DCIT, New Delhi V. M/s. Info Edge India Ltd., New Delhi

ITA 2031/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7373 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RUPESH J AIN; MANISHA SHARMA
• Keywords: Capital receipt

Judgement Text

1 ITA 2031/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI: JUDICIAL MEMBER ITA NO. 2031/DEL/2014 ASSTT. YR: 2010-11 DCIT CIRCLE 11(1), VS. M/S INFO EDGE INDIA LTD., NEW DELHI. GF-12A, MEGHDOOT BUILDING, NEHRU PLACE, NEW DELHI-110019. PAN: AAACI 1838 D ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI RAJESH KUMAR SR. DR RESPONDENT BY : SHRI RUPESH JAIN ADV. & MS. MANISHA SHARMA ADV. DATE OF HEARING : 21/06/2016. DATE OF ORDER : 23/06/20126. O R D E R PER S.V. MEHROTRA, A.M: 1. THIS IS REVENUES APPEAL AGAINST THE ORDER D ATED 12.12.2013 PASSED BY THE LD. CIT(A)-XV, NEW DELHI IN APPEAL NO. 188 /2013-14 RELATING TO AY 2010-11. 2. SOLE EFFECTIVE GROUND TAKEN BY THE REVENUE IS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 75 ,65,000/- MADE BY DISALLOWING COMPENSATION ON EMPLOYEES STOC K OPTION PLAN TREATING THE SAME AS CAPITAL IN NATURE. 2 ITA 2031/DEL/2014 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 93,11,83,260/- . THE ASSESSEE COMPANY, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BUSINESS OF PROVIDING ONLINE RECRUITMENT, MATRIMONIAL AND REAL ESTATE CLA SSIFIED SERVICES IN INDIA. THE AO NOTICED THAT ASSESSEE HAD CHARGED RS. 75,65 ,000/- IN THE P&L A/C AS EMPLOYEE STOCK OPTION SCHEME COMPENSATION. AO OB SERVED THAT EXPENDITURE HAD BEEN DISALLOWED IN EARLIER YEAR AS THE EXPENDITURE HAD NOT ACTUALLY BEEN INCURRED BY THE ASSESSEE COMPANY. THE ASSESSEE IN ITS REPLY TO THE SHOW CAUSE NOTICE, ISSUED BY THE AO, POINTED OU T THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAS CHARGE D RS. 75,65,000/- AS EMPLOYEES STOCK OPTION SCHEME COMPENSATION AS PER S EBI UNDER SECURITIES AND EXCHANGE BOARD OF INDIA GUIDELINES 1 999. THE COMPANY CALCULATES THE COMPENSATION BASED ON INTRINSIC VALU E METHOD AND ACCORDINGLY, THE EXCESS IF ANY OF THE MARKET PRICE OF THE UNDERLYING EQUITY SHARES AS THE DATE OF GRANT OF THE OPTION OVER THE EXERCISE PRICE OF THE OPTION IS RECOGNIZED AS EMPLOYEE COMPENSATION COST AND AMO RTIZED ON STRAIGHT LINE BASIS OVER THE VESTING PERIOD . THE AO DISALLOWED THE ASSESSEES CLAIM. 4. LD. CIT(A) ALLOWED THE ASSESSEES CLAIM RELYING ON THE DECISION IN THE ASSESSEES OWN CASE FOR AY 2008-09 AND 2009-10. 5. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE DECISION OF LD. CIT(A) FOR AY 2007-08 TO 2009-10 HAS BEEN SET ASIDE BY THE ITAT DELHI BENCH VIDE ITA NOS. 1896, 2444 AND 2 445/DEL/2013 DATED 31.7.2015. LD. COUNSEL FURTHER POINTED OUT THAT THE RE IS NO CHANGE IN FACTS OBTAINING IN EARLIER YEAR AND THE SAME SCHEME HAS C ONTINUED. 6. LD. DR RELIED ON THE ORDER OF AO. 3 ITA 2031/DEL/2014 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THE FACTS ARE NOT DISPUTED. DISALLOWANCE HAS BEEN MADE ON THE SAME LINES AS IN EARLIER YEARS. WE FIND THAT THE TRIBUNAL IN PARA 3 OF ITS ORDER DATED 31.7.2015 IN ITA NOS. 1 896, 2444 & 2445/DEL/2013, HAS OBSERVED AS UNDER: 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE FIND THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE SPECIAL BENCH OF THE TRIBUNAL IN BIOCON LTD. VS. DCIT (2013) 144 ITD 21 (BANG.) (SB). IN THIS CASE, THE TRIBUNAL HAS HELD THAT DISC OUNT ON ISSUE OF ESOP IS ALLOWABLE AS DEDUCTION IN COMPUTING INCO ME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSI ON.' SINCE IT IS ON ACCOUNT OF AN ASCERTAINED AND NOT CONTINGENT LIA BILITY, IT CANNOT BE TREATED AS A SHORT CAPITAL RECEIPT. THERE AFTER, THE SPECIAL BENCH HAS LAID DOWN THE MECHANISM FOR DETER MINING AS TO WHEN AND HOW MUCH DEDUCTION SHOULD BE ALLOWED. I T HAS BEEN HELD THAT THE LIABILITY TO PAY THE DISCOUNTED PREMIUM IS INCURRED DURING THE VESTING PERIOD AND THE AMOUNT O F SUCH DEDUCTION IS TO BE FOUND OUT AS PER THE TERMS OF ES OP BY CONSIDERING THE PERIOD AND PERCENTAGE OF VESTING DU RING SUCH PERIOD. DEDUCTION OF THE DISCOUNTED PREMIUM DURING THE YEARS OF VESTING SHOULD BE ALLOWED ON STRAIGHT LINE BASIS . THEN, DEALING WITH THE SUBSEQUENT ADJUSTMENT TO DISCOUNT, THE SPECIAL BENCH LAID DOWN THAT ANY ADJUSTMENT TO INCOME IS CA LLED FOR AT THE TIME OF EXERCISE OF OPTION BY THE AMOUNT OF DIF FERENCE IN THE AMOUNT OF DISCOUNT CALCULATED WITH REFERENCE TO THE MARKET PRICE AT THE TIME OF GRANT OF OPTION AND MARKET PRI CE AT THE TIME OF EXERCISE OF OPTION . 8. FACTS OF THE CASE FOR THE PRESENT YEAR BEING IDE NTICAL AS IN EARLIER YEARS, FOR THE SAME REASONS AND RESPECTFULLY FOLLOW ING THE PRECEDENT, WE SET ASIDE THE IMPUGNED ORDER OF LD. CIT(A) AND SEND THE MATTER TO THE FILE OF AO 4 ITA 2031/DEL/2014 FOR DECIDING IT IN CONFORMITY WITH THE DECISION TAK EN BY THE SPECIAL BENCH OF THE ITAT IN THE CASE OF BIOCON LTD. VS. DCIT (2013 ) 144 ITD 21 (BANG.) (SB), AFTER AFFORDING REASONABLE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. 9. IN THE RESULT, DEPARTMENTS APPEAL STANDS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCEMENT IN OPEN COURT ON 23/06/2016. SD/- SD/- (BEENA A. PILLAI) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23/06/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.