FUTURE AGROVET LTD., MUMBAI V. ADDL.C.I.T. RG.8(1), MUMBAI

ITA 2654/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8169 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 26-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 19-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMBIT MISHRA
• Keywords: Capital asset; Recovery proceedings; Business income; Wholly owned subsidiary; Valuation report; Revenue expenditure; Capital expenditure
• Section: 37(1); 37; 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE HONBLE S/SHRI D. MANMOHAN , VICE-PRESIDENT AND B.R.BASKARAN (AM) , . , . . , ! ./I.T.A. NO.2654/MUM/2012 ( '#$ % / ASSESSMENT YEAR : 2008-09) FUTURE AGROVET LTD., KNOWLEDGE HOUSE, HOO JOGESHWARI VIKHROLI LINK ROAD, SHYAM NAGAR, JOGESHWARI (E), MUMBAI-400060. / VS. ADDL. CIT, RANGE - 9(1), AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020. ( !&' / APPELLANT) .. ( ()&' / RESPONDENT) & ./ *+ ./ PAN/GIRNO.:AADCP5377P !&' , / APPELLANT BY : S HRI VIPUL JOSHI ()&' - , /RESPONDENT BY : SHRI SAMBIT MISHRA . / - 01 / DATE OF HEARING : 24.7.2014 2 %$ - 01 /DATE OF PRONOUNCEMENT : 19.9.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 16- 02-2012 PASSED BY LD CIT(A)-16, MUMBAI AND IT RELAT ES TO THE ASSESSMENT YEAR 2008-09. THE DISALLOWANCE OF CLAIM FOR DEDUCTION O F RS.1.00 CRORE RELATING TO THE VALUE OF SWEAT EQUITY SHARES ISSUED BY IT TO ITS KE Y PERSONS, HAVING BEEN CONFIRMED BY LD CIT(A), THE ASSESSEE HAS FILED THI S APPEAL BEFORE US. 2. THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE S TATED IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRAD ING IN GROCERY, FOOD-GRAINS & PROVISION STORE ITEMS. IT IS STATED THAT THE COM PANY WAS EARLIER KNOWN AS PANTALOON FOOD PRODUCT INDIA LTD.. DURING THE YE AR UNDER CONSIDERATION, THE ASSESSEE COMPANY ISSUED SWEAT EQUITY SHARES TO THE FOLLOWING PERSONS:- I.T.A. NO.2654/MUM/2012 2 (A) SHRI NARENDRA BAHETI - RS. 50,00,000/- (B) SHRI RAJENDRA BAHETI - RS. 50,00,000/- ----------------------- - RS.1,00,00,000/- ============ EACH OF THE ABOVE SAID PEOPLE WAS ALLOTTED 5,00,00 0 EQUITY SHARES AT PAR VALUE OF RS.10/- PER SHARE AT FREE OF COST. THE ASSESSEE CLAIMED THE ABOVE SAID AMOUNT OF RS.1.00 CRORE AS EXPENDITURE. BEFORE THE AO, THE ASSESSEE SUBMITTED THAT THE PROVISIONS RELATING TO FRINGE BENEFIT TAX (SEC. 115WC(1)) REQUIRES THE ASSESSEE TO PAY FRINGE BENEFIT TAX ON THE VALUE OF SWEAT EQUITY SHARES ALLOTTED TO THE EMPLOYEES AND IT HAS ALSO PAID THE FRINGE BE NEFIT TAX ON THE ABOVE SAID AMOUNT OF RS.1.00 CRORES. ACCORDINGLY IT WAS SUBMI TTED THAT THE SWEAT EQUITY SHARES IS A KIND OF FRINGE BENEFIT GIVEN TO ITS EMP LOYEES AND THE SAME IS ALLOWABLE AS REVENUE EXPENDITURE. HOWEVER, THE ASS ESSING OFFICER REJECTED THE SAID EXPLANATION WITH THE FOLLOWING OBSERVATIONS:- THIS EXPLANATION IS NOT ACCEPTABLE AS THE LOSS IS NOT ON ACCOUNT OF ANY EXPENDITURE OR INCURRING ANY LIABILITY FOR SUCH EXP ENDITURE. FOR CLAIMING SUCH EXPENSES AS ALLOWABLE U/S 37(1), THE ASSESSEE HAS TO QUALIFY THAT EXPENSES ARE INCURRED AND THE SAME ARE WHOLLY AND E XCLUSIVELY FOR THE PURPOSE OF BUSINESS. BY ISSUING SHARES AT LESSER T HAN MARKET PRICE, THE ASSESSEE CANNOT BE SAID TO HAVE INCURRED EXPENDITUR E RATHER IT AMOUNTS TO SHORT RECEIPT OF CAPITAL. ACCORDINGLY, THE AO HELD THAT THE ABOVE SAID CLAIM IS NOT ALLOWABLE U/S 37 OF THE ACT. IN THIS REGARD, HE PLACED RELIANCE ON THE DEC ISION RENDERED BY ITAT IN THE CASE OF RANBAXY LABORATORIES LTD VS. ADDL. CIT (20 09)(124 TTJ (DEL) 771). ACCORDINGLY, THE AO DISALLOWED THE CLAIM OF RS.1.00 CRORE MADE BY THE ASSESSEE. 3. THE LD CIT(A) ALSO CONFIRMED THE DISALLOWANC E MADE BY THE ASSESSING OFFICER, BY PLACING RELIANCE ON THE DECISION RENDER ED IN THE CASE OF RANBAXY LABORATORIES LTD (SUPRA). AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. BEFORE US, THE LD A.R MAINLY PLACED RELIANC E ON THE PROVISIONS RELATING TO FRINGE BENEFIT TAX TO CONTEND THAT THE SWEAT EQUIT Y SHARES ISSUED TO THE EMPLOYEES WOULD FALL IN THE CATEGORY OF REVENUE EXP ENDITURE. HE SUBMITTED THAT THE SALARY PACKAGE GIVEN TO THE TWO KEY EMPLOYEES P ROVIDED FOR ISSUE OF SWEAT I.T.A. NO.2654/MUM/2012 3 EQUITY SHARES AT FREE OF COST AND THEIR RESPECTIVE SALARY PACKAGE HAS ALSO BEEN APPROVED BY THE CENTRAL GOVERNMENT. HE FURTHER SUB MITTED THAT THE DECISION RENDERED IN THE CASE OF RANBAXY LABORATORIES LTD (S UPRA) WILL NOT APPLY TO THE FACTS OF THE INSTANT CASE. HE FURTHER SUBMITTED TH AT THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY HAS ALSO PASSED A RESOLUTION AUTHO RIZING THE ISSUE OF THE SWEAT EQUITY SHARES TO THE TWO EMPLOYEES HE PLACE D HIS RELIANCE ON THE FOLLOWING CASE LAW TO SUPPORT HIS CONTENTIONS THAT THE SWEAT EQUITY SHARES ARE GIVEN AS AN INCENTIVE TO MOTIVATE THE EMPLOYEES AND HENCE IT IS ALLOWABLE AS REVENUE EXPENDITURE: (A) CIT VS. PVP VENTURES (2013)(90 DTR (MAD) 340) (B) BIOCON LTD VS. DCIT (2013)(25 ITR (TRIB) 602) (BANGALORE)(SB) (C) SSI LIMITED VS. DCIT (2004)(85 TTJ 1049)(CHEN NAI) (D) ACIT VS. SPRAY ENGINEERING DEVICES LTD (2012) (53 SOT 70)(CHD) (E) DCIT VS. ACCENTURE SERVICES (P) LTD (ITA NO.45 40/M/08 DT. 23.3.2010) (F) NOVO NORDISK INDIA P LTD VS. DCIT (2013)(37 C CH 414)(BANGALORE) THE LD A.R ALSO INVITED OUR ATTENTION TO THE PROVIS IONS RELATING TO FRINGE BENEFIT TAX. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE CASE LAW RELIED UPON BY THE ASSESSEE RELATE TO THE SHARES ISSUED UNDER ESOP SCH EME AND HENCE THE RATIO OF THOSE DECISIONS COULD NOT APPLIED TO THE FACTS PREV AILING IN INSTANT CASE, AS THE OBJECTIVE OF ISSUING SHARES UNDER ESOP SCHEME AND S WEAT EQUITY SCHEME IS DIFFERENT. HE SUBMITTED THAT THE APPROVAL GIVEN BY THE GOVERNMENT OF INDIA FOR ISSUING SHARES TO MR. NARENDRA BAHETI PROVIDED FOR ISSUING SHARES FOR A CONSIDERATION OTHER THAN CASH AND FURTHER IT STATE S THAT THE SHARES HAVE TO BE ISSUED AFTER ONE YEAR FROM THE DATE OF COMMENCEMENT OF BUSINESS AND WITHIN THE PERIOD OF 5 YEARS. ACCORDINGLY, THE LD D.R SUBMITT ED THAT THESE SHARES HAVE TO BE ISSUED FOR A NON-MONETARY CONSIDERATION. HE FUR THER SUBMITTED THAT THE CONDITION NO.11 STATED IN THE APPROVAL GIVEN BY GOV ERNMENT OF INDIA CLEARLY STATES THAT THE APPROVAL GIVEN UNDER THE COMPANIES ACT SHOULD NOT BE CONSTRUED TO CONVEY THE APPROVAL OF THE CENTRAL GOVERNMENT OR ANY OTHER STATUTORY AUTHORITY UNDER IT, UNDER ANY OTHER LAW OR REGULATIONS FOR TH E TIME BEING IN FORCE. REFERRING TO THE VALUATION REPORT PLACED AT PAGES 30 TO 54 OF THE PAPER BOOK, MORE PARTICULARLY TO PAGE 38 OF THE PAPER BOOK, THE LD D .R SUBMITTED THAT THE ISSUANCE OF SWEAT EQUITY SHARES IS DEPENDENT UPON THE DEVELO PMENT TO BE ACHIEVED BY THE EMPLOYEES AND IF THE DEVELOPMENTS ARE NOT SATIS FACTORILY ACHIEVED IN THE FIRST I.T.A. NO.2654/MUM/2012 4 YEAR, THE OPTION OF SWEAT EQUITY SHARES WOULD LAPSE . ACCORDINGLY, THE LD D.R SUBMITTED THAT THE ISSUANCE OF SWEAT EQUITY SHARES CANNOT BE CONSIDERED AS PART OF SALARY PACKAGE, BUT IT IS ONLY AN OPTIONAL ONE, WHICH IS DEPENDENT UPON THE DEVELOPMENTS ACHIEVED. HE FURTHER SUBMITTED THAT T HE BUSINESS INCOME OF THE ASSESSEE HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SEC. 28 TO 43 OF THE ACT AND THE FACT THAT VALUE OF FREE SHARES A LLOTTED TO THE KEY EMPLOYEES HAS SUFFERED FRINGE BENEFIT TAX WOULD NOT GIVE TICKET TO CONVERT A CAPITAL EXPENDITURE INTO REVENUE EXPENDITURE. THE LD D.R FURTHER POINTE D OUT THAT THE SWEAT EQUITY SHARES HAVE BEEN CLASSIFIED AS A CAPITAL ASSET U/S 2(42A)(HB) OF THE ACT. 6. IN THE REJOINDER, THE LD A.R INVITED OUR ATT ENTION TO THE LETTER DATED 07-01- 2008 GIVEN TO THE ASSESSING OFFICER, WHICH IS PLACE D AT PAGE 29 OF THE PAPER BOOK, AND SUBMITTED THAT THE ASSESSEE HAS GIVEN PRI OR INTIMATION THE ASSESSING OFFICER ABOUT THE APPROVAL GIVEN BY THE GOVERNMENT OF INDIA FOR ISSUING SWEAT EQUITY SHARES FOR THE PURPOSE OF FRINGE BENEFIT TAX . 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. WE NOTICE THAT BOTH THE TAX AUTHORITIES HAVE PLACED RELIANCE ON THE DECISION RENDERED IN THE CASE OF RANBAXY LABORATORIES LTD, REFERRED SUPRA. A PERUSAL OF THE DISCUSSIONS MADE BY LD CIT(A) ABOUT THE FACTS PREVAILING IN RAN BAXY LABORATORIES LTD WOULD SHOW THAT THE ISSUE CONSIDERED THEREIN WAS DIFFEREN T ONE, I.E., THE ASSESSEE THEREIN CLAIMED THE DIFFERENCE BETWEEN THE MARKET VALUE OF SHARES AND THE ISSUE PRICE AS EXPENDITURE. HOWEVER, IN THE INST ANT CASE, THE ASSESSEE HAS ISSUED SHARES AT FREE OF COST AND HENCE THE ENTIRE VALUE OF SHARES IS TREATED AS PART OF EMPLOYEE BENEFIT AND ACCORDINGLY THE VALUE OF SWEAT EQUITY SHARES WAS CLAIMED AS DEDUCTION. 8. BEFORE US, THE LD A.R MAINLY PLACED RELIANCE ON THE PROVISIONS OF FRINGE BENEFIT TAX TO CONTEND THAT THE ASSESSEE, HAVING PA ID THE FRINGE BENEFIT TAX, SHOULD BE ALLOWED TO CLAIM THE VALUE OF SWEAT EQUIT Y SHARES AS DEDUCTION. THE LD A.R INVITED OUR ATTENTION TO CIRCULAR NO.8 OF 20 05 DATED 29-08-2005 ISSUED BY THE CBDT GIVING CLARIFICATIONS ABOUT THE FRINGE BEN EFIT TAX. THE LD A.R INVITED OUR ATTENTION TO THE QUESTION NO.35 AND THE ANSWER GIVEN TO IT, WHEREIN IT IS CLARIFIED THAT THE FRINGE BENEFIT TAX IS NOT PAYABL E ON THE PORTION OF EXPENSES, WHICH WERE DISALLOWED. ACCORDINGLY, THE LD A.R DRE W AN INFERENCE, APPARENTLY ON REVERSE INTERPRETATION, THAT IF THE FRINGE BENEF IT TAX IS ACCEPTED, THEN THE I.T.A. NO.2654/MUM/2012 5 EXPENDITURE IS ALLOWABLE AS REVENUE EXPENDITURE. W E ARE UNABLE TO AGREE WITH THE SAID CONTENTIONS. AS SUBMITTED BY LD D.R, THE INCOME FROM BUSINESS HAS TO BE NECESSARILY COMPUTED IN TERMS OF SEC. 28 TO 43 O F THE ACT. THE COMPUTATION OF FRINGE BENEFIT TAX IS A SUBSEQUENT EXERCISE. ACCOR DINGLY, IF ANY EXPENDITURE IS DISALLOWED WHILE COMPUTING THE BUSINESS INCOME, THE N THE ASSESSEE MAY NOT BE LIABLE TO PAY THE FRINGE BENEFIT TAX. THIS POSITIO N HAS BEEN MADE CLEAR BY THE CBDT IN THE ANSWER TO Q. NO.35 GIVEN IN CIRCULAR NO .8 OF 2005 DATED 29-08- 2005, WHEREIN IT IS STATED THAT THE FRINGE BENEFIT TAX IS PAYABLE ONLY ON THE AMOUNT ALLOWED UNDER THE PROVISIONS OF INCOME TAX ACT. HE NCE, IN OUR VIEW, THE ASSESSING OFFICER WAS RIGHT IN HOLDING THAT THE QUE STION OF ALLOWABILITY OF THE IMPUGNED CLAIM SHOULD BE INDEPENDENTLY TESTED IN TE RMS OF THE PROVISIONS OF SEC. 37(1) OF THE ACT. FURTHER OUR ATTENTION WAS INVITE D TO THE PROVISIONS OF SEC. 115WKA WHICH PROVIDE FOR RECOVERY OF FRINGE BENEFIT TAX BY THE EMPLOYER FROM EMPLOYEE AND ALSO TO THE PROVISIONS OF SEC. 115WKB OF THE ACT WHICH STATES THAT THE FRINGE BENEFIT TAX SO RECOVERED SHALL BE DEEMED TO BE THE TAX PAID BY SUCH EMPLOYEE IN RESPECT OF THE VALUE OF FRINGE BENEFIT AS DETERMINED U/S 115WC(1)(BA) OF THE ACT. HENCE, A SPECIFIC QUESTIO N WAS PUT TO THE LD A.R AS TO WHETHER THE ABOVE SAID EMPLOYEES HAVE DISCLOSED THE VALUE OF SWEAT EQUITY SHARES AS THEIR RESPECTIVE INCOME, THE LD A.R SUBMI TTED THAT THEY HAVE NOT DECLARED THE SAME AS THEIR RESPECTIVE INCOME. IN A NY CASE, THE METHODOLOGIES PRESCRIBED IN THE PROVISIONS RELATING TO FRINGE BEN EFIT TAX FOR PAYMENT / RECOVERY OF TAX MAY NOT BE RELEVANT TO DETERMINE ABOUT THE D EDUCTIBILITY OF AN EXPENDITURE U/S 37(1) OF THE ACT. 9. NOW WE SHALL EXAMINE THE DEFINITION GIVEN FO R SWEAT EQUITY SHARES IN THE EXPLANATION BELOW TO SEC. 115WB(1) OF THE ACT:- SWEAT EQUITY SHARES MEANS EQUITY SHARES ISSUED B Y A COMPANY TO ITS EMPLOYEES OR DIRECTORS AT A DISCOUNT OR FOR CONSIDE RATION OTHER THAN CASH FOR PROVIDING KNOW-HOW OR MAKING AVAILABLE RIGHTS I N THE NATURE OF INTELLECTUAL PROPERTY RIGHTS OR VALUE ADDITIONS, BY WHATEVER NAME CALLED. THUS, IT IS SEEN THAT THE SWEAT EQUITY SHARES IS IS SUED FOR CONSIDERATION OTHER THAN CASH FOR PROVIDING KNOW-HOW OR FOR MAKING AVA ILABLE RIGHTS IN THE NATURE OF INTELLECTUAL PROPERTY RIGHTS OR VALUE ADDITIONS. T HUS, THE EMPLOYEES OR DIRECTORS SHOULD PROVIDE INTANGIBLE ASSETS OF THE NATURE SP ECIFIED IN THE ABOVE SAID DEFINITION TO THE COMPANY FOR OBTAINING THE EQUITY SHARES AT A DISCOUNT OR FOR I.T.A. NO.2654/MUM/2012 6 CONSIDERATION OTHER THAN CASH. IF SHARES ARE ISSU ED AT FREE OF COST WITHOUT ACQUIRING ANY INTANGIBLE ASSETS OF THE NATURE SPECI FIED IN THE ABOVE SAID DEFINITION, IN OUR VIEW, THE SAME WOULD NOT FALL IN THE CATEGORY OF SWEAT EQUITY SHARES. 10. THE NOTES OF ACCOUNTS ATTACHED TO THE BALAN CE SHEET AS AT 31.3.2008, WHICH IS PLACED AT PAGE 27 OF THE PAPER BOOK, STAT ES ABOUT THE ISSUE OF SWEAT EQUITY SHARES AS UNDER:- DURING THE YEAR THE COMPANY HAS ISSUED EQUITY SHAR ES OF RS.50,00,000/- EACH (5,00,000 EQUITY SHARES OF RS.10/- EACH) TO MR . NARENDRA BAHETI (MANAGING DIRECTOR) AND MR. RAJENDRA BAHETI (ZONAL HEAD NORTH ZONE) AS PER BOARD RESOLUTION DATED 14 TH NOVEMBER, 2007. THE SHARE HOLDERS HAD PASSED A SPECIAL RESOLUTION IN THE EXTRA-ORDINA RY GENERAL MEETING HELD ON 29 TH DECEMBER, 2007 TO AUTHORIZE SUCH ALLOTMENT. THE S HARES WERE ALLOTTED ON 16 TH JANUARY, 2008. THE SWEAT EQUITY SHARES HAVE BEEN ISSUED FOR CONSIDERATION OTHER THAN CASH FOR PROVID ING PROFESSIONAL SERVICES . THUS IT IS SEEN THAT THE ASSESSEE HAS ISSUED EQUITY SHARES FOR PROVIDING PROFESSIONAL SERVICES, WHICH HAS BEEN CONSIDERED AS VALUE ADDITION BY THE ASSESSEE COMPANY. THIS FACT HAS FURTHER BEEN ELABO RATED IN THE REPORT DATED 18- 10-2007 GIVEN BY M/S DOOGAR & ASSOCIATES, CHARTERED ACCOUNTANTS WHO HAD VALUED THE CONSIDERATION FOR PROPOSED ISSUE OF SWEA T EQUITY SHARES TO BOTH THE EMPLOYEES. IN THE SAID REPORT, IT IS STATED THAT T HE BUSINESS CONCEPT OF SELLING STAPLES SUCH AS SUGAR, RICE, PULSES, WHEAT / ATTA E TC., IN OPEN DRUMS WAS INTRODUCED BY MR. BAHETI (ONE OF THE EMPLOYEES) FOR THE FIRST TIME IN THE NAME OF FOOD BAZAAR, WHICH BECAME A GREAT HIT WITH THE CO NSUMERS. CONSIDERING THE VAST EXPERIENCE IN THE TRADING, PROCUREMENT, BUSINE SS DEVELOPMENT AND MANAGING QUALITIES OF MR. NARENDRA BAHETI, HE WAS M ADE THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY. ANOTHER EMPLOYEE SHRI RAJ ENDRA BAHETI IS A CHARTERED ACCOUNTANT AND HE HAD JOINED HANDS WITH M R. NARENDRA BAHETI IN DEVELOPING FOOD BAZAARS AND WAS IN-CHARGE OF PROCUR EMENT OF STAPLES. HENCE HE WAS APPOINTED AS ZONAL HEAD NORTH. 11. FROM THE VALUATION REPORT FURNISHED BY THE C ONSULTANT CITED ABOVE, WE NOTICE THAT THE ISSUING OF SWEAT EQUITY SHARES WAS AUTHORIZED WITH THE STIPULATION THAT THEY WILL BE ENTITLED FOR THE SAME AFTER THE C OMPLETION OF ONE YEAR FROM THE I.T.A. NO.2654/MUM/2012 7 DATE OF COMMENCEMENT OF BUSINESS SUBJECT TO THE CON DITION THAT HE WILL DEVELOP THE SUPPLY CHAIN TO MEET PRIL (HOLDING COMPANY) REQ UIREMENT FOR THEIR FOOD & GROCERY OUTLETS AND FRAME THE ORGANIZATION STRUCTUR E IN SUCH A WAY THAT PFPIL (OLD NAME OF THE ASSESSEE HEREIN) DEVELOP ITS SYSTE M WITH THE DEVELOPMENT OF PRILS BUSINESS. THE SWEAT EQUITY SHARES SHALL BE ISSUED WITHIN FIRST FIVE YEARS AND IF DEVELOPMENTS ARE NOT ACHIEVED SATISFACTORILY IN THE FIRST YEAR, AFORESAID OPTION OF SWEAT EQUITY WILL LAPSE. FROM THE REPOR T GIVEN UNDER THE HEADING BUSINESS ACTIVITIES OF THE COMPANY, IT IS SEEN TH AT THE ASSESSEE COMPANY WAS FORMED ORIGINALLY IN THE NAME OF PANTALOON FOOD PRO DUCT INDIA LTD (PFPIL) AS A WHOLLY OWNED SUBSIDIARY OF PANTALOON RETAIL (INDIA) LTD (PRIL) ON 13.04.2005. THE TURNOVER TARGET WAS FIXED AT RS.50 CRORES FOR T HE FIRST YEAR OF OPERATIONS AND THE SAME WAS ACHIEVED. HENCE BOTH THE PERSONS CITE D ABOVE WERE ALLOTTED SWEAT EQUITY SHARES DURING THE YEAR UNDER CONSIDERA TION. 12. THE FOREGOING DISCUSSIONS WOULD SHOW THAT THE SWEAT EQUITY SHARES WERE ISSUED TO THE ABOVE SAID TWO PERSONS FOR VALUE ADD ITION AS GIVEN IN THE DEFINITION OF THE EXPRESSION SWEAT EQUITY SHARES. AS DISCUSSED EARLIER, THE VALUE ADDITION WAS GIVEN BY THE ABOVE SAID PERSONS TO THE ASSESSEE COMPANY IN THE FORM OF THEIR VAST EXPERIENCE IN NEW BUSINESS C ONCEPTS AND PROFESSIONAL EXPERIENCE. UNDER THESE SET OF FACTS, IN OUR VIEW, THE VALUE ADDITION WOULD PARTAKE THE CHARACTER OF AN INTANGIBLE ASSET IN THE HANDS OF THE ASSESSEE COMPANY. SINCE THE SWEAT EQUITY SHARES WERE ISSUED FOR ACQUIRING THE VALUE ADDITION, IN OUR VIEW, THE TAX AUTHORITIES ARE JUST IFIED IN HOLDING THE SAME AS CAPITAL EXPENDITURE IN THE HANDS OF THE ASSESSEE COMPANY. ACCORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19TH SEP, 2014. 2 %$ . 3 4 5 6 19TH SEP, 2014 - 7/ 8 SD SD ( . / D. MANMOHAN ) ( . . , / B.R. BASKARAN ) / VICE- PRESIDENT / ACCOUNTANT MEMBER . / MUMBAI: 19TH SEP,2014. I.T.A. NO.2654/MUM/2012 8 . ' . ./ SRL , SR. PS !'#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. !&' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. . =0 ( ! ) / THE CIT(A)- CONCERNED 4. . =0 / CIT CONCERNED 5. 6. >?7 ('0'@# , !1 !@#$ , . / / DR, ITAT, MUMBAI CONCERNED 7 / / GUARD FILE. A . / BY ORDER, TRUE COPY * (ASSTT. REGISTRAR) !1 !@#$ , . / /ITAT, MUMBAI