APTECH SOFTWARE LTD, MUMBAI V. DCIT 8(1), MUMBAI

ITA 6655/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2838 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 14-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B D NAIK
• Assessee Lawyers: S C TIWARI
• Keywords: Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL,MUMBAI BENCH A, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.6655/MUM/2013 ASSESSMENT YEAR: 2009-10 M/S APTECH SOFTWARE LTD. APTECH HOUSE, A-65, MIDC, MAROL, ANDHERI (E), MUMBAI-400093. PAN: AAECA5151D VS. DCIT 8(1), R. NO. 260-C, 2 ND FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.C. TIWARI (AR) REVENUE BY : SHRI B.D. NAIK (DR ) DATE OF HEARING : 19.05.2016 DATE OF ORDER : 22.06.2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF CIT(A)-16, MUMBAI, DATED 18.09.2013 FOR AY-2009-10 RAISING ON LY ONE SUBSTANTIAL GROUND AGAINST THE DISALLOWANCE OF EMPLOYEES STOCK OPTION EXPENSES (ESOP) OF RS. 5,61,750/-. 2. THE BRIEF FACTS OF THE CASE ARE THE IN THE RETURN O F INCOME FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE CLAIMED ESOP CHARGES OF RS. 5,61,700/-. DURING THE COURSE OF ASSESSMENT PRECEDING THE AO AS KED THE ASSESSEE, AS TO WHY THESE EXPENSES SHOULD NOT BE DISALLOWED BEING C APITAL EXPENSES. THE ASSESSEE SUBMITTED ITS REPLY AND CONTENDED THAT ESO P WAS ISSUED TO THE EMPLOYEE BASED ON SEBI GUIDELINES AND FOLLOWING ACC OUNTING PROCEDURE AND GUIDELINES OF SEBI. THE ESOP WAS ISSUED TO PROV IDE INCENTIVE TO THE EMPLOYEES WITH THE MOTIVE TO RETAIN THE PRECIOUS HU MAN RESOURCES OF THE 2 ITA NO. 6655/MUM/2013- M/S APTECH SOFTWARE LTD. COMPANY IN A COMPETITIVE MARKET. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY AO. THUS AO DISALLOWED RS. 5,61,700/- H OLDING IT AS CAPITAL EXPENDITURE. AGGRIEVED BY THE ORDER OF AO ASSESSEE FILED APPEAL BEFORE CIT(A). DURING THE FIRST APPELLATE PROCEEDING, ASSE SSEE CLAIMED THAT NO CAPITAL EXPENDITURE INVOLVED BECAUSE IT IS NOT EXPE NDITURE IN THE NATURE OF SHARE ISSUE EXPENSES. THE EXPENDITURE IN THE NATURE OF INCENTIVE TO THE EMPLOYEES AND THEREFORE, IT IS AN EXPENDITURE INCUR RED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE COMP ANY AND IS ALLOWABLE AS REVENUE EXPENSES U/S 37(1) OF THE ACT. THE CONTENTI ON OF ASSESSEE WAS NOT ACCEPTED BY THE CIT(A) AND CONFIRMED THE ACTION OF AO. AGGRIEVED, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE THIS TRIBU NAL RAISING THE AFOREMENTIONED GROUND. 3. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE (AR) OF ASSESSEE AND DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. AR OF THE ASSESSEE ARGUED THAT THIS CASE IS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH IN CASE OF BIOCON LTD. VS. DCIT (LTU) VIDE ITA NO. 368/BANG/2010 DATED 16.07.2013. DR FOR REVENUE HAS FAIRLY CONCEDED THE CONTENTION OF THE AR OF THE ASSESSEE. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIERS AND THE ORDER OF AUTHORITIES BELOW AS WELL AS THE ORDER CITED BY SPE CIAL BENCH IN CASE OF BIOCON LTD. (SUPRA). PERUSAL OF THE ORDER REVEALED THAT SIMILAR ISSUE WAS ADJUDICATED BY THE TRIBUNAL. CONSIDERING THE SAME, WE RESTORE THE MATTER TO THE FILE OF AO TO FOLLOW THE SAID DECISION OF THE S PECIAL BENCH AND GRANT THE RELIEF TO THE ASSESSEE IN ACCORDANCE WITH LAW. WE MAY FURTHER CLARIFY THAT IN CASE OF AN ISSUE OF SHARES TO THE PUBLIC AL SO, THE DISCOUNT ON THE ESOP SHALL BE RECKONED WITH REGARD TO THE ISSUE PRI CE OF THE SHARES TO THE PUBLIC. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND JUNE, 2016. SD/- SD/- (SANJAY ARORA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 22/06/2016 S.K.PS 3 ITA NO. 6655/MUM/2013- M/S APTECH SOFTWARE LTD. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. !'# / GUARD FILE. $ //TRUE COPY/