Appeal details
Counselvise Citation
[2018] 126 COUNSELVISE.COM (IT) 2871 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 9 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-03-2018
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
D
Assessment Year
2009-2010
Appeal Filed On
25-05-2015
Judgement Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI D BENCH, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER, AND SHRI B.P. JAIN, ACCOUNTANT MEMBER, ITA NO. 3318 TO 3320 /D EL /20 16 [AYS. 2008 - 09 TO 20010 - 11] M/S OXIGEN SERVICES [I] PVT LTD VS. THE A. C.I.T. G - 4, C - BLOCK, COMMUNITY CENTRE CIRCLE 13 (1) NARAINA VIHAR NEW DELHI NEW DELHI PAN : AA BCI 1405K [APPELLANT] [RESPONDENT] DATE OF HEARING : 0 6 . 03 .201 8 DATE OF PRONOUNCEMENT : . 03 .201 8 ASSESSEE BY : SHRI SATYEN SETHI, ADV SHRI ARTA TRANA PANDA, ADV REVENUE BY : SHRI AMIT JAIN , SR.DR ORDER PER B.P. JAIN, ACCOUNTANT MEMBER, THE ABOVE THREE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 7, NEW DELHI FOR THE ASSESSMENT YEARS 2008 - 09, 2009 - 10 AND 2010 - 11 VIDE SEPARATE ORDERS DATED 9.3.2015. SINCE IN ALL THE THREE APPEA LS, THE 2 ASSESSEE HAS RAISED SIMILAR GROUNDS, THE APPEALS ARE BEING TAKEN UP TOGETHER FOR DISPOSAL FOR THE SAKE OF BREVITY AND CONVENIENCE . 2. THE GROUNDS FOR THE ASSESSMENT YEARS 2008 - 09, 2009 - 10 AND 2010 - 11 ARE IDENTICAL AND THE SAME ARE REPRODUCED AS U NDER: ASSESSMENT YEAR : 2008 - 09 1. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS) - 7, NEW DELHI [BRIEFLY THE CIT(A)] HAS ERRED IN DISALLOWING DEDUCTION OF INR 2,33,11,692/ - IN RESPECT OF EMPLOYEE STOCK OPTION PLAN (ESOP) SCHEME, HOLDING THAT THE ISSUE IS COVERED AGAINST THE APPELLANT BY THE ORDER IN DY. CIT V. RANBAXY LABORATORIES LTD. (2009) 124 TTJ (DEL) 771. 1.1 THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT FOLLOWING THE ORDER OF SPECIAL BENCH IN BIOCON LTD. V. DY. CIT(LTU) [2013] 155 TTJ (BANG - SB) 649, WHEREIN, ITAT ORDER IN RANBAXY LABORATORIES LTD. (SUPRA) WAS DULY CONSIDERED AND DISTINGUISHED. 1.2 THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN HOLDING THAT NEITHER ANY EXPENDITURE WAS INCURRED NOR IS THERE ANY SPECIFIC PROVISION TO ALLOW DEDUCTION OF EXPENDITURE ON ESOP SCHEME. 3 2. THAT ON THE FACTS AND THE CIRCUMSTA NCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT ALLOWING DEDUCTION OF INR 20,00,000/ - BEING THE NON REFUNDABLE DEPOSIT PAID TO INDIAN RAILWAY CATERING AND TOURISM CORPORATION LTD. (IRCTC), FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. 2.1 THAT O N THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) DID NOT APPRECIATE THAT EXPENDITURE BY WAY OF NON REFUNDABLE DEPOSIT TO IRCTC DID NOT PROVIDE ANY ENDURING BENEFIT OF CAPITAL NATURE, RATHER, IT WAS PURELY REVENUE EXPENSE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 2.2 WITHOUT PREJUDICE, ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAVING TREATED NON REFUNDABLE DEPOSIT TO IRCTC AS INTANGIBLE ASSET AND ALLOWING DEPRECIATION @25%, ERRED IN QUANTIF YING THE DEPRECIATION AT INR 4,00,000/ - INSTEAD OF INR 5,00,000/ - . NECESSARY RELIEF DESERVES TO BE ALLOWED. ASSESSMENT YEAR : 2009 - 10 1. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS) - 7, NEW DELHI [B RIEFLY THE CIT(A)] HAS ERRED IN DISALLOWING DEDUCTION OF INR 76,55,886/ - IN RESPECT OF EMPLOYEE STOCK OPTION PLAN (ESOP) SCHEME, HOLDING THAT THE ISSUE IS COVERED AGAINST THE APPELLANT BY THE ORDER IN DY. CIT V. RANBAXY LABORATORIES LTD. (2009) 124 TT J (DEL) 771. 4 1.1 THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT FOLLOWING THE ORDER OF SPECIAL BENCH IN BIOCON LTD. V. DY. CIT(LTU) [2013] 155 TTJ (BANG - SB) 649, WHEREIN, ITAT ORDER IN RANBAXY LABORATORIES LTD . (SUPRA) WAS DULY CONSIDERED AND DISTINGUISHED. 1.2 THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN HOLDING THAT NEITHER ANY EXPENDITURE WAS INCURRED NOR IS THERE ANY SPECIFIC PROVISION TO ALLOW DEDUCTION OF EXPEN DITURE ON ESOP SCHEME. 2. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAVING TREATED NON REFUNDABLE DEPOSIT OF INR 20,00,000/ - PAID TO INDIAN RAILWAY CATERING & TOURISM CORPORATION LTD. AS INTANGIBLE ASSET U/S 32(1)(II) AND ALLOWING DEPRECIATION IN THE ASSESSMENT YEAR 2008 - 09, OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION IN THE ASSESSMENT YEAR IN QUESTION, MORE SO BECAUSE BOTH THE APPEALS WERE DISPOSED OF ON THE SAME DAY I.E. 9.3.2015. 2.1 THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER MAY BE DIRECTED TO ALLOW DEPRECIATION ON NON REFUNDABLE DEPOSIT OF INR 20,00,000/ - PAID TO IRCTC, TREATED AS INTANGIBLE ASSET IN THE ASSESSMENT YEAR 2008 - 09. 5 ASSESSMENT YEAR : 2010 - 11 1. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, COMMISSIONER OF INCOME TAX (APPEALS) - 7, NEW DELHI [BRIEFLY THE CIT(A)] HAS ERRED IN DISALLOWING DEDUCTION OF INR 42,75,966/ - IN RESPECT OF EMPLOYEE STOCK OPTION PLAN (ESOP) SCHEME, HOLDING THAT THE ISSUE IS COVERED AGAINST THE APPELLANT BY THE ORDER IN DY. CIT V. RANBAXY LABORATORIES LTD. (2009) 124 TTJ (DEL) 771. 1.1 THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT FOLLOWING THE O RDER OF SPECIAL BENCH IN BIOCON LTD. V. DY. CIT(LTU) [2013] 155 TTJ (BANG - SB) 649, WHEREIN, ITAT ORDER IN RANBAXY LABORATORIES LTD. (SUPRA) WAS DULY CONSIDERED AND DISTINGUISHED. 1.2 THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN HOLDING THAT NEITHER ANY EXPENDITURE WAS INCURRED NOR IS THERE ANY SPECIFIC PROVISION TO ALLOW DEDUCTION OF EXPENDITURE ON ESOP SCHEME. 2. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAVING TREATED NON REFU NDABLE DEPOSIT OF INR 20,00,000/ - PAID TO INDIAN RAILWAY CATERING & TOURISM CORPORATION LTD. AS INTANGIBLE ASSET U/S 32(1)(II) AND ALLOWING DEPRECIATION IN THE ASSESSMENT YEAR 2008 - 09, OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION IN T HE ASSESSMENT YEAR IN QUESTION, MORE SO BECAUSE THE APPEALS FOR 6 THE ASSESSMENT YEARS 2008 - 09, 2009 - 10 AND 2010 - 11 WERE DISPOSED OF ON THE SAME DAY I.E. 9.3.2015. 2.1 THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER MA Y BE DIRECTED TO ALLOW DEPRECIATIO N ON NON REFUNDABLE DEPOSIT OF INR 20,00,000/ - PAID TO IRCTC, TREATED AS INTANGIBLE ASSET IN THE ASSESSMENT YEAR 2008 - 09. GROUND NO.1 TO 1.2 3. B RIEF FACTS RELATING TO GROUND NOS. 1 AND 2 ARE THAT THE ASSESSEE , BY ITS EMPLOYEE STOCK OPTION SCHEME, 2006 , PROVIDED EQUITY BASED INCENTIVE TO ITS EMPLOYEES AND CLAIMED A SUM OF RS.2,33,11,692/ - AS EMPLOYEE STOCK OPTION PLAN (ESOP) EXPENDITURE, FOR THE ASSESSMENT YEAR 2008 - 09. 4. THE ASSESSING OFFICER DISALLOWED THE CLAIM OBSERVING THAT ESOP EXPENSES ARE NOTHING BUT NOTIONAL LOSS AND UNDER MERCANTILE SYSTEM OF ACCOUNTING, NOTIONAL LOSS CANNOT BE ALLOWED AS DEDUCTION. REFERENCE IN THIS REGARD WAS MADE TO M/S. VIP INDUSTRIES LTD. V. DCIT [ITA NO.7242/MUM/2008] AND RANBA XY LABORATORIES LTD. V. ACIT (2009) 124 TTJ 771 (DEL). THE ASSESSING OFFICER WAS ALSO OF THE VIEW THAT FOR AN EXPENDITURE TO BE ALLOWABLE UNDER SECTION 37 OF THE IT ACT, 1961, THE 7 SAME MUST GO FROM THE POCKET OF THE ASSESSEE , IRRETRIEVABLY. SINCE THE ASSES SEE HAS NOT INCURRED ANY EXPENDITURE BUT HAS MERELY RECEIVED LESSER AMOUNT OF SHARE PREMIUM, THE SAME CANNOT BE TERMED AS EXPENDITURE. IT WAS ALSO OBSERVED THAT ENTRY OF ESOP EXPENSES IN THE BOOKS OF ACCOUNT TO MEET THE SEBI REQUIREMENT IS NOT CONCLUSIVE F OR THE PURPOSES OF SECTION 37 OF THE IT ACT. 5. BEFORE THE LD. CIT (A) , THE ASSESSEE RELIED UPON THE DECISION OF SPECIAL BENCH IN BIOCON LTD. V. DY. CIT [2014] 144 ITD 21 (BANG - SB) . THE PROPOSITIONS EMANATING FROM THE SPECIAL BENCH DECISION ARE REPRODUCED IN THE ORDER OF THE FIRST APPELLATE AUTHORITY. THE LD. CIT(A) REJECTED THE ASSESSEES CLAIM GIVING FOLLOWING REASONS: 7.4 THE APPELLANT HAS CLAIMED THE EXPENDITURE ON ACCOUNT OF ESOP ON THE GROUND THAT THE SCHEME WAS APPROVED BY SEBI. THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. V. CIT, 320 ITR 573 HAS HELD THAT THE GUIDELINE OF ANY REGULATORY AUTHORITY CANNOT OVER RIDE THE SPECIFIC PROVISIONS OF THE INCOME TAX ACT. IN ORDER TO CLAIM A DEDUCTION ADMISSIBLE UNDER I.T. ACT, THE APPELLANT MUST SHOW THE SPECIFIC PROVISIONS UNDER WHICH THE SAME IS ALLOWABLE UNDER I.T. ACT. FURTHER AN EXPENDITURE SHOULD BE INC URRED AND INCURRED FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. IN VIEW OF THE DISCUSSION AND DECISION OF JURISDICTIONAL ITAT, DELHI IN THE CASE OF RANBAXY LTD. (SUPRA), WHICH IS AGAINST 8 THE APPELLANT, I HOLD THAT THE AO WAS FULLY JUSTIFIED IN MAKING DISA LLOWANCE OF RS.2,33,11,692/ - ON ACCOUNT OF ESOP. I THEREFORE, CONFIRM THE ADDITION ON ACCOUNT OF THE DISALLOWANCE MADE BY THE AO. THE GROUND OF APPEAL IS RULED AGAINST THE APPELLANT. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) IN DE CIDING THE ISSUE AGAINST THE ASSESSEE DID NOT TAKE ANY COGNIZANCE OF THE DECISION OF SPECIAL BENCH IN BIOCON LTD (SUPRA). IT WAS SUBMITTED THAT THE DECISIONS IN M/S. VIP INDUSTRIES LTD. (SUPRA) AND RANBAXY LABORATORIES LTD. (SUPRA) WERE DULY CONSIDERED BY THE SPECIAL BENCH BUT THE REASONS RECORDED THEREIN DID NOT FIND FAVOUR WITH THE SPECIAL BENCH. 7. IT WAS FURTHER SUBMITTED THAT THE ISSUE IS COVERED BY DECISIONS OF HONBLE DELHI HIGH COURT IN CIT V. LEMON TREE HOTELS LTD. (ITA NO.107/2015 DATED 18.8.201 5) AND PR. CIT V. INDIAMART INTELMESH LTD. (ITA NO.80/2018 DATED 24.1.2018). 8. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE LD. CIT(A) AND THE ORDER OF THE ASSESSING OFFICER. 9 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE REC ORD AND VARIOUS ORDERS ON WHICH RELIANCE WAS PLACED AND ARE OF THE VIEW THAT THE CASE IS SQUARELY COVERED BY THE DECISION IN BIOCON LTD. (SUPRA). IN LEMON TREE HOTELS LTD V. ADDL. CIT (ITA NO.4588/DEL/2013 DATED 23.6.2014), WHICH HAS BEEN AFFIRMED BY HONB LE DELHI HIGH COURT, THE TRIBUNAL HAS GIVEN FOLLOWING REASONS TO ALLOW SIMILAR EXPENDITURE: THE QUESTION WHETHER EMPLOYEE STOCK OPTION COST INCURRED BY THE EMPLOYER COMPANY IS AN ALLOWABLE EXPENDITURE AS PER SECTION 37 OF THE ACT IS NO LONGER RES - INTEG RA. THE SPECIAL BENCH OF THE TRIBUNAL IN BIOCON LTD. VS. DCIT VIDE ORDER DATED 16TH JULY 2013 (36 CCH 268, BANGALORE SPECIAL BENCH OF THE TRIBUNAL) HAS HELD THAT THE DISCOUNT ON ISSUE OF EMPLOYEE STOCK OPTION IS AN ALLOWABLE DEDUCTION IN COMPUTING THE INCO ME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION . THE RELEVANT RATIO - DECIDENTI OF THE SPECIAL BENCH IS REPRODUCED BELOW: - 9.4.1 THERE IS ANOTHER IMPORTANT DIMENSION OF THIS ISSUE. CHAPTER XII_H OF THE ACT CONSISTING OF SECTION 115W TO 115WL WITH THE CAPTION:INCOME - TAX ON FRINGE BENEFITS HAS BEEN INSERTED BY THE FINANCE ACT, 2005 W.E.F. 1.04.2006. MEMORANDUM EXPLAINING THE PROVISI ONS OF THE FINANCE BILL, 2005 HIGHLIGHTS THE DETAILS OF THE FRINGE BENEFITS TAX. IT PROVIDES THAT : FRINGE BENEFIT AS OUTLINED 10 IN SECTION 115WB, MEAN ANY PRIVILEGE, SERVICE, FACILITY OR AMENITY DIRECTLY OR INDIRECTLY PROVIDED BY AN EMPLOYER TO HIS EMPLOYE ES (INCLUDING FORMER EMPLOYEES) BY REASON OF THEIR EMPLOYMENT. CHARGING SECTION 115WA OF THIS CHAPTER PROVIDES THAT :IN ADDITION TO THE INCOME - TAX CHARGED UNDER THIS ACT, THERE SHALL BE CHARGED FOR EVERY ASSESSMENT YEAR . FRINGE BENEFIT TAX IN RESPECT O F FRINGE BENEFITS PROVIDED OR DEEMED TO HAVE BEEN PROVIDED BY AN EMPLOYEE TO HIS EMPLOYEES DURING THE PREVIOUS YEARSECTION 115WB GIVES MEANING TO THE EXPRESSION FRINGE BENEFITS. SUB - SECTION (1) PROVIDES THAT FOR THE PURPOSES OF THIS CHAPTER, FRINGE BE NEFITS MEANS ANY CONSIDERATION FOR EMPLOYMENT AS PROVIDED UNDER CLAUSE (A) TO (D), CLAUSE (D), WHICH IS RELEVANT FOR OUR PURPOSE, STATES THAT: ANY SPECIFIED SECURITY OR SWEAT EQUITY SHARES ALLOTTED OR TRANSFERRED, DIRECTLY OR INDIRECTLY, BY THE EMPLOYER F REE OF COST OR AT CONCESSIONAL RATE TO HIS EMPLOYEES (INCLUDING FORMER EMPLOYEE OR EMPLOYEES), SHALL BE TAKEN AS FRINGE BENEFIT. EXPLANATION TO THIS CLAUSE CLARIFIES THAT FOR THE PURPOSES OF THIS CLAUSE, - (I) SPECIFIED SECURITY MEANS THE SECURITIES AS DE FINED IN CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) AND, WHERE EMPLOYEES STOCK OPTION HAS BEEN GRANTED UNDER ANY PLAN OR SCHEME THEREOF, INCLUDES THE SECURITIES OFFERED UNDER SUCH PLAN OR SCHEME. THUS IT IS DIS CERNIBLE FROM THE ABOVE PROVISIONS OF THE ACT THAT THE LEGISLATURE ITSELF CONTEMPLATES THE DISCOUNT ON PREMIUM UNDER ESOP AS A BENEFIT PROVIDES BY THE EMPLOYER TO ITS 11 EMPLOYEES DURING THE COURSE OF SERVICE. IF THE LEGISLATURE CONSIDERS SUCH DISCOUNTED PREM IUM TO THE EMPLOYEES AS A FRINGE BENEFIT OR ANY CONSIDERATION FOR EMPLOYMENT . IT NOT OPEN TO ARGUE CONTRARY. ONCE IT IS HELD AS A CONSIDERATION FOR EMPLOYMENT, THE NATURAL COROLLARY WHICH FOLLOWS IS THAT SUCH DISCOUNT I) IS AN EXPENDITURE II) SUCH EXPEND ITURE IS ON ACCOUNT OF AN ASCERTAINED (NOT CONTINGENT) LIABILITY; III) IT CANNOT BE TREATED AS A SHORT CAPITAL RECEIPT. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT DISCOUNT ON SHARES UNDER THE ESOP IS AN ALLOWABLE DEDUCTION. .. 10.8 REVERTING TO THE QUESTIONS OF WHEN AND HOW MUCH OF DEDUCTION FOR DISCOUNT ON OPTIONS IS TO BE GRANTED, WE HOLD THAT THE LIABILITY TO PAY THE DISCOUNTED PREMIUM IS INCURRED DURING THE VESTING PERIOD AND THE AMOUNT OF SUCH DEDUCTION IS TO BE FOUND OUT AS PER THE TERMS OF THE ESOP SCHEME BY CONSIDERING TH E PERIOD AND PERCENTAGE OF VESTING DURING SUCH PERIOD. WE, THEREFORE, AGREE WITH THE CONCLUSION DRAWN BY THE TRIBUNAL IN SSI LTD. S CASE ALLOWING DEDUCTION OF THE DISCOUNTED PREMIUM DURING THE YEARS OF VESTING ON A STRAIGHT LINE BASIS, WHICH COINCIDES WITH OUT ABOVE REASONING. 10 . AGAINST THE AFORESAID ORDER OF THE TRIBUNAL, HONBLE DELHI HIGH COURT HAS DISMISSED THE APPEAL FILED BY THE DEPARTMENT OBSERVING THAT: 12 2. THE QUESTION SOUGHT TO BE PROJECTED BY THE REVENUE IS WHETHER THE ITAT ERRED IN DELETI NG THE ADDITION OF RS. 1,28,19,169/ - MADE BY THE ASSESSSING OFFICER (AO) BY WAY OF DISALLOWANCE OF THE EXPENSES DEBITED AS COST OF EMPLOYEES STOCK OPTION (ESOP ) IN PROFIT AND LOSS ACCOUNT? 3. THE COURT HAS BEEN SHOWN A COPY OF THE DECISION DATED 19T H 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 A ND 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 A S REVENUE EXPENDITURE. 