DCIT, CIRCLE- 12(1), New Delhi V. ICRA Ltd., New Delhi

ITA 1916/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9083 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 19-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BA RANWAL
• Keywords: Earning of tax free income; Revenue expenditure; Rule 8D; Set aside
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 1916/DEL/2018 (ASSESSMENT YEAR : 2014-15) DCIT CIRCLE 12(1) NEW DELHI PAN NO. AAACI 0218 B VS. ICRA LTD 1105, KAILASH BUILDING 11 TH FLOOR, 26 KASTURBA MARG, NEW DELHI-110001 (APPELLANT) (RESPONDENT) A SSESSEE BY -- NONE -- RE VENUE BY MS. ANIMA BARANWAL, SR. D.R. DATE OF HEARING: 09 .0 8 .2021 DATE OF PRONOUNCEMENT: 12 . 0 8 . 202 1 ORDER PER ANIL CHATURVEDI, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 24.01.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-4, NEW DELHI RELATING TO ASSESSMENT YEAR 2014-15. 2. ON THE DATE OF HEARING, NONE APPEARED ON BEHALF OF ASSESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED ON ITS BEHALF, THOUGH THE NOTICE FOR HEARING WAS ISSUED TO THE ASSESSEE. THE CASE FILE FURTHER REVEALS THAT THERE WAS NO APPEARANCE IN THE PAST FROM THE 2 ASSESSEES SIDE. IN SUCH A SITUATION, WE PROCEED TO DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE AFTER CONSIDERING THE MATERIAL ON RECORD AND AFTER HEARING BY THE LEARNED DR. 3. THE RELEVANT FACTS AS CULLED FROM THE MATERIAL ON RECORDS ARE AS UNDER : 4. ASSESSEE IS A COMPANY WHICH STATED TO BE ENGAGED IN THE BUSINESS OF CREDIT RATING. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2014-15 ON 29.11.2014 DECLARING TOTAL INCOME OF RS.67,32,94,360/- WHICH WAS SUBSEQUENTLY REVISED ON 31.03.2016 BY DECLARING AN INCOME OF RS.67,69,56,180/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 21.12.2016 AND THE TOTAL INCOME WAS DETERMINED AT RS.70,77,59,955/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO VIDE ORDER DATED 24.01.2018 (APPEAL NO.847/16-17/CIT(A)-4) ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF EMPLOYEE STOCK OPTION SCHEME COMPENSATION AMOUNTING TO RS.1,46,46,000/-. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY AO U/S 14A R.W.R 8D, AMOUNTING TO RS.1,59,43,221/-? 3 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D OF THE ACT ON THE GROUND THAT THE ASSESSING OFFICER (AO) HAD NOT RECORDED SATISFACTION BEFORE INVOLVING RULE 8D OF THE RULE BY IGNORING THAT THE ASSESSING OFFICER HAD DEALT THE ISSUE IN DETAIL IN HIS ORDER. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) IS CORRECT IN HOLDING THAT DISALLOWANCE U/S 14A OF THE IT ACT SHOULD BE RESTRICTED TO ONLY THOSE INVESTMENTS FROM WHICH THE ASSESSEE ERRED EXEMPT INCOME DURING THE YEAR. 5. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ADD OR FOREGO ANY GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF APPEAL. 5. GROUND NO.1 IS WITH RESPECT TO DELETING THE DISALLOWANCE OF EMPLOYEE STOCK OPTION SCHEME COMPENSATION. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAS CLAIMED RS.1,46,46,000/- IN ITS P&L ACCOUNT TOWARDS AMORTIZATION OF DEFERRED EMPLOYEES COMPENSATION (EMPLOYEE STOCK OPTION SCHEME COMPENSATION). ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM OF EXPENSES TO WHICH THE SUBMISSIONS WERE MADE. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO AO. AO WAS OF THE VIEW THAT THE EXPENDITURE ON ESOP COMPENSATION WAS NOT REVENUE EXPENDITURE AS IT HAS BEEN INCURRED TOWARDS THE RAISING OF SHARE CAPITAL, IT IS NOT AN ACTUAL EXPENDITURE BUT JUST A NOTIONAL LOSS, SEBI GUIDELINES ARE NOT A PREROGATIVE FOR DETERMINING ALLOWABILITY OR OTHERWISE OF AN ITEM FOR INCOME TAX PURPOSE. HE ACCORDINGLY HELD THAT THE AMOUNT TO BE NOT ALLOWABLE AND ACCORDINGLY DISALLOWED RS.1,46,46,000/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). CIT(A) NOTED THAT IDENTICAL ISSUE AROSE IN ASSESSEES 4 OWN CASE FOR A.Y. 2011-12 & 2012-13 AND HIS PREDECESSOR HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. HE ALSO NOTED THAT THE ISSUE WAS ALSO COVERED IN ASSESSEES FAVOUR BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT. HE THUS FOLLOWING THE ORDER OF HIS PREDECESSORS, ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LEARNED DR SUPPORTED THE ORDER OF AO. 8. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO DELETION OF DISALLOWANCE OF EMPLOYEE STOCK OPTION SCHEME COMPENSATION. WE FIND THAT CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE HAS NOTICED THAT HER PREDECESSOR IN ASSESSEES OWN CASE FOR A.Y. 2011-12 & 2012-13 HAD ALLOWED THE CLAIM OF THE ASSESSEE. BEFORE US, NO FALLACY IN THE FINDINGS OF CIT(A) HAS BEEN POINTED OUT BY THE REVENUE. REVENUE HAS ALSO NOT PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THE ORDER OF CIT(A) FOR A.Y. 2011-12 & 2012-13 HAS BEEN SET ASIDE BY HIGHER JUDICIAL FORUM. IN SUCH A SITUATION, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THE GROUND OF THE REVENUE IS DISMISSED. 9. GROUND NOS. 2 TO 4 ARE INTERCONNECTED AND ARE WITH RESPECT TO DISALLOWANCE U/S 14A R.W.R 8D OF THE ACT. 5 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTED THAT ASSESSEE HAD CLAIMED EXEMPT INCOME OF RS.16,10,000/- AND SUO MOTO DISALLOWED RS.1,81,956/- U/S 14A BEING RELATED TO THE EARNING OF THE EXEMPTED INCOME. ASSESSEE WAS ASKED TO EXPLAINED AS TO WHY THE DISALLOWANCE NOT BE MADE U/S 14A R.W.R 8D OF THE ACT TO WHICH ASSESSEE MADE SUBMISSIONS WHICH WERE NOT FOUND ACCEPTABLE TO AO. THE AO THEREAFTER BY FOLLOWING THE METHODOLOGY PRESCRIBED U/R 8D COMPUTED DISALLOWANCE AT RS.1,61,25,177/- AND AFTER GIVING THE CREDIT THE SUO MOTO DISALLOWANCE OF RS.1,81,956/- MADE BY THE ASSESSEE, MADE A NET DISALLOWANCE OF RS.1,59,43,221/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE NOTED THAT AO IN THE ASSESSMENT ORDER HAS NOT DEMONSTRATED AS TO HOW THE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE WAS INCORRECT OR INADEQUATE. HE HAS ALSO GIVEN A FINDING THAT AO HAD MECHANICALLY APPLIED THE PROVISION OF SECTION 14A R.W.R 8D OF THE ACT. HE HAS FURTHER NOTED THAT AO HAS NOT IDENTIFIED ANY EXPENDITURE WHICH WAS RELATABLE TO EARNING OF EXEMPT INCOME AND THAT AO HAD APPLIED THE PROVISION OF RULE 8D MECHANICALLY. CIT(A) FURTHER NOTED THAT SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE WAS AFTER CONSIDERING THOSE INVESTMENTS WHICH HAD YIELDED DIVIDEND INCOME AND THAT THE STAND TAKEN BY THE ASSESSEE WAS IN ACCORDANCE WITH THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF ACB INDIA LTD. VS ACIT (2015)(4) TMI 224 AND VARIOUS OTHER DECISIONS. CIT(A) THUS DIRECTED THE AO TO RESTRICT THE DISALLOWANCE AT RS.1,81,956/-, BEING THE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE AND DIRECTED THE DELETION OF 6 THE ADDITIONAL DISALLOWANCE OF RS.1,59,43,221/- . AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW BEFORE US. 11. BEFORE US, LEARNED DR SUPPORTED THE ORDER OF AO. 12. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO DISALLOWANCE U/S 14A R.W.R 8D OF THE ACT. WE FIND THAT CIT(A) WHILE DECIDING THE ISSUE IN ASSESSEES FAVOUR HAS GIVEN A FINDING THAT AO HAS APPLIED THE PROVISIONS OF RULE 8D MECHANICALLY AND HAS NOT DEMONSTRATED AS TO HOW THE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE WAS INCORRECT OR INADEQUATE. HE HAS FURTHER GIVEN A FINDING THAT THE SUO MOTO DISALLOWANCE MADE BY THE ASSESSEE WAS IN ACCORDANCE WITH THE DECISION OF JURISDICTION HIGH COURT. BEFORE US, NO FALLACY IN THE FINDINGS OF CIT(A) HAS BEEN POINTED OUT BY THE REVENUE. IN SUCH A SITUATION, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THE GROUNDS OF THE REVENUE ARE DISMISSED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.08.2021 SD/- SD/- (KULDIP SINGH) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE:- 12.08.2021 7 PY* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI