Appeal details
Counselvise Citation
[2022] 105 COUNSELVISE.COM (IT) 3270 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-04-2022
Appeal Filed By
Department
Order Result
PartlyAllowed
Bench Allotted
D
Assessment Year
2014-2015
Appeal Filed On
20-05-2020
Judgement Text
आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ D’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos. 272-273/AHD/2020 िनधाᭅरण वषᭅ/Asstt. Years: 2014-2015 & 2015-16 D.C.I.T, GNR Circle. Jamnagar Vs. M/s. Gujarat State Petronet Ltd., Plot No.E-18, GIDC Electronics Estate, Sector-26, Gandhinagar. PAN: AABCG1812E (Applicant) (Respondent) Revenue by : Shri Mohd. Usman, CIT. D.R with Smt. Neeju Gupta, Sr.D.R Assessee by : Shri S.N. Soparkar, Sr. Advocate with Shri Parin Shah, A.R सुनवाई कᳱ तारीख/Date of Hearing : 19/04/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 29/04/2022 आदेश/O R D E R PER WASEEM AHMED ACCOUNTANT MEMBER: The captioned two appeals have been filed at the instance of the Revenue and the assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals)-13, Ahmedabad, of even dated 29/01/2021 (in short “Ld. CIT(A)”) arising in the matter of assessment order passed under s. 143(3) of the ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 2 Income Tax Act 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2014-2015 & 2015-16. ITA No.272/Ahd/2020 for A.Y. 2014-15 2. The Revenue has raised following grounds of appeal: 1. Whether the Id.CIT(A) has erred in law and on facts in deleting the disallowance u/s.!4A applying Rule 8D amounting to Rs. 1,51,46,813/- . 2. Whether the Id.CIT(A) has erred in law and on facts in allowing depreciation of Rs.30,90,866/- on WDV of certain Administrative Expenses capitalized in earlier years. 3. Whether the Id.CIT(A) has erred in law and on facts in allowing ESOP Compensation Expenses Rs. 90,28,831/- 4. It is, therefore prayed that the order of the Ld.Commissioner of Income-tax(Appeals) may be set aside and that of the Assessing Officer be restored. 5. The appellant prays for leave, to amend or alter any ground or add a new ground which may be necessary, 3. The first issue raised by the Revenue is that the learned CIT-A erred in deleting the addition of Rs. 1,51,46,813/- under section 14A read with rule 8D of the Act. Note: the amount as per ground and addition as per assessment order does not match. 4. The assessee is a public company engaged in the business of transmission of natural gas through pipeline. The assessee company during the year under consideration earned exempted income of Rs. 2,46,37,085/- from investments. However, the assessee has not made any disallowance in pursuance to the provisions of section 14A read with rule 8D of the Income Tax Rule. As per the assessee, the investment was made with view to enhance the business potential and not to earn dividend income. Furthermore, similar addition was made in the A.Y. 2008-09 and 2009-10 in its own case which was deleted by the ITAT and the finding of the ITAT further confirmed by the Hon’ble Gujarat High Court on the appeal preferred by the Revenue. ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 3 5. The AO rejected the contention of the assessee by holding that decision of Hon’ble High court has not reached to the finality. Therefore, the issue is still open. Thus, following the previous assessment year the AO disallowed an amount of Rs. 11,34,42,968/- under the provision of section 14A read with rule 8D of the Income Tax Rule 1962. 6. Aggrieved assessee preferred an appeal before the learned CIT-A. 7. The assessee before learned CIT-A submitted that while applying Rule 8D of Income Tax Rules, the Ld. AO has not recorded any dissatisfaction as regards to explanation made by it (the appellant) which is sine qua non and therefore, disallowance made by the AO by merely invoking the Rule 8D without recording satisfaction is liable to be deleted. Further the ITAT Bench in its own case for A.Y. 2009-10 held that Rule 8D cannot be invoked unless it is proved by the Ld. AO that he is dissatisfied with the amount of disallowance computed by the appellant and the said order of the ITAT was subsequently confirmed by the Hon’ble Gujarat High Court in the appeal preferred by the Revenue. 7.1 The assessee alternatively submitted that the disallowances under section 14A read with rule 8D of Income Tax Rule cannot exceed the amount of exempted income. 8. The learned CIT-A after considering the assessment order and the submission of the assessee deleted the addition made by the AO by observing as under: 5.5 From the appellant's submission which is already reproduced before is found to have factual and legal backing and there appears to be no case for disallowance made U/S.14A. It is the case of the appellant that the investments made are for strategic purposes ad proximate cause of incurring expenses in relation to such investments are not to earn any exempt income. Furthermore, it has been brought to the attention that such additions made by the AO in earlier years have been deleted by the Jurisdictional ITAT which have been confirmed by the Jurisdictional High Court. Accordingly the AO is directed to delete the addition of Rs. 11,34,42,968/-. The related grounds of appeal succeed. ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 4 9. Being aggrieved by the order of the learned CIT-A the Revenue is in appeal before us. 10. The learned DR before us contended that the facts of the case on hand are distinguishable from the facts of the case referred by the learned CIT-A insofar that there was no suo-moto disallowance made by the assessee in the year under consideration. Accordingly, the issue in the case on hand with regard to the disallowance of the expenses against the exempted income under the provisions of section 14A read with rule 8D cannot be said as a covered issue. As per the learned DR, there was no disallowance made by the assessee against the exempted income, there was no option available to the AO except to resort the provisions of rule 8D of income tax rules read with section 14A of the Act. The learned DR in support of his contention has relied on the judgment of Hon’ble Gujarat High Court in the case of Devarsons Industries (P) Limited Vs ACIT reported in 84 Taxmann.com 244. 11. On the contrary learned AR before us submitted that identical addition was made in own case of the assessee in A.Y. 2012-13 and 2013-14 which was deleted by this tribunal in ITA NO. 381 & 382/Ahd/2019. 12. Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 13. We have heard the rival contentions of both the parties and perused the materials available on records. The 1 st controversy before us arises for our adjudication so as to whether the issue on hand is covered in favour of the assessee in its own case by the order of ITAT and the Hon’ble Gujarat High Court in the earlier years. In this connection we have perused the order of the ITAT for the assessment year 2008-09 in ITA NO. 2286/Ahd/2011 and for A.Y. 2012-13 in ITA No. 381/Ahd/2019 and the Hon’ble Gujarat High Court in Tax Appeal No. 208 of 2019 for the assessment year 2011-12. All these decisions were passed in the own ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 5 case of the assessee wherein the issue was decided in favour of the assessee and against the revenue. On perusal of these orders/judgments, we note that there is a common thread which is running in all these orders/judgements. As such, in all these orders/judgments, there was the suo-moto disallowance of the expenses by the assessee itself against the exempted income. Thus in such a situation, it becomes imperative for the AO to reject the disallowance made by the assessee at its own under the provisions of section 14A read with rule 8D before making the disallowance by himself. In other words, the revenue in all these years have invoked the provisions of rule 8D read with section 14A of the Act without rejecting or pointing out any defect in the working of suo-moto disallowance made by the assessee. Accordingly, the action of the AO was interpreted by the courts that there was no satisfaction recorded by the AO for making the disallowance in the manner as provided under section 14A of the Act. Accordingly, the courts have taken a view that there cannot be disallowance as per rule 8D read with section 14A without having recorded the dissatisfaction before resorting to the provisions of rule 8D read with section 14A of the Act. However, the facts of the present case are distinguishable from the facts of own case of the assessee in the earlier years. As such in the year under consideration, there was no suo-moto disallowance made by the assessee towards the exempted income under the provisions of section 14A of the Act. In the absence of suo-moto disallowance, the AO had no option except to resort to the provisions of section 14A read with rule 8D of Income Tax Rule. The Hon’ble Gujarat High Court in the case of Devarsons Industries (P.) Ltd. reported in 84 taxmann.com 244 has held as under: To give effect to the provision of section 14A and in particular sub-section (2) thereof, Rule 8D of the rules provides the method for determining the amount of expenditure in relation to the income not includable in the total income. Sub-rule (1) echoes the provision of sub- sections (2) and (3) of section 14A where it provides that if the Assessing Officer having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the expenditure or the claim made is that no expenditure has been incurred in relation to the income which does not form part of the total income, he would determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2). Sub-rule (2) of rule 8D prior to its amendment with effect from 02-06-2016 provided a formula to apportion the expenditure in connection with the tax free income. Section 14A as well as Rule 8D require the Assessing Officer to arrive at a satisfaction that the claim of the expenditure made by the assessee is not correct. It is only then that he can apply the formula under sub-rule (2) of Rule 8D. However, these statutory provisions do not require that such satisfaction must be arrived at in a particular manner. As long as there is sufficient material ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 6 to enable the Assessing Officer to arrive at such a satisfaction and which is also recorded by him in the order of assessment, the requirements of the statute would be satisfied. In the present case, it is noted that the Assessing Officer has given detailed reasons for discarding the assessee's theory that to earn the assessable income the assessee incurred no expenditure whatsoever. The Tribunal confirmed such view. The decision of the Assessing Officer to apply the formula under Rule 8D was, therefore, correct. [Para 8] 13.1 In view of the above, we are not convinced with the arguments advanced by the learned AR for the assessee by stating that the issue on hand is covered issue in favour of the assessee in its own case of earlier years by the order of the tribunal and Hon’ble High Court. 13.2 Now the next step comes for making the disallowance against the exempted income. As there was no suo-moto disallowance made by the assessee, there was no option available with the revenue except to make the disallowance in the manner as provided under rule 8D of income tax rule. However, we find that the own fund of the assessee exceeds the investments. Thus, a presumption can be drawn that the assessee has made investment out of its own fund without involving any borrowed fund. The amount of own fund of the assessee stands at Rs. 2,94,057.78 Lacs as on 1 st April 2013 and 31 March 2014 at Rs. 3,29,483.04 Lacs and likewise the amount of investment as on 1 st April to 13 and 31 March 2014 stand at Rs. 52,602.09 Lacs and 65,610.45/- lacs respectively. There is no ambiguity, that the own fund of the assessee exceeds the investments. In this regard we refer the judgment of The Hon’ble Gujarat High Court in the case of CIT vs. Torrent Power Ltd reported in 363 ITR 474 where it was held as under: It was noted from records that the assessee was having share holding funds to the extent of 2607.18 crores and the investment made by it was to the extent of`Rs.195.10 crores. In other words, the assessee had sufficient funds for making the investments and it had not used the borrowed funds for such purpose. This aspect of huge surplus funds is not disputed by the revenue which earned it the interest on bonds and dividend income. [Para 7] 13.3 In view of the above we hold that there cannot be any disallowance of interest expenses against the impugned exempted income. 13.4 Now coming to the next issue i.e. disallowance of administrative expenses as per rule 8D of Income Tax Rule. Admittedly the assessee has made huge ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 7 investments and has earned exempted income to the tune of Rs. 2,46,37,085/-. The decision for making the investments in the shares is a very complex decision which are generally taken by the top management. Likewise, a lot of research is done before taking the decision for making the investments which is generally carried out by the staff. Similarly, in a meeting the expenses on refreshment, travelling, patrol and stationary are generally incurred. The services of the accountants are also used to record the necessary transactions in the books of accounts. The books of accounts are generally audited and therefore the services of the auditors also utilized indirectly for making the investments in equity shares. Thus, we hold that the argument of the learned AR is not acceptable that there was no expense incurred with respect to the impugned investments. Accordingly, we hold that the disallowance made by the AO on account of administrative expenses in pursuance of the provisions of rule 8D is correct and as per the provisions of law. Before parting, it is necessary to note that the investments which have yielded the dividend income in the year under consideration should only be considered for the purpose of making the disallowance under section 14A read with rule 8D of income tax rule. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of Vision Finstock Ltd. in Tax Appeal No. 486 of 2017 dated 31 st July 2017 where it was held as under: 2. From the record it emerges that, during the period relevant to the assessment year 2008- 09, the assessee had earned exempt income of Rs.55,604/-. As against that, the Assessing Officer had worked out the disallowance of expenditure under section 14A of the Act read with Rule 8D to Rs. 1,02,82,049/-. The Tribunal, while restricting the disallowance to Rs. 55,604/-, relied on the decision of Delhi High Court in case of Joint Investments (P.) Ltd. v. CIT reported in 372 ITR 694 holding that disallowance of expenditure in terms of section 14A read with Rule 8D cannot exceed the exempt income itself. Our High Court has also adopted the similar view in case of Commissioner of Income Tax v. Corrtech Energy Pvt Ltd. reported in 372 ITR 97. 13.5 In view of the above, and after considering the facts in totality we hold that the disallowance with respect to administrative expenses has to be made as per the provisions of law and in the manner as discussed above against the exempted income. Hence the ground of appeal of the Revenue is partly allowed. ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 8 14. The second issue raised by the Revenue is that the learned CIT-A erred in allowing the depreciation of Rs. 30,90,866/- on account of capitalization of certain administrative expenses capitalized in the earlier year. 15. The assessee right from the assessment year 2008-09 was showing capital work-in-progress in its books of accounts. However, the AO right from the assessment year 2008-09 was allocating 10% of the certain administrative expenses attributable to such capital work in progress. In earlier years, the matter travelled up to ITAT, particularly for the assessment year 2008-09 wherein it was held that 1% of the administrative expenses should be attributed to such capital work in progress and therefore the same should be capitalized. Based on the order of the ITAT for the assessment year under consideration, the AO calculated 1% of the administrative expenses amounting to Rs. 35,54,217/- and held that such expenses has to be capitalized. However, the AO further held that such expenses being capitalized are eligible for depreciation in the year under consideration at the rate of 15% under section 32 of the Act. Thus the amount of Rs. 5,33,133/- was worked out as depreciation on such capitalization and the AO added the balance amount of Rs. 30,21,084/- to the total income of the assessee. 16. The assessee carried the matter to the learned CIT-A. 17. The assessee before the learned CIT-A did not dispute the finding of the AO as far as disallowances of 1% of certain administrative expenses is concern. However, the assessee before the learned CIT-A made additional claim by submitting that the depreciation on the amount of administrative expenses capitalised in earlier years should be allowed in the year under consideration on the written down value. For better understanding, the submission of the assessee read as under: 2.1 The appellant humbly submits that from AY 2008-09 to AY 2012-13, the then learned A.O. had disallowed 10% of certain administrative expenditure considering it to be attributable to CW1P / Fixed asset. ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 9 2.2 The appellant had preferred further appeal before Hon'ble CIT(A) & Hon'ble ITAT. Hon'ble ITAT vide it's order dated 07/12/2015 for AY 2008-09 (Copy enclosed - Annexure 02), and dated 11/03/2016 for A.Y. 2009-10 (Copy enclosed - Annexure 03) (Lead years) has concluded on the above issue & has restricted the disallowance @ 1% as against 10% estimated by the learned AO. 2.3 In view of the decision of Hon'ble ITAT for A.Y. 2008-09, the then learned A.O. has from AY 13-14 onwards, disallowed 1% of certain administrative expenditure considering it to be attributable to CWIP / Fixed asset. 2.4 The appellant further submits that as the additional amount sought to be capitalized to CWIP/fixed asset by AO/ITAT is eligible for depreciation u/s 32 of the Income Tax Act, appellant vide its submission to AO dated 08/ 08/16, submitted its claim for allowance of depreciation of Rs.13,90,866/- on WDV of admin, expenses which was disallowed in earlier years and sought to be capitalized, (from AY 2008-09 onwards). However, learned AO has not dealt with this claim & in turn the depreciation was not granted to the appellant. The relevant working as submitted before the learned AO is reproduced hereunder for your goodself’s ready reference AY Disallowanc e (Rs) Depreciatio n for AY 09- 10 Depredatio n for AY 10- 11 Depredatio n for AY 11- 12 Depredatio n for AY 12- 13 Depredatio n for AY 13- 14 Depredatio n for AY 14- 15 2008- 09 12,34,815 1,85,222 1,57,439 1,33,823 1,13,750 96,687 82,184 2009- 10 16,53,753 - 2,48,063 2,10,354 1,79,225 1,52,342 129,490 2010- 11 16,06,491 - - 2,40,974 2,04,328 1,74,103 147,988 2011- 12 21,93,612 - - - 3,29,042 2,79,686 237,733 2012- 13 26,58,319 • - - - 3,98,748 338,936 2013- 14 30,30,231 - - - - - 454,535 Total 1,85,222 4,05,502 5,85,651 8,26,845 11,01,566 13,90,866 2.5 APPEALLANT'S SUBMISSIONS. a) The appellant submits that the learned A.O. himself has granted depreciation on current year's [AY 14-15] addition of 1%, however, he has erred in not granting depreciation on WDV of earlier year's additions. b) The appellant further submits that Hon'ble CIT(A)had in its orders for AY 10-11 (Copy enclosed - Annexure 09)A.Y. 12-13 (Copy enclosed -Annexure 07)& A.Y. 13-14 (Copy enclosed -Annexure OSjhaue directed theAO to grant the depredation on such capitalized expenditure. c) The appellant humbly prays to your honour that claim of depreciation of Rs. 13,90,866/~ on WDV of certain administrative expenditure which was disallowed and considered to be attributable to CWIP / Fixed asset in earlier AY's may kindly be granted ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 10 18. The learned CIT-A after considering the submission of the assessee allowed the ground of appeal of the assessee by observing as under: 5.7 As to the non-granting of depreciation of Rs.30,90,866/-, it is seen that in A.Y. 2008-09 to A.Y. 2012-13 the AO had disallowed 10% of specified expenditure out of CWIP which was reduced and restricted to 1% by the Hon'ble ITAT in its orders dated 07.12.2015 and 11.03.2016 for A.Y. 2008-09 and A.Y. 2009-10 respectively and accordingly the appellant has claimed additional allowance of depreciation of Rs.30,90,866/- on WDV of expenses (which was disallowed in earlier years). In this regard the AO is directed to check the records arid the computation of depreciation given by the appellant and having satisfied himself, to allow the depreciation now claimed as applicable. 19. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 20. Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 21. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note certain ambiguity in the statement of facts relating to the dispute. The ITAT in the earlier year in ITA No. 2286/Ahd/2011 has directed the Revenue to capitalize 1% of the administrative expenses against the disallowance made by the Revenue at the rate of 5% of the administrative expenses. As such, in earlier year, there was no issue with respect to the depreciation on the capitalization of administrative expenses attributable to capital work-in-progress. However the AO, for the 1 st time, while capitalizing the administrative expenses being 1% attributable to capital work-in- progress, has allowed depreciation at the rate of 15% which was acceptable to the assessee. In simple words, the assessee did not dispute the action of the AO before the higher authorities. However, the assessee 1 st time before the learned CIT-A made an additional claim for the depreciation on the amount of administrative expenses which were capitalized in the earlier years. The claim of the assessee was also accepted by the learned CIT-A. At this juncture, it is also important to note that the claim of the assessee was at Rs. 13,90,866/- for the depreciation before the ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 11 learned CIT-A who has accepted the same but inadvertently, he (the ld. CIT-A) directed to allow the depreciation of ₹ 30,90,866/- instead of ₹ 13,90,866/- as claimed by the assessee. Thus, it appears that there was some typo error in the order of the learned CIT-A. 21.1 However, we note that the Revenue has challenged the action of the learned CIT-A for allowing the depreciation for the amount of ₹ 30,90,866/- only. As observed earlier, there was no claim made by the assessee for ₹ 30,90,866/- and therefore the dispute in the given case is limited to the amount of ₹ 13,90,866/- for the reasons as discussed above. Thus, the issue before us is limited whether the assessee is eligible for depreciation on the amount of administrative expenses which were capitalized in the earlier years. The answer stands in positive. It is for the reason that the AO himself has allowed the depreciation at the rate of 15% on the amount of ₹ 35,54,217/- which were capitalized in the year under consideration by attributing to the capital work in progress. Accordingly, the amount which were capitalized in the earlier year and brought forward after claiming the depreciation in the respective year is eligible for depreciation. Thus we do not find any infirmity in the order of the learned CIT-A. 21.2 Before parting, it is also important to note that the learned AR at the time of hearing contended that the issue raised by the revenue is not maintainable on the reason that the same is not arising from the order of the authorities below. We are in disagreement with the contention of the learned AR for the assessee. It is for the reason that the assessee has made additional claim before the learned CIT-A which was also admitted by him. But the learned CIT-A inadvertently has recorded the wrong amount. Thus we are of the view that the issue raised by the revenue cannot be said as not maintainable merely on the reasoning that the amount recorded by the learned CIT-A is wrong. Anyway, the assessee succeeds in the ground of appeal raised by the revenue. Accordingly, there should not be any grievance to the assessee. Hence the ground of appeal of the Revenue is hereby dismissed. ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 12 22. The last issue raised by the Revenue is that the learned CIT-A erred in allowing the ESOP compensation expenses for Rs. 90,28,831/- only. 23. The assessee at the time of appellate proceeding submitted that during the year it has debited ESOP compensation in profit & loss account for Rs. 90,28,831/- as per SEBI guideline. But due to abundant caution it disallowed the same in return of income filed under the Act. However the same is allowable expenses as per the order of special bench in case of Biocon Ltd. reported 35 taxmann.com 335 and as per various other judicial pronouncement. The assessee further submitted that learned CIT-A in the own case of the assessee for the A.Y. 2012-13 and 2013-14 allowed its claim for ESOP Compensation. 24. The learned CIT-A after considering the submission of the assessee allowed the claim of the assessee by observing as under: 5.6 As to the issue of claim of deduction of ESOP compensation expenses, it seen that following the decision of Banglore ITAT Special Bench in the case of Biocon Ltd. v/s DCIT 35 taxmann.com 335, the Ld. CIT(Appeal) had allowed the deduction by way of additional claim for the AY 2012-13 and AY 2013-14. Following the decision of the Ld. CIT (Appeal), the AO is directed toallow deduction of Rs.90,28,931/- 25. Being aggrieved by the order of the learned CIT-A the Revenue is in appeal before us. 26. The learned DR before us vehemently supported the order of the AO. On the contrary learned AR before us submitted that the identical claim was made in own case of the assessee in A.Y. 2012-13 and 2013-14 which was allowed by learned CIT-A and by this tribunal in ITA NO. 381 & 382/Ahd/2019. The learned AR before us vehemently supported the order of the learned CIT-A. 27. We have heard the rival contention of the both the parties and perused the material available on record. At the outset we find that identical issue came up before this tribunal in the own case of the assessee in appeal bearing ITA NO. 381 ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 13 & 382/Ahd/2019 where the coordinate bench of this tribunal vide order dated 02- 08-2021 has decided the issue against the Revenue by observing as under: 13. We have heard both the respective parties, we have also perused the relevant materials available on record including the order passed by the Special Bench of ITAT in the matter of Biocon Limited vs. DCIT (LTU), reported in (2013) 35 taxmann.com 335 (Bangalore Trib. – SB). We have further perused the order passed by the Ld. CIT(A). However, no explanation is forthcoming as to how without verifying the records as regards the actual expenses incurred by the appellant’s claim has been allowed. In this regard, we have carefully considered the order passed by the Special Bench in the case of Biocon Ltd. vs. DCIT (LTU) (supra) where it has been held that ESOP compensation expenditure is not a notional expenditure but an allowable expenditure under Section 37(1) of the Act. It has further been held that Special Bench that object of issuing of shares at a lower issue price than the market price to the employees under ESOP must be taken into consideration and thereby it cannot be treated as short receipt of securities premium but a cost on account of compensation of employees. Thus, principally the claim on account of deduction of ESOP compensation is allowable but in our considered opinion it would be in the fitness of things to remit the issue to the file of the Ld. AO to verify the actual expenses incurred by the appellant and to allow the same in terms of ratio laid down by the judgment of Biocon Ltd. The order is passed accordingly. Thus, assessee’s claim is allowed for statistical purposes. 27.1 Respectfully following the finding of the coordinate bench in the own case of the assessee, the ground of appeal of the revenue for the year under consideration is allowed for the statistical purposes. 28. In the result appeal filed by the Revenue is partly allowed for the statistical purposes. Coming to ITA No. 273/Ahd/2020 an appeal by the Revenue for the A.Y. 2015-16 29. The Revenue has raised following grounds of appeal: 1. Whether the ld.CIT(A) has erred in law and on facts in deleting the disallowance U/S.14A applying Rule 3D amounting to Rs. 15,78,90,024/- 2. Whether the Id.CIT(A) has erred in law and on facts in allowing depreciation of Rs. 16,35,399/- on WDV of certain Administrative Expenses capitalized in earlier years. 3. Whether the Id.CIT(A) has erred in law and on facts in allowing ESOP Compensation Expenses Rs. 10,42,306/- 4. It is, therefore prayed that the order of the Ld.Commissioner of Income-tax(Appeals) may be set aside and that of the Assessing Officer be restored. ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 14 5. The appellant prays for leave, to amend or alter any ground or add a new ground which may be necessary. 30. The first issue raised by the Revenue is that the learned CIT-A erred in deleting addition of Rs. 15,78,90,024/- under the provision of section 14A r.w.r. 8D of Income Tax Rule 31. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2015-16 are identical to the issues raised by the Revenue in ITA No. 272/AHD/2020 for the assessment year 2014-15. Therefore, the findings given in ITA No. 272/AHD/2020 shall also be applicable for the year under consideration i.e. AY 2015-16. The appeal of the Revenue for the assessment 2014-15 has been decided by us vide paragraph No. 13 to 13.5 of this order partly in favour of the Revenue. The learned DR and the AR also agreed that whatever will be the findings for the assessment year 2014-15 shall also be applied for the year under consideration i.e. AY 2015-16. Hence, the grounds of appeal filed by the Revenue is partly allowed. 32. The next issue raised by the Revenue is that the learned CIT-A erred in allowing the depreciation on capitalisation of administrative expenses in the earlier year. 33. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2015-16 are identical to the issues raised by the Revenue in ITA No. 272/AHD/2020 for the assessment year 2014-15. Therefore, the findings given in ITA No. 272/AHD/2020 shall also be applicable for the year under consideration i.e. AY 2015-16. The appeal of the Revenue for the assessment 2014-15 has been decided by us vide paragraph No.21 to 21.2 of this order against the Revenue. The learned DR and the AR also agreed that whatever will be the findings for the assessment year 2014-15 shall also be applied for the year under consideration i.e. AY 2015-16. Hence, the grounds of appeal filed by the Revenue is hereby dismissed. ITA nos.272-273/AHD/2020 Asstt. Yeasr 2014-15 & 2015-16 15 34. The last issue raised by the Revenue is that the learned CIT-A erred in allowing the ESOP compensation expenses for Rs. 10,42,306/- only. 35. At the outset we note that the issues raised by the Revenue in its grounds of appeal for the AY 2015-16 are identical to the issues raised by the Revenue in ITA No. 272/AHD/2020 for the assessment year 2014-15. Therefore, the findings given in ITA No. 272/AHD/2020 shall also be applicable for the year under consideration i.e. AY 2015-16. The appeal of the Revenue for the assessment 2014-15 has been decided by us vide paragraph No.25 to 27.2 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2014-15 shall also be applied for the year under consideration i.e. AY 2015-16. Hence, the grounds of appeal filed by the Revenue is allowed for statistical purposes. 36. In the result appeal of the Revenue is partly allowed for the statistical purposes. 37. In Combined result, both the appeal of the Revenue are partly allowed for the statistical purposes. Order pronounced in the Court on 29/04/2022 at Ahmedabad. Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 29/04/2022 Manish