4. IN THE CIRCUMSTANCES, THE IMPUGNED ORDER OF THE ITAT ANSWERING THE QUESTION IN FAVOUR OF THE ASSESSEE IS AFFIRMED. 1 1 . RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE DELHI HIGH COURT IN LEMON TREE HOTELS LTD DATED 18.8.2015 AND THE ORDER OF THE SPECIAL BENCH IN BIOCON LTD. (SUPRA), WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO ALLOW CLAIM OF ESOP EXPENSES. 13 1 2 . SINCE GROUND NO.1 TO 1.2 FOR THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 INVOLVE IDE NTICAL ISSUE, THEREFORE, F OR THE SAME REASONS, ASSESSEES APPEAL FOR THE ASSESSMENT YEARS 2009 - 10 AND 2010 - 11 IS ALLOWED. GROUND NOS.2 TO 2.2 1 3 . TH E BRIEF FACTS IN RESPECT OF GROUNDS 2 TO 2.2 ARE THAT THE ASSESSEE ON 7.12.2007 HAD ENTERED INTO AGREEMENT WITH INDIAN RAILWAY CATERING AND TOURISM CORPORATION LTD. (IRCTC) TO SELL E - TICKETS FOR TRAVEL IN TRAINS OF INDIAN RAILWAY FOR A PERIOD OF TWO YEARS. FOR THE SAID SERVICES, THE ASSESSEE PAID A NON - REFUNDABLE DEPOSIT OF RS.20,00,000/ - , WHICH WAS CLAIMED UNDER SECTION 37 OF THE IT ACT. 14 . THE ASSESSING OFFICER TAKING INTO ACCOUNT THAT SINCE THE AGREEMENT WAS ENTERED INTO ON 7.12.2007, THEREFORE, ONLY PROPORTIONATE DEDUCTION CAN BE ALLOWED. ACCORDINGLY, DEDUCTION OF RS.3,33,333/ - BEING PROPORTIONATE TO THE PERIOD OF 4 MONTHS WAS ALLOWED. 14 1 5 . IN FIRST APPEAL, THE L D. CIT(A) TOOK THE VIEW THAT NON - REFUNDABLE DEPOSIT PAID TO IRCTC WAS IN THE NATURE OF CO MMERCIAL RIGHT/BUSINESS RIGHT AND AS SUCH, FALLS WITHIN THE MEANING OF SECTION 32(1)(II) OF THE ACT I.E. I NTANGIBLE A SSET. HAVING TREATED THE DEPOSIT AS INTANGIBLE ASSET, DEPRECIATION @25% WAS ALLOWED. 16 . THOUGH THE PRIMARY GROUND BEFORE THE TRIBUNAL WAS THAT THE ENTIRE AMOUNT OF RS.20,00,000/ - OUGHT TO HAVE BEEN ALLOWED, HOWEVER, DURING THE HEARING THE LD. COUNSEL FOR THE ASSESSEE DID NOT MAKE ANY SUBMISSION ON THIS ASPECT. HIS SUBMISSION ONLY WAS THAT THE ADMISSIBLE DEPRECIATION @ 25% COMES TO RS.5,0 0,000/ - AND THAT BY MISTAKE IT WAS QUANTIFIED AT RS.4,00,000/ - . 17 . THE LD. DR DID NOT OPPOSE THIS CONTENTION OF THE LD. AR OF THE ASSESSEE, FOR IT APPEARS TO BE AN INADVERTENT ERROR. 18 . WE HAVE PERUSED THE RECORD AND ARE OF THE VIEW THAT THE END S OF JUSTICE WOULD BE MET BY DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION @25% AS DIRECTED BY THE LD. CIT(A). GROUND NO. 2 TO 2.2 FOR THE ASSESSMENT YEAR 2008 - 09 ARE DISPOSED OFF ACCORDINGLY. FOR THE 15 ASSESSMENT YEARS 2009 - 10 AND 2010 - 11, CONSEQUENT IAL RELIEF OF DEPRECIATION DESERVES TO BE ALLOWED . IT IS DIRECTED ACCORDINGLY. 1 9 . IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NOS.3318, 3319 AND 3320/DEL/2015 ARE PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON .03.2018. [H.S. SIDHU] [B.P. JAIN] JUDICIAL MEMBER ACCOUNTANT MEMBER DA TED: MARCH , 201 8 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI
