental Representative and particularly the full bench decision of Hon'ble Gujarat High Court in the case of Cellulose Products of India Ltd. (supra), has been specifically disapproved by Hon'ble Supreme Court in NTPC's case (supra). 16. Ld. AR further placed reliance on the following case laws on allowance of the fresh claim for first time in the appeal before the Tribunal :- a) Jute Corporation of India Ltd. vs. CIT [1991] 187 ITR 688 (SC) b) ACIT vs Jubilant Enpro Ltd. ITA No. 348s/Del/20i4 dt. 16.06.2018 17. In view of the above, he submitted that the action of the ld. CIT(A) to question the sco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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