DCIT 7(3), MUMBAI V. BLOW PLAST LTD, MUMBAI

ITA 6402/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79025 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-06-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 19-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS AGARWAL
• Keywords: Business expenditure; Revenue expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 6402/MUM/2012 ASSESSMENT YEAR: 2006-07 DCIT-7(3) MUMBAI VS. BLOW PLAST LTD. DGP HOUSE, 88-C, OLD PRABHADEVI ROAD, MUMBAI 400 025 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AAACB 0476 G APPELLANT BY : SHRI J.P. BAIRAGRA REVENUE BY : SHRI VIKAS AGARWAL DATE OF HEARING : 16.06.2014 DATE OF PRONOUNCEMENT : 16.06.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD.CIT(A)-13, MUMBAI DATED 25.07.2012 DELETING THE PENALTY OF RS.33,01,004/- LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX AC T FOR THE ASSESSMENT YEAR 2007- 08. { 2. BRIEFLY STATED, THE AO LEVIED THE IMPUGNED PENAL TY ON ACCOUNT OF EMPLOYEE STOCK OWNERSHIP PLAN (ESOPS) LIABILITY CLAIMED BY T HE ASSESSEE AS REVENUE EXPENDITURE IN THE P & L ACCOUNT. THE AO DISALLOWE D THE SAID CLAIM OF THE ASSESSEE AS THE SAME IS NOT ALLOWED UNDER SECTION 37(1) BEIN G NOT REVENUE IN NATURE. ACCORDINGLY, THE AO DISALLOWED THE DIFFERENCE BETWE EN THE MARKET PRICE AND THE PRICE ON WHICH THE SHARES WERE ALLOTTED TO THE EMPL OYEES UNDER ESOPS AS ALLOWABLE REVENUE EXPENDITURE. IN THE QUANTUM APPEAL, THE TRI BUNAL CONFIRMED THE SAID DISALLOWANCE BY FOLLOWING THE DECISION OF THE TRIBU NAL ON THE SAME ISSUE IN THE CASE OF A GROUP COMPANY M/S. VIP INDUSTRIES LTD. FOR A.Y. 2005-06 & 2006-07 BY RELYING ON THE DECISION OF THE DELHI TRIBUNAL IN THE CASE O F RANBAXY LABORATORIES LTD. VS. ITA NO. 6402/MUM/2012 BLOW PLAST LTD. ASSESSMENT YEAR: 2006-07 2 ACIT 124 TTJ 771 (DEL) . ON APPEAL AGAINST THE PENALTY LEVIED BY THE AO, T HE LD.CIT(A) DELETED THE IMPUGNED PENALTY AS THE ASSES SEE HAS NOT PROVIDED ANY INACCURATE PARTICULARS OF INCOME AND ALSO THE ISSUE OF ALLOWABILITY OF THE EXPENDITURE IS A DEBATABLE ONE. AGGRIEVED BY THE IMPUGNED DECIS ION, THE REVENUE IS IN APPEAL BEFORE US. 3. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE ISSUE WHETHER OR NOT ESOPS IS AN ALLOWABLE DEDUCTION AS BUSINESS EXPENDITURE HAS BEEN VERY MUCH A DEBATA BLE ISSUE WHEN THE TRIBUNAL DECIDED THE MATTER IN QUANTUM PROCEEDINGS. IT IS OB SERVED THAT DUE TO THE DIVERGENT VIEWS TAKEN BY THE TRIBUNAL, LATER ON SIMILAR ISSUE HAS BEEN REFERRED TO THE SPECIAL BENCH IN THE CASE OF BIOCOM LTD. VS. DCIT (35 TAXMAN.COM 335) (BANGALORE ) SB AND VIDE ORDER DATED 16 TH JULY, 2013 IT HAS BEEN HELD BY THE SPECIAL BENCH T HAT DISCOUNT ON ISSUE OF EMPLOYEES STOCK OPTION IS ALLOWABLE AS DEDUCTION IN COMPUTING THE INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINES S OR PROFESSION. THIS INDICATES THAT THE IMPUGNED CLAIM OF DEDUCTION HAS BEEN A DEB ATABLE ISSUE AND BY NOW THE SPECIAL BENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WHEN THE ISSUE IS DEBATABLE AND WHERE THERE IS A POSSIBI LITY OF TWO SUSTAINABLE VIEWS, IT IS A WELL SETTLED PRINCIPLE OF LAW THAT PENALTY CANNOT BE LEVIED. MOREOVER, IT IS OBSERVED THAT IN THE GROUP CONCERN CASE OF THE ASSESSEE IN DCIT VS. M/S. VIP INDUSTRIES LTD. IN ITA NOS. 6403, 6401/MUM/2012 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY, THE TRIBUNAL CONFIRMED THE DELETION O F PENALTY BY THE LD.CIT(A) AS THE ISSUE INVOLVED IS DEBATABLE WHERE TWO VIEWS ARE POS SIBLE. IN VIEW OF THE AFOREMENTIONED DISCUSSION, WE DO NOT FIND ANY JUSTI FIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) DELETING THE IMPUGNED PENALT Y LEVIED BY THE AO. THUS, THE ORDER OF THE LD.CIT(A) IS UPHELD. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF JUNE 2014. SD/- SD/- (SANJAY ARORA) (DR.S.T.M.PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 16.06.2014. *SRIVASTAVA ITA NO. 6402/MUM/2012 BLOW PLAST LTD. ASSESSMENT YEAR: 2006-07 3 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.