DCIT, CIRCLE- 12(1), NEW DELHI V. ICRA LTD., NEW DELHI

ITA 5707/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3388 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 06-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNITA SINGH MS ANIMA BARNWAL
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Revised return; Revenue expenditure; Capital expenditure; Rule 8D; Set aside; Capital Gains
• Section: 14A; 37(1); 13; 145; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: C NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.5706/DEL/2017 ASSESSMENT YEAR: 2011-12 AND ITA NO.5707/DEL/2017 ASSESSMENT YEAR: 2012-13 DCIT, CIRCEL-12(1), NEW DELHI VS. ICRA LTD., 1105, KAILASH BUILDING, 11 TH FLOOR, 26 KASTURBA MARG, NEW DELHI PAN : AAACI0218B (APPELLANT) (RESPONDENT) AND C.O. NO.8/DEL/2018 [ARISING OUT OF ITA NO.5707/DEL/2017] ASSESSMENT YEAR: 2012-13 ICRA LTD., 1105, KAILASH BUILDING, 11 TH FLOOR, 26 KASTURBA MARG, NEW DELHI VS. DCIT, CIRCEL-12(1), NEW DELHI PAN :AAACI0218B (APPELLANT) (RESPONDENT) DEPARTMENT BY MS. SUNITA SINGH, CIT(DR) MS. ANIMA BARNWAL, SR.DR ASSESSEE BY NONE DATE OF HEARING 30.09.2021 DATE OF PRONOUNCEMENT 14.10.2021 2 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 ORDER PER O.P. KANT, AM: THE APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2011- 12 IS DIRECTED AGAINST ORDER DATED 15/05/2017 IN APPEAL N O.337/16-17 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS)-39, NEW DELHI [IN SHORT THE CIT(A)]. THE APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE FOR ASSESSMENT YEAR 2012-13 ARE DIRECTED AGAINST ORDER DATED 15/05/2017 IN APPEAL N O.339/16- 17. AS COMMON ISSUES IN DISPUTE ARE INVOLVED IN BOT H THE APPEALS OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE, WE HAVE HEARD THESE TOGETHER AND DISPOSED OFF BY WAY OF THI S CONSOLIDATED ORDER FOR CONVENIENCE AND TO AVOID REPETITION OF FA CTS. ITA NO.5706/DEL/2017 FOR AY: 2011-12 2. FIRST, WE TAKE UP THE APPEAL OF REVENUE FOR ASSESS MENT YEAR 2011-12. THE GROUNDS RAISED BY THE REVENUE ARE REPR ODUCED AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF EMPLOYEE STOC K OPTION SCHEME COMPENSATION, AMOUNTING TO RS.7,51,29,706/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/ 14A R.W. RULE 8D, AMOUNTING TO RS.69,21,744/-. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT AN Y TIME BEFORE OR DURING THE HEARING OF APPEAL. 3. AT THE OUTSET, WE MAY LIKE TO MENTION THAT DESPITE NOTIFYING NEITHER ANYONE WAS PRESENT ON BEHALF OF THE ASSESSE E, NOR ANY APPLICATION WAS FILED FOR ADJOURNMENT ON BEHALF OF THE ASSESSEE. 3 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 IN THE CIRCUMSTANCES, WE PROCEEDED TO HEAR THE APPE AL ON THE BASIS OF ARGUMENTS ADVANCED BY LEARNED DEPARTMENTAL REPRESENTATIVES AND MATERIAL AVAILABLE ON RECORD. 4. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE A ND PERUSED THE RELEVANT MATERIAL ON RECORD. 4.1 THE GROUND NO.1 OF THE APPEAL OF THE REVENUE RELAT ES TO DELETION OF DISALLOWANCE OF EMPLOYEE STOCK OPTION S CHEME (ESOP) COMPENSATION, AMOUNTING TO 12,91,99,000/-. 4.2 BRIEFLY STATED FACTS RELEVANT TO THE ADJUDICATION OF THE ISSUE IN DISPUTE BEFORE US ARE THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM MADE IN PROFIT AND LOSS ACCOUNT OF EMPLOYEES STOCK OPTION SCHEME COMPENSATION OF 12,91,99,000/- ON THE GROUND THAT EXPENDITURE WAS ON ACCOUNT OF ISSUANCE OF SHARE CAP ITAL, WHICH BEING IN THE NATURE OF CAPITAL EXPENDITURE, WAS NOT ALLOWED AS BUSINESS EXPENDITURE. THE DETAILED FINDING OF LEARN ED ASSESSING OFFICER IS REPRODUCED AS UNDER: I. THE EXPENDITURE ON ESOP COMPENSATION EXPENDITUR E IS NOT REVENUE EXPENDITURE AS THE SAME HAS BEEN INCURRED T OWARDS THE RAISING OF SHARE CAPITAL WHICH IS CLEARLY CAPIT AL IN NATURE. THE VARIOUS HONBLE COURTS HAS HELD IN THEIR DECISI ONS THAT THE NATURE OF EXPENSE SHOULD BE TAKEN IN THE BROAD WAY TO WHICH IT IS ATTRIBUTABLE. II. THE AMOUNT OF EXPENDITURE CLAIMED AS COMPENSATI ON TOWARDS EMPLOYEES STOCK OPTION PLAN/SCHEME IS NOT AN ACTUAL EXPENDITURE INCURRED BY THE COMPANY. IT IS JUST A N OTIONAL LOSS. III. SEBI GUIDELINES ARE NOT A PREROGATIVE FOR DETE RMINING ALLOWABILITY OR OTHERWISE OF AN ITEM FOR INCOME TAX PURPOSE. IV. THE SHARES WERE THE CAPITAL OF THE ASSESSEE COM PANY AND ANY LOSS TO THE CAPITAL CAN BE CONSIDERED AS CAPITAL LO SS AND NOT REVENUE EXPENDITURE. RELIANCE IS PLACED ON DECISION S IN THE 4 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 FOLLOWING CASES; M/S VIP INDUSTRIES LTD VS DCIT, & RANBAXY LABORATORIES VS. ADD.CIT 124 TTJ (DEL) 771. V. SECTION 145 OF THE INCOME TAX, 1961 PROVIDES THA T INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSI NESS AND PROFESSION SHALL BE COMPUTED IN ACCORDANCE WITH ME RCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSE SSEE. HOWEVER THERE IS A RIDER IN SECTION 145 THAT THE CE NTRAL GOVERNMENT MAY NOTIFY ACCOUNTING STANDARDS TO BE FO LLOWED BY THE ASSESSEE. IT IS RELEVANT TO MENTION THAT CEN TRAL GOVERNMENT HAS NOT NOTIFIED ANY ACCOUNTING STANDARD IN THE MATTER OF ESOP VI IT IS NECESSARY TO CLAIM DEDUCTION THAT THE EXP ENDITURE SHOULD RELATE TO THE PREVIOUS YEAR IN ORDER TO ASCERTAIN, WHETHER THE EXPENDITURE RELATES TO THE RELEVANT PREVIOUS YEAR O R NOT, ONE HAS TO EXAMINE THE METHOD OF ACCOUNTING GENERALLY B EING ADOPTED BY THE ASSESSEE. TO AVAIL DEDUCTION OF EXPE NDITURE IT IS NECESSARY THAT THE BUSINESS IN RESPECT OF WHICH EXPENSES ARE INCURRED SHOULD BE CARRIED ON BY THE ASSESSEE D URING THE PREVIOUS YEAR. EXPENDITURE SHOULD HAVE BEEN INCURRE D IN CONNECTION WITH ASSESSEES OWN BUSINESS. VII. IN INCOME TAX ACT, CERTAIN EXPENSES ARE AN AL LOWABLE EXPENDITURE ON THE AMORTIZATION BASIS PROVIDED THES E ARE ACTUAL ONE THESE EXPENSES ARE IDENTIFIED LIKE EXPEN DITURE IN CONNECTION WITH PREPARATION OF FEASIBILITY REPORT . PREPARATION OF PROJECT REPORT (SECTION 35D), AMORTIZATION OF EXPEN DITURE IN THE CASE OF AMALGAMATION AND DE-MERGER (SECTION 35DD),V OLUNTARY RETIREMENT SCHEME (SECTION 35DDA).BESIDES THE EXPEN SES AS SPECIFIED ABOVE CERTAIN EXPENSES ARE ALLOWABLE U/S 37 OF THE ACT PROVIDED THESE ARE ACTUAL EXPENDITURE VIZ THERE IS AN OUTGO OF THE CAPITAL IN TRANSACTION RELATING TO BUSINESS ACTIVITY OF THE ASSESSEE DURING THE RELEVANT YEAR. AS THE ASSESSEE HAS NOT PURCHASED THE SHARES FROM THE MARKET BUT EXHAUSTED ITS OWN QUOTA OF ISSUED CAPITAL WHILE GIVING IT TO THE EMPL OYEE AND THERE IS NO MONITORY OUTGOING IN ITS EXISTING CAPIT AL AND NO ACTUAL EXPENDITURE HAS BEEN INCURRED BY THE ASSESSE E COMPANY. EVEN IF THE METHOD OF ACCOUNTING OF THE AS SESSEE COMPANY IS CONSIDERED (MERCANTILE), EXPENSES ARE AL LOWED ON PROVISION BASIS IF IT IS ASCERTAINED ONE BUT FIRST AND FOREMOST CONDITION THAT NEEDS TO BE FULFILLED IS THAT THERE HAS TO BE A TRANSACTION WHICH CAN BE TERMED AS EXPENDITURE. VIII. FURTHER, THE CASE LAWS CITED BY THE ASSESSEE HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL IS PENDING B EFORE THE HONBLE COURTS IN THE RESPECTIVE CASES. 5 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 4.3 THE LD. CIT(A) DELETED THE DISALLOWANCE OBSERVING AS UNDER: 5.1 IT IS GATHERED FROM THE APPELLANTS SUBMISSION AT PARA 4 AND 4.1 ABOVE THAT IN AY 2011 - 12, THE APPELLANT GRANT ED ESOP TO ITS EMPLOYEES UNDER ITS EMPLOYEE STOCK OPTION SCHEME, 2 006 WHOSE OBJECTIVE WAS FURTHER THE APPELLANTS GROWTH AND DEVELOPMENT MOTIVATE EMPLOYEES TOWARDS THE APPELLANTS OBJECTIV ES MAINTAIN ABILITY TO ATTRACT AND RETAIN OUTSTANDING EMPLOYEES FOR POSITIONS OF SUBSTANTIAL RESPONSIBILITY THE APPELLANT RECOGNIZED THIS EMPLOYEE COST IN IT S BOOKS OF ACCOUNT AS AN EXPENSE IN ACCORDANCE WITH THE EXTANT SEBI GUIDELINES - MANDATORY FOR LISTED COMPANIES. UNDER THE ESOP 2,72,500 SHARES WERE GRANTED TO ITS ELIGIBLE EMPLOY EES IN NOVEMBER 2010 VESTING IN THE ELIGIBLE EMPLOYEES OVER A PERIO D OF 3 YEARS - @ 40%, 30% AND 30%. ACCORDINGLY, SHARES OF FACE VALUE OF RS.10/- WERE ISSUED AT RS.330/- PER SHARE (IPO PRICE) ALLOT TED TO ICRA EMPLOYEES WELFARE TRUST WHILE THE MARKET PRICE ON THE GRANTING DATE WAS RS. 1,423.85/- PER SHARE. THE INTRINSIC VA LUE OF SHARES OF RS.1,093.85 I.E. DIFFERENCE BETWEEN MARKET PRICE OF RS.1,423.85 AND THE GRANT PRICE OF RS.330/-, WAS ADOPTED FOR COMPUT ING THE ESOP EXPENSES IN ACCORDANCE WITH THE SEBI GUIDELINES WHI CH PROVIDED THAT THE ESOP EXPENSES WILL BE AMORTIZED ON A STRAI GHT LINE BASIS OVER THE VESTING PERIOD - THE PRO RATA EXPENDITURE DEBITED AS EMPLOYEE COMPENSATION IN THE RELEVANT PY WAS RS.7,5 1,29,706/- WAS CLAIMED AS A DEDUCTION IN THE REVISED RETURN FI LED BY THE APPELLANT ON 7/03/2013. 5.1A IT IS ALSO OBSERVED FROM THE APPELLANTS SUBM ISSIONS FILED AT THE APPELLATE STAGE THAT THE APPELLANT IS A LISTED COMPANY AND HENCE, IT IS MANDATORY, IN MY VIEW, TO ABIDE BY SEB I GUIDELINES IN RESPECT OF ANY ACTION /ACTIVITY UNDERTAKEN BY IT UN DER THE COMPANY LAW. THE QUESTION OF DEDUCTIBILITY OF ESOP COMPENSA TION AS AN EXPENDITURE UNDER THE INCOME TAX ACT [U/S 37(1)] IS ALTOGETHER A COMPLETELY DIFFERENT ISSUE. SECONDLY, THE APPELLANT HAS TO ALSO SATISFY THE GENERALLY ACCEPTED ACCOUNTING PRINCIPLE S AND THEREAFTER CLAIM A DEDUCTION ON ACCOUNT OF AN EXPENDITURE OR L OSS. IT IS ONLY THEREAFTER THAT THE APPLICABILITY OF THE PROVISIONS OF THE INCOME TAX ACT 1961 APPLIES. 5.1B IT IS GATHERED FROM ITS RESPONSE TO ALL THE REASONS MENTIONED IN THE IMPUGNED ORDER FOR THE DISALLOWANCE OF ITS CLAI M OF DEDUCTION FOR THE LOSS INCURRED ON THE ESOP SCHEME DURING THE REL EVANT PY (ALBEIT ON A 3 YEAR PRO RATA BASIS) THAT WHILE THE APPELLAN TS CONTENTION IS 6 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 FORTIFIED BY THE JUDICIAL PRECEDENTS RELIED ON BY I T, ESPECIALLY BY THE IT AT BANGALORE (SB) IN THE BIOCON CASE (SUPRA), IT S CONTENTION THAT THE FACTS OF THE CASE APPLY TO THOSE IN THE PRESENT CASE SQUARELY, IS BORNE OUT FROM RECORDS. AS REGARDS THE QUESTION OF INCURRING ACTUAL EXPENDITURE VIS-A-VIS NOTIONAL EXPENDITURE AS HE LD IN THE IMPUGNED ORDER, THE APPELLANTS CONTENTION APPEARS PLAUSIBLE IN VIEW OF THE FACT THAT EXPENDITURE IS NOWHERE DEFINED IN THE A CT AND THAT IF THE LIABILITY TO INCUR AN EXPENDITURE IS ASCERTAINED, I T IS SUFFICIENT TO CLAIM THE EXPENSES UNDER THE MERCANTILE SYSTEM OF A CCOUNTING ADOPTED REGULARLY BY THE APPELLANT AS HELD LEGALLY BY COURTS. IN FACT, IT IS MENTIONED IN THE AFORESAID CASE, INTER ALIA, 9.2.8 THOUGH DISCOUNT ON PREMIUM IS NOTHING BUT AN EXPENDITURE U /S 37 (1), IT IS WORTH NOTING THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS WOODWORD GOVERNOR INDIA (P) LTD (2009) 312 ITR 254 (SC) /179 TAXMANN 326 HAS GONE TO THE EXTENT OF COVERING LOS S IN CERTAIN CIRCUMSTANCES WITHIN THE PURVIEW OF EXPENDITURE A S USED IN SECTION 37 (1).... THEIR LORDSHIPS NOTICED THAT THE WORD EXPENDITURE HAS NOT BEEN DEFINED IN THE ACT. THEY HELD THAT: TH E WORD EXPENDITURE IS, THEREFORE, REQUIRED TO BE UNDERST OOD IN THE CONTEXT IN WHICH IT IS USED. SECTION 37 ENJOINS THAT ANY EX PENDITURE NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIO NS 30 TO 36 LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSES OF THE BUSINESS SHOULD BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION IN SECTIONS 30 TO 36 THE EXPRESSION EXPENDITURE INCUR RED, AS WELL AS ALLOWANCE AND DEPRECIATION, HAS ALSO BEEN USED FOR EXAMPLE DEPRECIATION AND ALLOWANCES ARE DEALT WITH IN SECTI ON 32, THEREFORE, THE PARLIAMENT HAS USED EXPRESSION ANY EXPENDITURE IN SECTION 37 TO COVER BOTH. THEREFORE, THE EXPRESSION EXPENDITU RE AS USED IN SECTION 37 MADE IN THE CIRCUMSTANCES OF A PARTICULA R CASE, COVERS AN AMOUNT WHICH IS REALLY A LOSS EVEN THOUGH THE SAI D AMOUNT HAS NOT GONE OUT FROM THE POCKET OF THE ASSESSEE. FROM THE ABOVE ENUNCIATION OF LAW BY THE HONBLE SUMMIT COURT, THE RE REMAINS NO DOUBT WHATSOEVER THAT THE TERM EXPENDITURE IN CER TAIN CIRCUMSTANCES CAN ALSO ENCOMPASS 'LOSS EVEN THOUGH NO AMOUNT IS ACTUALLY PAID OUT. EX CONSEQUENT, THE ALTERNATIVE A RGUMENT OF THE LD. DR THAT DISCOUNT ON SHARES IS LOSS AND HENCE CAN T BE COVERED UNDER SECTION 37(1), ALSO DOES NOT HOLD WATER IN TH E LIGHT OF THE ABOVE JUDGEMENT. IN VIEW OF THE ABOVE DISCUSSION, W E, WITH UTMOST RESPECT, ARE UNABLE TO CONCUR WITH THE VIEW TAKEN I N RANBAXY LABORATORIES LTD (SUPRA)....... 9.3.2 IT IS A TRITE LAW AND THERE CAN BE NO QUARREL OVER THE SETTLED LEGAL POSITION THAT DED UCTION IS PERMISSIBLE IN RESPECT OF AN ASCERTAINED LIABILITY AND NOT A CONTINGENT LIABILITY. SECTION 31 OF THE INDIAN CONT RACT ACT, 1872 DEFINES CONTINGENT CONTRACT AS A CONTRACT TO DO OR NOT TO DO SOMETHING, IF SOME EVENT, COLLATERAL TO SUCH CONTRA CT DOES NOT HAPPEN. WE NEED TO DETERMINE AS TO WHETHER THE LIA BILITY ARISING ON THE ASSESSEE - COMPANY FOR ISSUING SHARES AT A DISC OUNTED PREMIUM 7 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 CAN BE CHARACTERIZED AS A CONTINGENT LIABILITY IN T HE LIGHT OF THE DEFINITION OF CONTINGENT CONTRACT... 9.3.3 THE HONBLE SUPREME COURT IN BHARAT EARTH MOVERS VS CIT (2000) 245 ITR 428 / 112 TAXMAN 61 DEALT WITH THE DEDUCTIBILITY OR OTHERWISE OF PROVIS ION FOR LIABILITY TOWARDS ENCASHMENT OF EARNED LEAVE.... WITH THIS LE GISLATIVE AMENDMENT, THE APPLICATION OF THE RATIO DECIDENDI I N THE CASE OF BHARAT EARTH MOVERS (SUPRA) TO THE PROVISION FOR LE AVE ENCASHMENT HAS BEEN NULLIFIED. HOWEVER, THE PRINCIPLE LAID DOW N IN THE SAID JUDGEMENT IS ABSOLUTELY INTACT THAT A LIABILITY DEF INITELY INCURRED BY AN ASSESSEE IS DEDUCTIBLE NOTWITHSTANDING THE FACT THAT ITS QUANTIFICATION MAY TAKE PLACE IN A LATER YEAR. THE MERE FACT THAT THE QUANTIFICATION IS NOT PRECISELY POSSIBLE AT THE TIM E OF INCURRING THE LIABILITY WOULD NOT MAKE AN ASCERTAINED LIABILITY A CONTINGENT... 9.3.5 WHEN WE CONSIDER THE FACTS OF THE PRESENT CASE IN THE BACKDROP OF THE RATIO LAID DOWN BY THE HONBLE SUPR EME COURT IN BHARAT EARTH MOVERS (SUPRA) AND ROTORK CONTROLS IND IA (P) LTD (SUPRA), IT BECOMES VIVID THAT THE MANDATE OF THESE CASES IS APPLICABLE WITH FULL FORCE TO THE DEDUCTIBILITY OF THE DISCOUNT ON INCURRING OF LIABILITY ON THE RENDITION OF SERVICE BY THE EMPLOYEES. THE FACTUM OF THE EMPLOYEES BECOMING ENTITLED TO EXERCI SE OPTIONS AT THE END OF THE VESTING PERIOD AND IT IS ONLY THEN THAT THE ACTUAL AMOUNT OF DISCOUNT WOULD BE DETERMINED, IS AKIN TO THE QUA NTIFICATION OF THE PRECISE LIABILITY TAKING PLACE AT A FUTURE DATE, TH EREBY NOT DISTURBING THE OTHERWISE LIABILITY WHICH STOOD INCURRED AT THE END OF EACH YEAR ON AVAILING THE SERVICES... 5.1C FURTHER, IT IS OBSERVED THAT THE APPELLANTS CONTENTION REGARDING DEDUCTIBILITY OF THE COMPENSATION IN ESOP SUPPORTS ITSELF ON THE FACT THAT THIS LOSS IS ACTUALLY FOR THE EMPLOYEES - PROV IDING A PART OF THE WEALTH TO THE EMPLOYEES IN ORDER TO MOTIVATE THEM T O HARNESS THEIR POTENTIAL IN INCREASING THE GROWTH AND THEREBY PROF ITS OF THE APPELLANT. HENCE, ITS CONTENTION THAT THE LOSS CAN ALSO BE LOOKED AT AS EMPLOYEES WELFARE AND THEREBY ALLOWABLE UNDER T HE ACT U/S 37(1) APPEARS PLAUSIBLE. ALSO PLAUSIBLE IS THE ARGU MENT TAKEN BY THE APPELLANTS AR IN SUBMITTING THAT THERE IS NO INCRE ASE IN THE NUMBER OF SHARES OR IN THE PAID UP CAPITAL OF THE APPELLAN T IN THE PRESENT CASE BUT LOSS TAKEN IN ITS ACCOUNTS - DIFFERENCE BE TWEEN THE MARKET PRICE OF THE SHARE AND ITS ISSUE PRICE I.E. FIXED B Y THE APPELLANT ON THE EFFECTIVE DATE OF THE ESOP SCHEME. IT IS OBSERV ED THAT THE APPELLANT HAS RELIED ON THE TRIBUNALS DECISION IN BIOCON LTD VS. DY. CIT (LTU) [2013] 35 TAXMANN.COM 335 (ITAT BANG)(SB) . THIS DECISION HAS 'OVER RULED THAT OF ITAT (DEL) IN RANBAXY LABO RATORIES LTD, VS. ADDL. CIT (2010) (39 SOT 17). ALSO, BOTH THE JURISD ICTIONAL HIGH COURT IN CIT VS. LEMON TREE HOTELS LTD. (2015) ITA NO.107 /2015 AND ITAT DELHI IN BHARTI AIRTEL LTD. VS. ADDL. CIT (2014) (4 3 TAXMANN.COM 50) HAVE RULED THAT SUCH COMPENSATION IS DEDUCTIBLE AS A REVENUE EXPENDITURE. IN FACT, THE HONBLE HC HAS RELIED ON THE DECISION OF THE 8 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 MADRAS HC IN PVP VENTURES (SUPRA) WHILE THE ITAT DE LHI HAS RELIED ON THE DECISION OF THE ITAT BANGALORE (SB) IN BIOCO N (SUPRA). 5.1D ACCORDINGLY, IN DUE DEFERENCE TO THE DECISIONS OF THE JURISDICTIONAL HC AND THE ITAT (BANG)(SB) AND ITAT DELHI FOLLOWING THE DECISION OF THE SB OF ITAT BANGALORE AS WELL AS THE JUDICIAL PRECEDENTS RELIED UPON BY THE APPELLANT I AM IN AGR EEMENT WITH THE APPELLANTS CONTENTION THAT THE COMPENSATION ON ACC OUNT OF THE LOSS ON ESOP IS AN EXPENDITURE ELIGIBLE FOR DEDUCTION U/ S 37(1) OF THE ACT, BEING REVENUE IN NATURE ON THE STRENGTH OF THE ARGU MENT THAT IT REPRESENTS EMPLOYEE COST AND CANNOT BE CONSIDERED AS A CAPITAL LOSS AS HELD IN THE IMPUGNED ORDER. HENCE, THE DISA LLOWANCE OF THE APPELLANTS CLAIM OF DEDUCTION TOWARDS ESOS COMPENS ATION (RS.7,51,29,706/-) MADE IN THE IMPUGNED ORDER IS DE LETED. THIS GROUND IS THEREFORE ALLOWED. 4.4 WE FIND THAT LEARNED CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE FOLLOWING THE DECISION OF THE SPECIAL BENC H OF TRIBUNAL IN THE CASE OF BIOCON LTD. (SUPRA) AND OTHER DECISION OF JURISDICTIONAL HIGH COURT. WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LEARNED CIT(A) IN FOLLOWING BINDING PR ECEDENTS, AND ALLOWING EMPLOYEE STOCK OPTION COMPENSATION AS REVE NUE EXPENDITURE. THE GROUND OF THE APPEAL OF THE REVENU E IS, ACCORDINGLY, DISMISSED. 5. THE GROUND NO.2 OF THE APPEAL IS RELATED TO DISALLO WANCE OF 69,21,744/- UNDER SECTION 14A READ WITH RULE 8D OF INCOME-TAX RULES, 1962 (IN SHORT THE RULES). 5.1 BRIEF FACTS QUA THE ISSUE IN DISPUTE ARE THAT THE ASSESSEE CLAIMED EXEMPTED INCOME OF 4,88,16,855/- WHICH INCLUDED DIVIDEND INCOME OF 2,69,42,798/- AND PROFIT ON REDEMPTION OF INVESTMENT OF 2,18,74,057/-. THE ASSESSEE MADE SUO MOTU DISALLOWANCE OF 16,22,056/- FOR EARNING THE ABOVE EXEMPTED INCOME. DESPITE BEING SPECIFICALLY ASKED BY THE ASS ESSING OFFICER, NO DETAILS OF WORKING OF SUO MOTU DISALLOWANCE OF 16,22,046/- 9 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 WAS PROVIDED BY THE ASSESSEE. CONSEQUENTLY, THE ASS ESSING OFFICER INVOKING RULE 8D OF THE INCOME-TAX RULES, 1 962 (IN SHORT THE RULES) RULES COMPUTED DISALLOWANCE OF 85,43,800/- AS UNDER: S. NO. PARTICULARS AMOUNT (I) EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME NIL (II) EXPENDITURE INCURRED BY WAY OF INTEREST (A*B/C) A= AMOUNT OF INTEREST B= AVERAGE VALUE OF INVESTMENTS 1708760000 INVESTMENT AS ON 01-04-2010 1117949000 INVESTMENT AS ON 31 -03-2011 2299571000 C= AVERAGE OF TOTAL ASSETS TOTAL ASSETS AS ON 01-04-2010 TOTAL ASSETS AS ON 31-03-2011 A * B/C SUBJECT TO MAXIMUM OF A (III) ONE HALF % OF AVERAGE VALUE OF INVESTMENT INCOME FR OM WHICH DOES NOT FORM PART OF TOTAL INCOME. AVERAGE VALUE OF INVESTMENTS 1708760000 ONE HALF % OF AVERAGE VALUE OF INVESTMENT. 8543800 TOTAL DISALLOWANCE AS PER RULE 8D 85,43,800 5.2 THE ASSESSING OFFICER MADE NET DISALLOWANCE OF 69,21,744/- AFTER REDUCING THE SUM OF 16,22,056, WHICH WAS DISALLOWED SUO MOTU BY THE ASSESSEE. ON FURTHER APPEAL, THE LD. CIT(A) DELETED THE DISALLOWANCE OBSERVING AS UNDER: 10 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 5.2C IT CAN THEREFORE BE SAFELY INFERRED FROM THE IMPUGNED ORDER THAT THE SATISFACTION OF THE AO FOR DISALLOWANCE OF EXPENSES, IN VIEW OF THE PRESUMED TAX-EXEMPT DIVIDEND INCOME , U/S 14 A OF THE ACT IS DRAWN FROM THE FACT THAT THE APPELLANT SUO MOTU MAD E A DISALLOWANCE OF RS. 16,22,056/- BUT AS PER THE IMPU GNED ORDER, NO EXPLANATION/WORKING OF THE DISALLOWANCE 14A WAS PRO VIDED BY THE APPELLANT. THE DISALLOWANCE WAS WORKED OUT BASED ON AVAILABLE INFORMATION. HOWEVER, IT IS OBSERVED THAT THE AVERA GE OF THE ENTIRE INVESTMENT WAS WORKING OUT THE DISALLOWANCE AS PER THE EXTANT RULE 8D(2)(III) INSTEAD OF WHAT IS STIPULATED-...AVERAG E OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME... FROM THE AUDITED ACCOUNTS, THIS IS DISCERNIBLE - INCOME FROM GROWTH FUNDS IS TAXABLE AND FORMS A PAR T OF THE TOTAL INCOME. HENCE INVESTMENT IN SUCH FUNDS ARE TO BE EX CLUDED 3 WORKING OUT THE DISALLOWANCE UNDER RULE 8D(2)(III). IN FACT, THE ARS VERSION OF THE FACTS IS BORNE OUT FROM RECORDS. ALS O, INVESTMENT IN SUBSIDIARY WHERE THE OBJECT OF SUCH INVESTMENT IS N O: DIVIDEND BUT CONTROLLING STAKE IS ALSO EXCLUDED WHILE WORKING OU T THE DISALLOWANCE UNDER RULE 8D(2)(III). ACCORDINGLY, IN VIEW OF THE EXTANT LAW ON THE SUBJECT, PRESENTLY SETTLED BY JUDICIAL P RECEDENTS FROM THE COURTS INCLUDING THE JURISDICTIONAL HIGH COURT (DEL HI HC) MAXOPP INVESTMENT LTD VS. CIT (A Y 2002-03) IT A NO. 687/2009 (DEL) CHEMINVEST LTD. VS. CIT (AY 2004-05) (2015) 61 TAXMANN.COM 118 (DEL) [THE ITAT DECISION MENTIONED IN THE IMPUGNED ORDER STANDS OVERRULED BY THIS DECISION] CIT VS. HOLCIM INDIA PVT. LTD. ITA NO. 486/2014 AND 299/2014 (DEL) CIT VS. TAIKISHA ENGINEERING INDIA LTD (2014) IT A 115/2014 & 119/2014 (DEL) DCM LTD. VS. DCIT AND VICE-VERSA (2015) 9 TM1111 0 (ITAT, DELHI) JOINT INVESTMENTS PVT. LTD. VS. CIT 372ITR 694 ( DEL) CIT VS. HERO CYCLES LTD.[2010] 189 TAXMANN 50 (P &H) ACB INDIA LTD. VS. ACIT (2015) 62 TAXMANN.COM 71 (DEL) DLF LTD VS ADDL. CIT ITA NO. 2677/DEL/2011(2016) (ITAT DELHI) AND IN DUE DEFERENCE TO THE AFOREMENTIONED COURT DE CISIONS, I AM INCLINED TO AGREE WITH THE CONTENTION OF THE APPELL ANT IN THIS REGARD AND DELETE THE DISALLOWANCE (RS.69,21,744/-) MADE U /S 14A OF THE ACT IN THE IMPUGNED ORDER. 5.3 WE FIND THAT THE LD. CIT(A) HAS DELETED THE DISALL OWANCE MAINLY ON THE GROUND THAT INVESTMENT FROM GROWTH FU ND IS 11 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 TAXABLE, AND THEREFORE, SAID INVESTMENT SHOULD BE E XCLUDED WHILE WORKING OUT THE DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES. ALSO DIRECTED NOT TO CONSIDER INVESTMENT IN SUBSIDI ARY, WHICH ACCORDING TO THE LD. CIT(A), WAS FOR CONTROLLING ST AKE. WE FIND THAT IN VIEW OF THE RECENT DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF MAXXOP INVESTMENT LTD VS. CIT, CIVIL APPEAL NOS. 104-109 OF 2015 & ORS. (ORDER DATED 12 TH FEBRUARY, 2018) STRATEGIC INVESTMENT FOR OBTAINING CONTROLLING STAK E HAS ALSO BEEN FOUND LIABLE FOR COMPUTING DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES AND THEREFORE TO THIS EXTENT, THE ORDER O F THE LD. CIT(A) IS SET ASIDE AND MATTER RESTORED BACK TO THE LEARNE D ASSESSING OFFICE FOR RE-COMPUTING THE DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES. THE ASSESSING OFFICER IS ALSO DIRECTED T O VERIFY WHETHER INCOME FROM GROWTH FUNDS HAS BEEN INCLUDED UNDER TA XABLE INCOME AND IF SO, THEN HE SHALL EXCLUDE THE SAID IN VESTMENT FOR COMPUTING DISALLOWANCE IN TERMS OF RULE 8D(2)(III) OF RULES. THE GROUND OF THE APPEAL OF THE REVENUE IS ACCORDINGLY ALLOWED PARTLY FOR THE STATISTICAL PURPOSES. ITA NO.5707/DEL/2017 & C.O.NO.8/DEL/2018 FOR AY:2012- 13 6. NOW, WE TAKE UP THE APPEAL OF REVENUE FOR ASSESSME NT YEAR 2012-13 AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE. THE GROUNDS OF THE APPEAL FOR ASSESSMENT YEAR 2012- 13 AND CROSS OBJECTIONS BY THE ASSESSEE ARE REPRODUCED AS UNDER: GROUNDS RAISED BY THE REVENUE: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF EMPLOYEE STOC K OPTION SCHEME COMPENSATION, AMOUNTING TO RS.12,91,99,000/- . 12 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE U/S 14A R.W. RUL E 8D, AMOUNTING TO RS.1,00,53,608/-. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT AN Y TIME BEFORE OR DURING THE HEARING OF THE APPEAL. CROSS OBJECTIONS RAISED BY THE ASSESSEE : 1. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW, I N UPHOLDING DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D OF THE ACT IN RESPECT TO INVESTMENTS IN INDIAN SUBSIDIARIES. THE APPELLANT PRAYS FOR LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF CROSS OBJECTIONS AT A NY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 7. WE FIND THAT GROUND NO.1 OF THE APPEAL OF THE REVE NUE IN THE YEAR UNDER CONSIDERATION IS IDENTICAL TO GROUND NO. 1 OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2011-12, AND THE REFORE FOLLOWING OUR FINDING IN ASSESSMENT YEAR 2011-12, T HE GROUND NO.1 OF APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2 012-13 IS DISMISSED. 8. THE GROUND NO. 2 OF THE APPEAL AND CROSS OBJECTION RELATE TO DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF RULES. 8.1 BRIEF FACTS QUA THE ISSUE-IN-DISPUTE FOR THE YEAR UNDER CONSIDERATION ARE THE ASSESSEE CLAIMED EXEMPTED INC OME OF 2,10,87,429/- AND AGAINST WHICH DISALLOWED SUM OF 15,47,540/- FOR EARNING THE SAID EXEMPTED INCOME. I N THE YEAR UNDER CONSIDERATION ALSO, NO DETAILS OF SUO MOTU DISALLOWANCE WAS PROVIDED BY THE ASSESSEE AND, THEREFORE, THE ASSESS ING OFFICER 13 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 INVOKING RULE 8D OF RULES MADE DISALLOWANCE OF 1,16,01,148/- COMPUTATION OF WHICH IS REPRODUCED AS UNDER : S. NO. PARTICULARS AMOUNTS (I) EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME NIL (II) EXPENDITURE INCURRED BY WAY OF INTEREST (A*B/C) A= AMOUNT OF INTEREST B= AVERAGE VALUE OF INVESTMENTS 232,02,29,500 INVESTMENT AS ON 01-04-2011 2299571000 INVESTMENT AS ON 31-03-2012 2340888000 C= AVERAGE OF TOTAL ASSETS TOTAL ASSETS AS ON 01-04-2010 TOTAL ASSETS AS ON 31-03-2011 A * B/C SUBJECT TO MAXIMUM OF A (III) ONE HALF % OF AVERAGE VALUE OF INVESTMENT INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME. AVERAGE VALUE OF INVESTMENTS 232,02,29,500 ONE HALF % OF AVERAGE VALUE OF INVESTMENT. 1,16,01,148 TOTAL DISALLOWANCE AS PER RULE 8D 1,16,01,148 8.2 THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISP UTE IS REPRODUCED AS UNDER: 5.2B IN THE IMPUGNED ORDER IT IS MENTIONED, INTER ALIA, .DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS CLAIMED EXEMPTED INCOME OF RS.2,10,87,429/-. THE ASSESSEE H AS FURTHER DISALLOWED A SUM OF RS.15,47,540/- BEING RELATED TO THE EARNING OF THE EXEMPTED INCOME. HOWEVER, NO WORKING HAS BEEN P ROVIDED BY THE ASSESSEE TO SUGGEST AS TO HOW IT HAS REACHED TO SUCH AMOUNT OF DISALLOWANCE U/S 14A. FURTHER PERUSAL OF PROFIT & L OSS ACCOUNT AND BALANCE SHEET REVEALS THAT ASSESSEE COMPANY HAS MAD E INVESTMENT IN SHARES/MUTUAL FUNDS AT RS.2,29,95,71,000/- AS ON 31.03.2011 AND RS. 2,34,08,88,000/- AS ON 01.04.2012 FOR THE P URPOSE OF EARNING DIVIDEND INCOME, LONG TERM CAPITAL GAINS AN D INTEREST INCOME 14 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 WHICH HAS BEEN CLAIMED AND WILL BE CLAIMED EXEMPTED AND NOT CHARGEABLE TO TAX UNDER THE INCOME TAX ACT. DURING THE ASSESSMENT PROCEEDINGS, THE AR OF THE ASSESSEE PROCEEDINGS, TH E AR OF THE ASSESSEE WAS ASKED TO PROVIDE THE WORKING OF DISALL OWANCE OF RS.15,47,540/- MADE SUO MOTO U/S 14A AND ALSO ASKED TO EXPLAIN AS TO WHY DISALLOWANCE U/S 14A SHOULD NOT BE MADE I N ACCORDANCE WITH RULE 8D. HOWEVER, NOTHING HAS BEEN FURNISHED B Y THE ASSESSEE IN THIS REGARD. HENCE THE CLAIM OF THE ASSESSEE IN THIS REGARD IS FOUND TO BE ACCEPTABLE AND THE ISSUE IS DECIDED ON THE BASIS OF INFORMATION AVAILABLE ON RECORD... ...THERE IS NO RATIONALE FURNISHED BY THE ASSESSEE IN DECIDING THE AMOUNT DISALLOWED AT RS.15,47,540/-. FURTHER, NO SE PARATE STAFF OR WORK STATION HAS BEEN DEPLOYED/MAINTAINED BY THE AS SESSEE TOWARDS THE INVESTMENT ACTIVITIES. FURTHER THE EARN ING OF EXEMPT INCOME IS NOT IN THE NATURE OF PASSIVE ACTIVITY HAV ING NO INPUT. IN FACT IN PRESENT SITUATION MAKING OF INVESTMENT, MAINTAIN ING OR CONTINUING OF INVESTMENT AND TIME TO EXIT FROM INVESTMENT ARE WELL INFORMED AND WELL COORDINATED MANAGEMENT DECISION INVOLVING NOT ONLY INPUTS FROM VARIOUS SOURCE BUT ALSO ACUMEN OF SENIOR MANAG EMENT FUNCTIONARIES. THEREFORE COST IS INBUILT INTO EVEN SO CALLED PASSIVE INVESTMENT. THERE ARE INCIDENTAL EXPENDITURES OF CO LLECTION, TELEPHONE, FOLLOW UP ETC. THEREFORE EXPENSES IN REL ATION TO EARNING OF INCOME ARE EMBEDDED IN INDIRECT EXPENSES... ... THEREFORE, THE DISALLOWANCE U/S 14A R.W. RULE 8 D IS COMPUTED AT RS. 1,16,01,148/-. AS THE ASSESSEE HAS ALREADY ADDE D BACK THE SUM OF RS.15,47,540/- TO THE TOTAL INCOME, THE REMA INING AMOUNT OF RS.1,00,53,608/- IS HEREBY DISALLOWED U/S 14A R.W. RULE 8D AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION... 5.2C IT CAN THEREFORE BE SAFELY BE INFERRED FROM TH E IMPUGNED ORDER THAT THE SATISFACTION OF THE AO FOR DISALLOWANCE OF EXPENSES, IN VIEW OF THE PRESUMED TAX-EXEMPT DIVIDEND INCOME, U/S 14A OF THE ACT IS DRAWN FROM THE FACT THAT THE APPELLANT SUO MOTU MAD E A DISALLOWANCE OF RS. 15,47,540/- BUT AS PER THE IMPU GNED ORDER, NO EXPLANATION / WORKING OF THE DISALLOWANCE U/S 14A W AS PROVIDED BY THE APPELLANT. THE DISALLOWANCE WAS WORKED OUT BASE D ON AVAILABLE INFORMATION. HOWEVER, IT IS OBSERVED THAT THE AVERA GE OF THE ENTIRE INVESTMENT WAS TAKEN IN WORKING OUT THE DISALLOWANC E AS PER THE EXTANT RULE 8D(2)(III) INSTEAD OF WHAT IS STIPULATE D - ...AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME...' FROM THE AUDITED ACCOU NTS, THIS IS DISCERNIBLE - INCOME FROM GROWTH FUNDS IS TAXABLE A ND FORMS A PART OF THE TOTAL INCOME. HENCE INVESTMENT IN SUCH FUNDS ARE TO BE EXCLUDED WHILE WORKING OUT THE DISALLOWANCE UNDER R ULE 8D(2)(III). IN FACT, THE ARS VERSION OF THE FACTS IS BORNE OUT FR OM RECORDS. 15 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 ACCORDINGLY, IN VIEW OF THE EXTANT LAW ON THE SUBJE CT, PRESENTLY SETTLED BY JUDICIAL PRECEDENTS FROM THE COURTS INCL UDING THE JURISDICTIONAL HIGH COURT (DELHI HC) MAXOPP INVESTMENT LTD VS. CIT (A Y 2002-03) ITA NO. 687/2009 (DEL) CHEMINVEST LTD. VS. CIT (AY 2004-05) (2015) 61 T AXMANN.COM 118 (DEL) [THE ITAT DECISION MENTIONED IN THE IMPUG NED ORDER STANDS OVERRULED BY THIS DECISION] CIT VS. HOLCIM INDIA PVT. LTD. ITA NO. 486/2014 AND 299/2014 (DEL) CIT VS. TAIKISHA ENGINEERING INDIA LTD (2014) IT A 115/2014 & 119/2014 (DEL) DCM LTD. VS. DCITAND VICE-VERSA (2015) 9 TM11110 (ITAT DELHI) JOINT INVESTMENTS PVT. LTD. VS. CIT 372ITR 694 ( DEL) CIT VS. HERO CYCLES LTD.[2010] 189 TAXMANN 50 (P &H) ACB INDIA LTD. VS. ACIT (2015) 62 TAXMANN.COM 71 (DEL) DLF LTD VS ADD! CIT ITA NO. 2677/DEL/2011(2016) (ITAT DELHI) AND IN DUE DEFERENCE TO THE AFOREMENTIONED COURT DE CISION, I AM INCLINED TO AGREE WITH THE CONTENTION OF THE APP ELLANT IN THIS REGARD AND DELETED THE DISALLOWANCE (RS.1,00,53,608 /-) MADE U/S 14A OF THE ACT IN THE IMPUGNED ORDER. 8.3 WE HAVE HEARD SUBMISSION OF LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF MAXOOP INVESTMENT LTD. (SUPRA), THE INVESTMENT IN S UBSIDIARIES MADE FOR ACQUIRING CONTROLLING STAKE, CANNOT BE EXC LUDED FOR THE PURPOSE OF THE COMPUTATION OF DISALLOWANCE UNDER RU LE 8D AND, THEREFORE, WE UPHOLD THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE CROSS OBJECTION RAISED BY T HE ASSESSEE. AS FAR AS CLAIM OF INCOME FROM GROWTH FUND, WHICH IS C LAIMED BY THE ASSESSEE AS TAKEN INTO CONSIDERATION FOR COMPUTED T OTAL INCOME, HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFI CER FOR VERIFICATION IN ASSESSMENT YEAR 2011-12, AND TO HAV E CONSISTENCY 16 ITA NO.5706 & 5707/DEL/2017 C.O. NO. 8/DEL/2018 IN OUR FINDING, THE ISSUE-IN-DISPUTE IN THE YEAR UN DER CONSIDERATION IS ALSO RESTORED TO THE FILE OF THE A SSESSING OFFICER. THE GROUND OF THE APPEAL OF THE REVENUE IS ACCORDIN GLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEALS OF THE REVENUE FOR ASSE SSMENT YEAR 2011-12 AND 2012-13 ARE ALLOWED PARTLY FOR STA TISTICAL PURPOSES AND CROSS OBJECTION OF THE ASSESSEE FOR AS SESSMENT YEAR 2012-13 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER, 2021 SD/- SD/- (KULDIP SINGH) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14 TH OCTOBER, 2021. RK/- (DTDC) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI