ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), AHMEDABAD, AHMEDABAD V. ARVIND LIMITED, AHMEDABAD

ITA 466/AHD/2024

AI Insights

The case involves appeals by both Arvind Limited and the Revenue against the order of the Commissioner of Income-Tax (Appeals), Ahmedabad-3, concerning the assessment year 2018-19. Arvind Limited contested the additions and disallowances made by the Assessing Officer, which were partially upheld by the CIT(A). The Revenue appealed against the relief granted to Arvind Limited by the CIT(A). The Tribunal's decision addressed issues related to disallowances under Section 14A read with Rule 8D, transfer pricing adjustments, and deductions claimed under Section 35(2AB) and for ESOPs.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705782 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2018-2019
• Other Referred Cases: CIT Vs. Subrata Roy, National Thermal Power Company Ltd. v. CIT, Goetze (India) Ltd vs CIT, Pruthvi Brokers & Shareholders Pvt. Ltd. vs. CIT, Jute Corpn. of India Ltd. vs. CIT, CIT vs. Jai Parabolic Springs Ltd., Chiranjeevi Wind Energy Ltd. vs. ACIT, Lupin Agrochemicals Ltd. vs. CIT, Thomas Kurian vs. CIT, Biocon Ltd. vs. CIT, Astral Polytechnik Ltd. vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATHVI RAJ MEENA; SANTOSH KUMAR
• Assessee Lawyers: BIREN SHAH; GULAB THAKOR
• Keywords: Business income; Revised return; Revenue expenditure; Transfer pricing; Fair market value; Salary income; Capital Gains; Principle of natural justice; TDS; Rectification of order; Earning of tax free income; Notional interest; Rule 8D
• Section: 143(3); 10; 14A; 115JB

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No. 349/Ahd/2024 (Assessment Year: 2018-19) Arvind Limited, Naroda Road, Ahmedabad-380025 [PAN : AABCA 2398 D] Vs. DCIT NFAC, Delhi (DCIT, Circle 1(1)(1), Ahmedabad) ITA No. 466/Ahd/2024 (Assessment Year: 2018-19) ACIT, Circle 1(1)(1), Ahmedabad Vs. Arvind Limited, Naroda Road, Ahmedabad-380025 [PAN : AABCA 2398 D] (Appellant) .. (Respondent) Assessee by : Shri Biren Shah, AR & Shri Gulab Thakor, AR Revenue by: Shri Prathvi Raj Meena, CIT-DR & Shri Santosh Kumar, Sr DR Date of Hearing 17.04.2025 Date of Pronouncement 03.07.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- These appeals have been filed by the assessee and Revenue against the order passed by the Ld. Commissioner of Income-Tax (Appeals), Ahmedabad-3 (hereinafter referred to as \"CIT(A)\" for short) under Section 250 of the Income- tax Act, 1961 [hereinafter referred to as \"the Act\" for short] dated 23.01.2024 for Assessment Year (AY) 2018-19. Since the issues are common and appeals are inter-connected, the same are being disposed of by this common order for the sake of convenience. ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 2– 2. The brief facts of the case are that the assessee is engaged in the business of textile, brands, retail, engineering, water treatment, telecom and advanced materials sectors, amongst others. The assessee had filed original return of income for the assessment year under consideration on 30.11.2018 declaring total income at Rs.242,96,68,370/- under normal provisions of the Act and Book Profit u/s 115JB of the Act at Rs.269,08,73,462/- and thereafter, the assessee had filed revised return on 30.03.2019, declaring total income at Rs.243,07,47,560/- under normal provision of the Act and Book profit u/s 115JB of the Act for Rs.268,92,45,043/-. The case was selected for complete scrutiny, and thereafter the Assessing Officer has assessed the total income of the assessee at Rs.628,31,46,240/-, vide the impugned order dated 29.11.2021 passed u/s 143(3) r.w.s. 144C(3) r.w.s. 144B of the Act, by making various additions / disallowances. 3. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the ld. CIT (A) who has given partial relief to the assessee. 4. Aggrieved by the order of the ld. CIT(A), the assessee and Revenue, both are in appeal before the Tribunal. The Revenue is in appeal against the relief allowed by the ld. CIT(A) while the assessee is in appeal against the addition sustained by the CIT(A). ITA No. 349/Ahd/2024 – Assessee’s appeal 5. The grounds raised in this appeal are as follows:- “1. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has grossly erred in ordering that the disallowance of 14A r.w.r. 8D of the Act should be restricted considering investments, which have yielded exempt income during the year under consideration instead of deleting the entire disallowance made by the Assessing Officer as appellant has already made disallowance u/s 14A of the Act while filling Return of Income. ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 3– 2. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has grossly erred in upholding upward adjustment of Rs.23,51,235/- being interest on loan given to AEs when interest charged by Appellant is at arms' length price as elaborately explained in written submission. 2.1 In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has grossly erred in not following decision of Hon'ble Ahmedabad ITAT in Appellant's own case for AY 2008-09 in ITA No. 2347/Ahd/2018, dated 26-05-2023 wherein interest rate of foreign loan considering LIBOR plus 2.5% is considered as reasonable rate for the purpose of determining ALP and interest charged by Appellant in year under consideration is within such parameters. 2.2 In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has grossly erred in holding that while applying filter to the loan connected data base, there was no requirement for applying one more filter \"primary purpose\" meaning thereby comparable interest rate on loan given to AE for specific purpose such as acquisition, takeover or dividend recapitalization should be excluded and only general corporate loan should be considered. 2.3 In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding TPO's working for computing ALP of interest charged on AE by considering forex risk 100 point BPS. Ld CIT(A) ought to have appreciated that comparable loan instances obtained from global data base which includes loan obtained in specific region/country by domestic companies, the spread rate already has considered impact of forex risk and other relevant risks. 3. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding upward adjustment of Rs.30,008/-relating to share application money and subsequently shares were allotted. Ld. CIT(A) ought to have appreciated that share application is not loan transaction but it is in nature of quasi capital under TP regulation for which no further adjustment is required. 4. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) ought to have deleted entire disallowance of deduction claimed u/s. 35(2AB) of the Act amounting to Rs. 58,36,15,599/- as same was already approved by DSIR in Form 3CL before the date of passing of assessment order instead of directing Assessing Officer to pass rectification order pursuant to rectification application filed by Appellant on similar ground. 5. In law and in the fact and circumstances of the case, the Ld. CIT(A) has erred in rejecting additional claim made during the course of assessment ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 4– proceedings/appellate proceedings even though all the facts relating to such claim was on record of Assessing Officer and claim so made is within four corners of the law. The Ld. CIT(A) ought to have appreciated that assessee is liable for taxation on correct taxable income. 5.1 In law and in the fact and circumstances of the case, the Ld. CIT(A) ought to have appreciated that when the assessee is entitled to any lawful claim, denial of the same on account of technicalities would result into levying and collecting more tax than sanctioned by law, which is violative of Article 265 of Constitution of India. 6. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has grossly erred in not allowing additional claim for deduction on account of ESOP amounting to Rs. 1,77,40,250/- when such claim left out to be made in original/revised return of income due to arithmetical error and entire working of ESOP is supported by judicial pronouncements referred in Appellant's submission and relied upon by ld. CIT(A) while deleting disallowance of ESOP expenses claimed in the return of income. 7. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has grossly erred in not allowing additional claim resulting into reduction of long term capital gain by Rs.21,62,670/-. The Id. CIT(A) ought to have appreciated that there was arithmetical error while computing income from long term capital gain in return of income which was demonstrated in written submission filed before Assessing Officer as well as CIT(A). 8. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has grossly erred in not allowing additional claim in respect of reduction of notional interest income of Rs. 37,76,627/- credited to the appellant’s Profit and Loss Account, when the said amount, not being real income, is not chargeable to tax.” ITA No. 466/Ahd/2024 – Revenue appeal 6. The Revenue has taken following grounds of appeal:- “1. Whether the CIT(A) has justified in law and on facts in allowing the deduction of ESOP of Rs. 3,12,95,400/- claimed by the assessee under the head \"Any other amount allowable as deduction in ITR, merely only on the basis of the SEBI Guidelines when the deduction is not permissible under the Income-tax Act unless a liability has either been paid or arisen during the year? ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 5– 2 Whether the CIT(A) has justified in law and on facts in allowing the deduction of ESOP of Rs. 71,39,194/-claimed by the assessee in the P&L account, merely only on the basis of the SEBI Guidelines when the deduction is not permissible under the income-tax Act unless a liability has either been paid or arisen during the year?\" Ground No. 1 – Disallowance u/s 14A r.w.r 8D 7. The brief facts relating to this issue are that the Assessing Officer made disallowance u/s 14A of the Act amounting to Rs. 6,61,44,690/- on the ground that the assessee company has not made disallowance as per Rule 8D of the Act and disallowed an amount of Rs.41,48,310/- instead of Rs.7,02,93,000/-. The Assessing Officer held that the assessee has made investment in unlisted equities, preference shares, other investments etc. out of interest bearing funds as the equity and share capital of the assessee only suffice the investment in fixed assets, therefore the Assessing Officer held that the provisions of Sec. 14A read with rule 8D were applicable in assessee’s case and the disallowance u/s.14A read with rule 8D towards expenditure made by the assessee was not sufficient to cover the investment to raise exempt income. The Assessing Officer accordingly made a disallowance of Rs.6,61,44,690/- u/s 14A of the Act. On appeal before the Ld.CIT(A), the Ld. CIT(A) directed the Assessing Officer to verify the records and recompute the disallowance u/s 14A r.w.r. 8D, considering only such investments, which have yielded exempt income during the year under consideration. 7.1 Before us, the Ld. AR submitted that as per the directions of the Ld. CIT(A) the Assessing Officer, in order giving effect to the CIT(A) order, deleted the disallowance of Rs.6,37,67,430/- and confirmed Rs.23,77,260/- and with respect to this, the Ld. AR contended that the investments were not made for the purpose of earning exempt income and those investments were made as part of expansion ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 6– of assessee’s own business. The Ld AR submitted that the exempt income is ancillary to the main objective of the investments made in the group/subsidiary companies. With regards to the disallowance of expenditure, the assessee company submits that since all investments are long-term strategic investments in group/subsidiary' companies and joint ventures, these investments do not require constant monitoring and therefore, no major efforts are required for the same. Ld. AR also submitted that no specific attempt was required for earning dividend income, accordingly, no part of the administrative expenses was attributable to exempt income. Thus, the entire administrative and other expenditure are incurred for the purpose of business only and not for the purpose of making investments resulting into tax free income. The Ld. AR argued that the assessee has identified the expenditure incurred for the investment activities yielding tax free income and accordingly, the assessee has disallowed Rs. 41,48,310/- while filing the return of income as per the working already provided. The Ld. AR submitted that the said expenses are separately identified in respect of persons engaged in work relating to investments and resources utilized for such activities. It was argued that all the actual expenses relating the investment activities yielding exempt income has already been disallowed while computing the total income of the appellant company. The Ld. AR submitted that Rs. 41,48,310/- has rightly been disallowed u/s 14A while computing the business income and that no other expenditure has been incurred during the year under consideration which is attributable to earning of exempt income. 7.2 The Ld. DR, on the other hand, supported the order of the Assessing Officer. Ld.DR argued that the assesses has earned exempt income u/s. 10 of the Act to the extent of Rs. 5,17,61,551 /- and the source of investment for earning income was out of borrowed funds, as the balance-sheet of the assessee prima-facie reflects that equity and share capital of the company has already utilized to meet the ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 7– requirements to the extent of fixed assets i.e. property and plant and machinery. Therefore, it is clear that the investments in shares have been made out of interest-bearing funds and thus there is direct nexus between the exempt income and expenditure incurred. The Ld. DR relied on the judgment of the Hon’ble High Court of Allahabad in the case of CIT Vs. Subrata Roy (219 Taxman 0133) wherein it was held that interest on borrowed funds cannot be allowed on investment which are note exclusively and wholly for the purposes of business, having no chance to receive any pecuniary benefits and are colorable devises for tax evasion. The Ld. DR argued that the assessee has made investments in unlisted equities, preference shares, other investments etc. out of interest-bearing funds as the equity and share capital of the assessee only suffice the investment in fixed assets i.e., property and plant and machinery, hence the provisions of Sec. 14A read with rule 8D are squarely applicable in the case of assessee company and the disallowance u/s.14A read with rule 8D towards expenditure made by the assessee is not sufficient to cover the investment to raise exempt income. 7.3 Having heard the rival contentions and perused the material available on record, we find that the investments have been made in the (group) companies to the tune of Rs.883 Crores. The assessee had share capital of Rs.258 Crores and Reserves & Surplus of Rs.2899 Crores, totaling to Rs. 3158 Crores of own resources/funds. The assessee has earned passive income earned out of the investments in (Group) various companies. 7.4 Since the assessee had enough own resources in the form of share capital, reserves and surplus to the tune of Rs.3158 crores and investments were only to the tune of Rs.883 crores, it is by now judicially established to presume that own funds have been utilized for the dividend yielding investments. Hence, no disallowance on account of interest is required to be made. The assessee had not made any continuous efforts to earn the dividend and also worked out the power, ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 8– salary, printing & stationary, legal and secretarial expenses which are exclusively utilized for earning of exempt income. Hence, we hold that disallowance of Rs.41.48 lakhs would suffice the expenses incurred in earning the exempt income of Rs.5.17 crores. The decision of the Assessing Officer to determine total disallowance of Rs. 7.02 crore for earning exempt income of Rs.5.17 crores cannot be supported. In the result, the appeal of the assessee on this ground is allowed. Ground No. 2 & 3 – Upward adjustments 8. The pertinent facts relating to this issue are that the Assessing Officer disallowed an amount of Rs.23,81,243/- as per the Transfer Pricing Officer’s order passed u/s 92CA(3) of the Act dated 31.07.2021. During the assessment, the assessee objected to the use of the \"General purpose/refinance\" filter, arguing that the \"primary purpose\" of the loan should be considered. The Assessing Officer observed that finding an exact comparable is difficult and thus used similar comparable. The Assessing Officer justified using the \"General purpose/refinancing\" filter, reasoning that it encompasses all types of advances, including payables, and that a 100-bps forex risk adjustment is reasonable. The Assessing Officer concluded that the assessee failed to charge an appropriate interest rate, ensuring the transaction was at arm’s length. Consequently, the Assessing Officer applied an interest rate of 5.31% (computed using 6-month LIBOR 151 + average comparable rate 279.77 + forex risk 100), calculating an interest amount of Rs. 88,54,571/-. This resulted in an adjustment of Rs. 23,51,235 (88,54,571 - 65,03,336). The Ld. CIT(A) upheld the order of the Assessing Officer on this issue. 8.1 Before us, the Ld. AR submitted as under:- ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 9– • The Associate Enterprise of the assessee company does not carry out any manufacturing or investment activity, it is created only for marketing and to increase the market presence; • The comparable taken over are from global database. Therefore, the risk has been already covered in the rate calculated by the assessee company and there is no need to add 100 basis points. • Also historically USD has appreciated over INR, hence there is no forex risk. • The rate of interest at ALP as calculated by assessee comes to 3.9778% and the actual rate of interest charged by the assessee to the AE is 3.9%. The maximum tolerable limit of difference between the two is capped at 3% and in the assessee’s case is 2% of the actual interest rate, which is within the tolerable limit. Therefore, no adjustment is required to be made. • In A.Y. 2008-09, the interest rate of LIBOR + 2.5% was considered as an acceptable range for such transactions. Keeping that in view and considering A.Y. 2008-09 as benchmark, interest rate comes as 3.51% (LIBOR + 5%) which is far less than what is charged by the assessee. • The rate of interest should be computed on the basis of the nature of the loan given. The nature of loan given is the basis of deciding the rate of interest and in the above instance the loan given was not of general purpose and primary in nature. The filter of primary purpose was not applied by the Ld. AO. The loan given was applied for day to day operations and are not used for any purpose such as acquisition, takeover, etc. instead it is a corporate purpose loan. The Assessing officer cannot step into the shoes of the assessee and decide his nature of business and purpose of loan. There seems no genuine cause on the basis of which the AO could justify that the interest charged is not at Arm’s Length Price. 8.2 The Ld. DR, on the other hand, supported the order of the authorities below. ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 10– 8.3 We have heard the rival contentions and perused the material available on record. We find that the Tribunal has considered LIBOR + 2.5% as appropriate for AY 2008-09 in ITA No. 2347/Ahd/2018 in assessee’s own case, hence keeping in view the interest charged by the assessee, we hold that no further adjustment is required on this issue. The appeal of the assessee on these grounds are allowed. Ground No. 4 - Deduction u/s 35(2AB) 9. This ground relating to the disallowance of deduction claimed u/s 35(2AB) of the Act amounting to Rs.58,36,15,599/- was not pressed before the us, hence, the same is dismissed as not pressed. Ground No. 5 – Additional claim made by the assessee Ground No. 6 – Deduction on account of ESOP – Rs. 4,90,35,650/- Assessee’s appeal & Ground No.1 – Deduction of ESOP – Rs.3,12,95,400/-, Ground No.2 - Deduction of ESOP of Rs. 71,39,194/- Revenue’s Appeal 10. The assessee company claimed deduction of Rs. 3,12,95,400/- on account of ESOP under the head any other amount allowable as deduction. The Assessing Officer held that the ESOP expenditure claimed is not an actual expenditure instead it is a notional expense and even if it is considered as an expense, it is not a revenue expense instead a capital nature of expenditure. 10.1 The Ld. CIT(A) held that ESOP benefits are taxable as perquisite and form part of employee's salary income. The employer is required to withhold tax at source in respect of such perquisite. The perquisite value is computed as the difference between the FMV of the share on the date of exercise and the exercise price. According to provisions of section 17(2) of the Act, said item is taxable in ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 11– the hands of employees as Perquisite. The Ld. CIT(A) reversed the order of the Assessing Officer holding that if the appellant company is not allowed the deduction of expenditure i.e. “perquisite value” on which the employee has already paid the taxes, it would result into double taxation, which is completely against the principles of natural justice. 10.2 Aggrieved, the Revenue is in appeal before us against the deletion of Rs. 3,12,95,400/-. The assessee is in appeal arguing that the expenditure incurred was not Rs. 3,12,95,400/-, but in reality, the amount was Rs. 4,90,35,650/- and prayed that the entire expenditure incurred in ESOPs be allowed. 10.3 It was argued that, during the assessment proceedings, the assessee presented an additional claim for certain deductions and benefits, which was based on facts and evidence already present in the Assessing Officer's records. The Assessing Officer did not allow such claim relying on the judgment of the Hon’ble Apex Court in the case of Goetze (India) Ltd. vs CIT, 284 ITR 323. The same reads as under:- “2. The question raised in this appeal relates to whether the appellant assessee could make a claim for deduction other than by filing a revised return. The assessment year in question was 1995-96. The return was filed on 30-11-1995, by the appellant for the assessment year in question. On 12- 1-1998, the appellant sought to claim a deduction by way of a letter before the assessing officer. The deduction was disallowed by the assessing officer on the ground that there was no provision under the Income Tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return. 3. This appellant's appeal before the Commissioner (Appeals) was allowed. However, the order of the further appeal of the department before the Income Tax Appellate Tribunal was allowed. The appellant has approached this court and has submitted that the Tribunal was wrong in upholding the assessing officer's order. He has relied upon the decision of this court in National Thermal Power Company Ltd. v. CIT (1998) 229 ITR 383, to contend that it was open to the assessee to raise the points of law even before the Appellate Tribunal. ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 12– 4. The decision in question is that the power of the Tribunal under section 254 of the Income Tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the assessing officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income Tax Appellate Tribunal under section 254 of the Income Tax Act, 1961. There shall be no order as to costs.” 10.4 When the assessee reiterated such claim during the appellate proceedings, the CIT (A) rejected it relying on the same judgement. 10.5 Before us, the Ld. AR argued that the principle of assessing the correct taxable income should take precedence over procedural technicalities. It was argued that the denial of valid substantial claim will result in incorrect assessment of the taxable income. 10.6 Heard both the parties and the material available on record. The admissibility of a claim which is not made by filing of revised return before assessing officer/appellate authority, have always been a contentious issue. There are various judicial pronouncements that support the contention that an additional claim not claimed in the return of income can be raised before the appellate authorities, even if it has not been raised before the Assessing Officer. The normal procedure envisages that an assessee is required to file his return of income, u/s. 139(1), before the due date specified. In case the assessee discovers any omission or any wrong statement in such return of income, they can file a revised return before the expiry of one year from the end of the relevant assessment year, or before the completion of assessment, whichever is earlier, in accordance with the provisions of section 139(5). Infrequently, the assessee discovers a mistake or omission in the return of income after the expiry of the ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 13– time prescribed for revision of his return of income u/s. 139(5). The issue arises whether in such cases the assessee can make a claim for a deduction, before the Assessing Officer or before the appellate authorities, which has not been claimed in the return of income, when he is not in a position to revise his return of income. The Revenue is always of the view that any claim can be made only through a revised return of income filed in time. Relying on the decision of the Supreme Court in the case of Goetze (India) Ltd vs. CIT 284 ITR 323, the department always argues that no such claim can be made outside the revised return of income. We find that Hon’ble Bombay High Court, in the case of Pruthvi Brokers & Shareholders Pvt. Ltd. (349 ITR 336), held that even if a claim was not made before the assessing officer, it could be made before the appellate authorities. It has been held that the assessee was entitled to raise not merely additional legal submissions before the appellate authorities, but was also entitled to raise additional claims before them. It was held that the appellate authorities had the discretion whether or not to permit such additional claims to be raised, but it could not be said that the Tribunal had no jurisdiction to consider the same as clearly enunciated by the Hon’ble Apex Court in the judgment of Goetze (India) Ltd. (supra). We also find that Chennai bench of the Tribunal in the case of Chiranjeevi Wind Energy Ltd. vs. ACIT 29 ITR (Trib) 534 vide order dated 21.10.2013 rejected the claim made for the first time before the Tribunal. We also find that the Hon’ble Supreme Court in the case of Jute Corpn. of India Ltd. vs. (CIT 187 ITR 688), it is clear that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. They have the jurisdiction to entertain the new claim. CBDT, Circular stating that: “Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 14– initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should — (a) Draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;(b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.” still holds the water. 10.7 Similarly, in CIT vs. Jai Parabolic Springs Ltd. (306 ITR 42), the Delhi High Court held that the tribunal had power to allow deduction for expenditure to assessee to which it was otherwise entitled to even though no claim was made by the assessee in the return of income. In this case, the decision of Supreme Court in Goetze (India) Ltd. was considered. The Cochin tribunal in the case of Thomas Kurian 303 ITR (AT) 110 (Coch), held that even the CIT(A) had the power to entertain a claim not made in the return of income. In Lupin Agrochemicals Ltd. ITA No. 3178 (Mum), the case of Goetze (I) Ltd. was considered and it was held that said decision did not prevent an assessee to make legal claim in assessment proceedings and that such claim could be made even in appellant proceedings. Hence, keeping in view the claim of the assessee is being considered on merits of the case. 10.8 The assessee, while filing the return of income, has claimed the deduction of Rs. 3,12,95,400/- for Employee Stock Option Plans (ESOPs) granted to employees, instead of the actual eligible amount of Rs. 4,90,35,650/-. It was stated that upon realizing the error, the assessee requested the Assessing Officer to allow the additional deduction of Rs. 1,77,40,250/-. However, the Assessing Officer refused to grant the adjustment and the Ld. CIT(A), on appeal, dismissed the ground raised by the assessee on this aspect. ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 15– 10.9 Before us, the Ld. AR submitted that there was an inadvertent error in claiming a deduction of Rs. 3,12,95,400/- for ESOPs granted to employees, instead of the correct amount of Rs. 4,90,35,650/-. The working on the basis of which the said expenditure was claimed, as submitted by the assessee, is reproduced as under: Particulars Aamir Akhtar Aamir Akhtar Aamir Akhtar Susheel Kaul Susheel Kaul Total Date of Exercise 01-Nov-17 02-Nov-17 13-Apr-17 26-Sep-17 30-Mar-17 FMV of shares 402.70 405.83 393.48 368.00 392.88 Option Price 200.45 200.45 200.45 200.45 200.45 Perquisite 202.25 205.38 193.03 167.55 192.43 Tax on Perquisite 71.87 72.98 68.59 59.54 8.38 Options exercised 14000 36000 50000 50000 108000 258000 Total Perquisite Amount 28,31,500 73,93,500 96,51,250 83,77,500 2,07,81,900 4,90,35,650 Total TDS collected 10,06,174 26,27,280 34,29,572 29,76,945 73,84,848 10.10 The Ld. AR submitted that when the assessee has claimed insufficient deductions, thereby resulting in higher tax payments, the Assessing Officer is obligated to notify the assessee and adjust the tax liability accordingly. The Ld. AR submitted that, the assessee in this case had inadvertently claimed Rs. 1,77,40,250/- less in ESOP deductions and, upon recognizing error, the assessee requested the Assessing Officer to adjust the deduction to reflect the correct expenditure incurred; however, the request of the assessee was denied by the Revenue Authorities. 10.11 The Ld. DR, on the other hand, supported the order of the authorities below. 10.12 We have heard the rival contentions and perused the material available on record. We find that there was no error in the above computation. The assessee ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 16– is eligible to claim deduction of Rs.4,90,35,650/- instead of Rs.3,12,95,400/-. The computation is not in dispute even by the Revenue, but denied just because it was not claimed in the return. With regard to the merits of allowability on expenditure on ESOPs, we are guided by the judgment of Hon’ble Delhi High Court in the case of CIT vs. Lemon Tree Hotels Ltd, wherein it was held as under:- “The question sought to be projected by the Revenue is whether the ITAT erred in deleting the addition of Rs. 1,28,19,169/- made by the Assessing Officer (‘AO’) by way of disallowance of the expenses debited as cost of Employees Stock Option (‘ESOP’) in profit and loss account? The Court has been shown a copy of the decision dated 19th June 2012 passed by the Division Bench of Madras High Court in CIT-III Chennai v. PVP Ventures Ltd. (TC(A) No. 1023 of 2005) where a similar question was answered in favour of the Assessee by holding that the cost of ESOP could be debited to the profit and loss account of the Assessee. This Court has also in its decision dated 4th August 2015 in ITA No.2 of 2002 (CIT v. Oswal Agro Mills Ltd.) held that the expenditure incurred in connection with issue of debentures or obtaining loan should be considered as revenue expenditure. In the circumstances, the impugned order of the ITAT answering the question in favour of the Assessee is affirmed.” Further reliance is being place on the judgements in the case of :- • CIT(A) Vs. M/s. Biocon Ltd, ITA No.653 of 2013 • DCIT Vs. M/s. Astral Polytechnik Ltd, ITA No. 287/Ahd/2020 10.13 Keeping in view the above proposition laid down, the claim of the assessee which was correct is now being allowed. The appeal of the assessee on these grounds are allowed, whereas the appeal of the Revenue on these grounds are dismissed. Ground No. 7 – Additional Claim resulting in LTCG – Rs.21,62,670/- 11. The assessee, for the year under consideration, has offered long term capital gain on sale of shares of Amol Decalite Ltd. of Rs. 38,81,310/- as against the actual long-term capital gain amounting to Rs. 17,18,640/-. The assessee had ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 17– requested the Assessing Officer to allow the reduction of Rs. 21,62,670/- in Long Term Capital Gain; however, while passing the assessment order, the same has not been allowed by the Assessing Officer. On appeal before the First Appellate Authority, the Ld. CIT(A) dismissed the appeal of the assessee on this ground. 11.1 The Ld. AR argued that the assessee mistakenly reported a gain of Rs. 38,81,310/- instead of the actual gain of Rs. 17,18,640/- from the sale of shares in Amol Decalite Ltd. The issue is akin to the issue dealt with at Ground No. 6 above. Keeping in view the above proposition laid down, the claim of the assessee which was correct is now being allowed. Since the computation is not being examined by the Tribunal, after laying down the proposition, the matter is remitted to the Assessing Officer for the limited purpose of re-computation of the capital gains. The appeal of the assessee on this ground is allowed for statistical purposes. Ground No. 8 – Notional interest 12. The relevant facts relating to this issue are that Arvind Premium Retail Limited had issued 9% redeemable non-cumulative preference shares to the tune of 60,000. 12.1 It was submitted that as per the Ind-AS Framework, for the purpose of fair valuation, the debt and equity component of the preference shares are required to be reported separately in the Balance sheet. Consequently, notional interest expense is recognized in the books of account of the issuer on the said debt component of the preference shares. The assessee-company, being the investee, has recognized the notional interest income on the debt component of the said preference shares in its books of account and interest income amounting to Rs. 37,76,627/- has been credited to profit and loss account under the head ‘other income’. The said interest income, being merely the notional entry and not the ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 18– real income, is not chargeable to tax; however, while filing the return of income for the year, the assessee company had inadvertently not reduced the same while computing the total income chargeable to tax. The appellant company, therefore, had requested the Assessing Officer to allow the reduction of the said notional interest income of Rs. 37,76,627/-, which has been disallowed by the Assessing Officer. The Ld. CIT(A) also upheld the action of the Assessing Officer in this regard. 12.2 Before us, the Ld. AR submitted that an inadvertent error occurred in the calculation of total income chargeable to tax by failing to exclude notional interest income and the assessee had inadvertently failed to reduce the notional interest income of Rs. 37,76,627/-, however, upon realizing this mistake, when the assessee requested the Assessing Officer to exclude this notional income from the total income, the request of the assessee was denied by both the Assessing Officer and the CIT(A). The Ld. AR, therefore, urges before the Tribunal to allow the reduction of the notional interest income being charged to tax. 12.3 The Ld. DR, on the other hand, supported the order of the authorities below. 12.4 We have heard the rival contentions and perused the material available on record. We find that the assessee has been harping upon an inadvertent error occurred in the calculation of total income chargeable to tax by failing to exclude notional interest income and the assessee had inadvertently failed to reduce the notional interest income of Rs. 37,76,627/-, however, upon realizing this mistake, the assessee requested the Assessing Officer to exclude this notional income from the total income. This needs a detailed examination of the accounts of the assessee as to how the same has been reflected in the P & L, its subsequent impact on the balance-sheet and on the determination of the total taxable income. Hence, accepting the argument of the Ld. DR, the matter is being restored to the Assessing ITA No. 349 & 466/Ahd/2024 Assessee : Arvind Limited Asst. Year : 2018-19 - 19– Officer for examination as to how the error has crept in and its impact on the determination of the total income. The appeal of the assessee on this ground is allowed for statistical purposes. 13. In the result, the appeal of the assessee is partly allowed for statistical purposes, whereas the appeal of the Revenue is dismissed. The order is pronounced in the open Court on 03.07.2025 Sd/- Sd/- (SUCHITRA KAMBLE) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 03/07/2025 btk आदेश की \u0007ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b थ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation …27.06.2025…….….. 2. Date on which the typed draft is placed before the Dictating Member …02.07.2025…… 3. Other Member… ……02.07.2025..……………… 4. Date on which the approved draft comes to the Sr.P.S./P.S … …02.07.2025.…………. 5. Date on which the fair order is placed before the Dictating Member for pronouncement …03.07.2025….. 6. Date on which the fair order comes back to the Sr.P.S./P.S ……03.07.2025.……………. 7. Date on which the file goes to the Bench Clerk ….03.07.2025……….…. 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order…………………………………… "