ACIT, Circle-19(2), New Delhi V. Pine Labs P.Ltd, New Delhi

ITA 567/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7342 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 24-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Keywords: Set aside
• Section: 263

Judgement Text

ITA NO.567/DEL/2018 ASSESSMENT YEAR : 2014-15 PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI F BENCH: NEW DELHI (THROUGH VIDEO CONFERENCING ) BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.567/DEL/2018 ASSESSMENT YEAR : 2014-15 ACIT, CIRCLE-19(2), NEW DELHI. VS PINE LABS P.LTD., 202, GUPTA ARCADE, LSC, PLOT NO.5, MAYUR VIHAR, PHASE-1 EXTN., NEW DELHI-110091. PAN-AACCP7457K APPELLANT RESPONDENT APPELLANT BY SH. GOVIND SINGHAL, SR.DR RESPONDENT BY SH. AJAY VOHRA, SR.ADV. & MS. SOMYA JAIN, CA DATE OF HEARING 05.08.2021 DATE OF PRONOUNCEMENT 1 8 .08.2021 ORDER PER KUL BHARAT, JM : THIS APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2014-15 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-38, DELHI DATED 10.10.2017. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 3. ON THE FACTS AND UNDER THE CIRCUMSTANCE OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 1,18.59,997/- ON ACCOUNT OF DISALLOWANCE OF ESOP EXPENSES. SINCE THE RECEIPT OF SHARE OF SHARE PREMIUM IS NOT TAXABLE, ANY SHORT RECEIPT OF SUCH PREMIUM ON ISSUING OPTIONS TO EMPLOYEES WILL ONLY BE NOTIONAL LOSS AND NOT THE ACTUAL LOSS FOR WHICH ANY LIABILITY IS INCURRED. 4. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 1,18,59,997/- ON ITA NO.567/DEL/2018 ASSESSMENT YEAR : 2014-15 PAGE | 2 ACCOUNT OF DISALLOWANCE OF ESOP EXPENSES, IN VIEW O F SEBI GUIDELINES 1999. 5. THE APPELLANT CRAVES TO BE ALLOWED TO ADD AND LA TER ANY FRESH GROUND(S) OF APPEAL AND/OR DELETE OR AMEND ANY OF T HE GROUND(S) OF APPEAL.' 2. FACTS GIVING RISE TO THE PRESENT APPEAL ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME THROUGH ELECTRONIC MODE ON 24.09.2014, DECLARING TOTAL INCOME OF RS.3,32,65,350/-. THE CASE OF THE ASSESSEE COMPANY WAS SELECTED FOR COMPLETE SCRUTINY UNDER CASS. THEREAF TER, THE ASSESSING OFFICER PROCEEDED TO FRAME THE ASSESSMENT. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICE R THAT DURING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD DEBIT ED TO ITS P&L A/C, AN AMOUNT OF RS.1,18,59,997/- ON ACCOUNT OF EMPLOYEE STOCK OPTION (ESOP) SCHEME. THE ASSESSING OFFICER SHOW CAUSED THE ASS ESSEE COMPANY AS TO HOW THIS EXPENDITURE IS ALLOWABLE. IN RESPONSE THERETO , THE ASSESSEE FILED A DETAILED WRITTEN SUBMISSIONS AND ALSO RELIED UPON CERTAIN CA SE LAWS. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THIS CONTENTION AN D PROCEEDED TO MAKE THE DISALLOWANCE OF THE SAME AND ADDED THE EXPENDITURE OF RS.1,18,59,997/- IN THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF IN COME. HENCE, THE ASSESSING OFFICER ASSESSED INCOME AT RS.4,51,25,347/- AGAINST THE RETURNED INCOME DECLARED AS PER RETURN INCOME OF RS.3,32,65,330/-. 3. AGGRIEVED AGAINST THIS, THE ASSESSEE PREFERRED A PPEAL BEFORE LD.CIT(A) RELYING THE JUDGEMENT OF THE HONBLE DELHI HIGH COU RT IN THE CASE OF LEMON ITA NO.567/DEL/2018 ASSESSMENT YEAR : 2014-15 PAGE | 3 TREE HOTELS LTD. IN ITA NO.107/2015 DATED 18.08.201 5 AND DECISION OF THE HONBLE SPECIAL BENCH OF TRIBUNAL, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED AGAINST THIS, THE REVENUE PREFERRED TH E PRESENT APPEAL BEFORE THIS TRIBUNAL. 5. AT THE OUTSET, SH.AJAY VOHRA, SR. ADVOCATE SUBMI TTED THAT THE ISSUE IS NO MORE RES INTEGRA AS DECIDED IN FAVOUR OF THE ASSESSEE BY THE JUDGEM ENT OF HONBLE DELHI HIGH COURT WHO HAS CONCURRED THE VIEW OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. BIACON LTD. VS DCIT IN ITA NO.368 TO 371 & 1206/BANG./2010 [BANGLORE ITAT SPECIAL BENCH]. 6. LD. SR. DR OPPOSED THESE SUBMISSIONS. HOWEVER, HE CONCEDED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE J UDGEMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF LEMON TREE HOTELS LTD. (SUPRA). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE SOLITARY ISSUE IN THIS APPEAL IS AL LOWABILITY OF ESOP. WE FIND THAT LD.CIT(A) HAS IN HER DECISION RELIED ON THE JU DGEMENT OF HONBLE DELHI HIGH COURT AND THE RELEVANT CONTENTS HAVE BEEN REPR ODUCED IN THE IMPUGNED ORDER. THE SAME IS REPRODUCED HEREUNDER FOR READY- REFERENCE:- 11. AS REGARDS THE SECOND ISSUE WHICH IS NOW CANVA SSED BEFORE THIS COURT VIZ., ON THE ISSUE OF EXPENDITURE OF 66.82 LA KHS TOWARDS THE ISSUE OF SHARES TO THE EMPLOYEES STOCK OPTION IS CONCERNED, THE TRIBUNAL POINTED OUT THAT THE SHARES WERE ISSUED TO THE EMPLOYEES ON LY FOR THE INTEREST OF THE BUSINESS OF THE ASSESSEE TO INDUCE EMPLOYEES TO WORK IN THE BEST INTEREST OF THE ASSESSEE. THE ALLOTMENT OF SHARES W AS DONE BY THE ITA NO.567/DEL/2018 ASSESSMENT YEAR : 2014-15 PAGE | 4 ASSESSEE IN STRICT COMPLIANCE OF SEBI REGULATIONS, WHICH MANDATE THAT THE DIFFERENCE BETWEEN THE MARKET PRICES AND THE PRICE AT WHICH THE OPTION IS EXERCISED BY THE EMPLOYEES IS TO BE DEBITED TO THE PROFIT AND LOSS ACCOUNT AS AN EXPENDITURE. THE TRIBUNAL POINTED OUT THAT WH AT HAD BEEN ADOPTED WAS NOT NOTIONAL OR CONTINGENT AS HAD BEEN SUBMITTE D BY THE REVENUE. POINTING OUT TO THE EMPLOYEES STOCK OPTION PLAN, TH E TRIBUNAL IN ITS ORDER STATED THAT IT WAS A BENEFIT CONFERRED ON THE EMPLO YEE. SO FAR AS THE COMPANY IS CONCERNED, ONCE THE OPTION WAS GIVEN AND EXERCISED BY THE EMPLOYEE, THE LIABILITY IN THIS BEHALF GOT ASCERTAI NED. THIS WAS RECOGNISED BY SEBI AND THE ENTIRE EMPLOYEES STOCK OPTION PLAN WAS GOVERNED BY GUIDELINES ISSUED BY SEBL. ON THE FACTS THUS FOUND, THE TRIBUNAL HELD THAT IT WAS NOT A CASE OF CONTINGENT LIABILITY DEPENDING ON THE VARIOUS FACTORS ON WHICH THE ASSESSEE HAD NO CONTROL. THE EXPENDITURE IN THIS BEHALF WAS AN ASCERTAINED LIABILITY, THUS THE EXPENDITURE INCURRE D BEING ON LINES OF THE SEBI GUIDELINES, THERE COULD BE NO INTERFERENCE IN THE RELIEF GRANTED BY THE ASSESSING AUTHORITY FOR THE EXPENDITURE ARISING ON ACCOUNT OF EMPLOYEES STOCK OPTION PLAN. THIS EXPENDITURE INCURRED AS PER SEBI GUIDELINES AND GRANTED BY THE OFFICER COULD NOT BE CONSIDERED AS E RRONEOUS ONE CALLING FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE A CT. 12. IN CONSIDERING THE OTHER ISSUES, THE TRIBUNAL ULTIMATELY POINTED OUT T HE VARIOUS GROUNDS RAISED BY THE ASSESSEE AS REGARDS INVOKING OF JURIS DICTION UNDER SECTION 263 OF THE ACT ON THE PLAIN LANGUAGE OF THE SAID PR OVISION. THE ASSESSEE CONTENDED THAT ALL THAT THE COMMISSIONER COULD DO I N EXERCISE OF POWER UNDER SECTION 263 OF THE ACT WAS EITHER TO ENHANCE THE ASSESSMENT OR MODIFY THE ASSESSMENT OR CANCEL THE ASSESSMENT AND TO GIVE A DIRECTION FOR FRESH ASSESSMENT. CONSIDERING THE WORDS OF 'ENHANCI NG OR MODIFYING' AS WELL AS THE USE OF WORD 'OR' WHICH IS A DISJUNCTION THEREAFTER, THE COMMISSIONER COULD ONLY ENHANCE OR MODIFY THE ASSES SMENT AND IT WOULD NOT BE POSSIBLE FOR THE COMMISSIONER TO DO BOTH THI S UNDER THE JURISDICTION OF SECTION 263 OF THE ACT. THE TRIBUNAL AGREED WITH THE ASSESSEE'S CONTENTION AND HELD THAT THE ENTIRE ORDER STOOD VIT IATED BY REASON OF FACT ITA NO.567/DEL/2018 ASSESSMENT YEAR : 2014-15 PAGE | 5 THAT THE COMMISSIONER HAD NOT GONE INTO THE ASSESSM ENT IN TOTO TO SET ASIDE THE ORDER OF ASSESSMENT NOR ENHANCED OR MODIF IED THE ASSESSMENT IN FULL. SINCE THE ORDER PASSED BY THE COMMISSIONER IS UNWORKABLE, THE ORDER OF THE COMMISSIONER HAD TO BE SET ASIDE. HOWEVER, T HE TRIBUNAL FURTHER POINTED OUT THAT SINCE ON MERITS, THE COMMISSIONER WAS ALSO NOT JUSTIFIED IN EXAMINING THE CONTENT OF THE JURISDICTION UNDER SECTION 263, A DETAILED EXAMINATION ON THIS ASPECT WAS PURELY ACADEMIC. THU S IT LEFT THE QUESTION AS IT IS. AGGRIEVED BY THIS, THE REVENUE IN ON APPE AL. 29. AS FAR AS THE EMPLOYEES STOCK OPTION PLAN IS CO NCERNED, AS RIGHTLY POINTED OUT BY THE TRIBUNAL, THE ASSESSEE HAD TO FO LLOW SEBI DIRECTION AND BY FOLLOWING SUCH DIRECTION, THE ASSESSEE CLAIMED T HE ASCERTAINED AMOUNT AS LIABILITY FOR DEDUCTION. WE DO NOT FIND THAT THE RE EXISTS ANY ERROR TO DISTURB THE ORDER OF THE TRIBUNAL AND IN TURN THE A SSESSING AUTHORITY. IN THE CIRCUMSTANCES, WE AGREE WITH THE SUBMISSION OF LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE IN THIS REGARD BY UPHOLD ING THE ORDER OF THE TRIBUNAL.' 8. LD. SR. DR COULD NOT POINT OUT ANY OTHER CONTRA RY BINDING PRECEDENTS BY THE HONBLE DELHI HIGH COURT OR THE HONBLE SUPREME COURT. THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD.CIT(A). T HUS, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ABOVE DECISION WAS PRONOUNCED ON CONCLUSION OF VIRT UAL HEARING IN THE PRESENCE OF BOTH THE PARTIES ON 18 TH AUGUST, 2021. SD/- SD/- (PRASHANT MAHARISHI) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIA L MEMBER *AMIT KUMAR* ITA NO.567/DEL/2018 ASSESSMENT YEAR : 2014-15 PAGE | 6 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI