TMI Blog2021 (9) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... nce u/s. 14A in the case of the assessee. Therefore, this ground of appeal of revenue is dismissed. - ITA No. 428/H/2020 - - - Dated:- 17-9-2021 - Satbeer Singh Godara, Member (J) And Laxmi Prasad Sahu, Member (A) For the Appellant : Kiran Katta, DR For the Respondents : S. Rama Rao ORDER Per L P Sahu, A M This appeal is filed by the Revenue against the order passed by the CIT(A)-2, Hyderabad order dated 18th Feb., 2020 involving proceedings u/s. 143(3) of the Income Tax Act, 1961 [in short the Act ]; on the following grounds of appeal. 1. The Ld. CIT(A) erred in allowing the claim of the expenses as revenue which has enduing benefit in the form of employee performance and thus need to be capitalized? ₹ 78,54,960/- 2. The CIT(A) erred in allowing the expenditure claimed which was not actually spent by the assessee to be allowed as such. It is a notional loss which was claimed as expenditure in the current year. The same is not allowable to be debited to P L Account. 3. The Ld. CIT(A) erred in ignoring the fact that the issue of allowability of ESOP expenditure has not reached finality and the SLP filed against the order of Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,989/- and as on the end of the balance sheet there was a closing balance of ₹ 11,77,57,652/-. After observing he applied Rule 8D for disallowance u/s. 14A of the Act and calculated disallowance at ₹ 13,45,777/- and added to the income of the assessee. 2.2. Feeling aggrieved from the order of the AO assessee filed appeal before the CIT(A). Before the CIT(A) the assessee filed in details after considering which, the CIT(A) allowed the appeal of the assessee. 2.3. Aggrieved from the order of the CIT(A), the Revenue is in appeal before us. 3. The Ld. DR relied on the order of the AO and further submitted that the AO has rightly applied the DCF method under rule 11 UA of the Act therefore he was justified to make disallowance u/s. 37 of the Act; in respect of disallowance u/s. 14A he submitted that there was certain expenditure which must have been incurred by the assessee which cannot be ruled out because there is a change in the value of the investments in opening and closing of the year, therefore, the AO has rightly calculated disallowance u/s. 14A; case law relied on by the ld. AR is not applicable and is distinguishable on facts of the case on hand. 4. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is not dispute that for the year under consideration the assessee did not claim the deduction in respect of the payment made to the parent company on account of Employees Stock Option and compensation. However we find that an identical issue has been considered in assessee's own case for the Assessment Year 2008-09 and it was held that it is an allowable deduction. Therefore, so far as the issue of allowability of the deduction is concerned it has been decided in favour of the assessee by this tribunal by following the decision of the Special Date of Judgment 16-8-2018, ITA No. 241/2017 The Pr. Commissioner of Income Tax - 7 Anr. Vs. The Hon'ble High Court of Delhi in ITA 107/2015 in the case of CIT vs. Lemon Tree Hotels Ltd. vide order dated 18.08.2015 has adjudicated as under: 2. The question sought to be projected by the Revenue is whether the ITAT erred in deleting the addition of ₹ 1,28,19,169/- made by the Assessing Officer ('AO') by way of disallowance of the expenses debited as cost of Employees Stock Option ('ESOP') in profit and loss account? http://www.itatonline.org ITA No. 107/2015 Page 2 of 23. The Court has been shown a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely rejecting the value was incorrect. The appellant has also justified the financials considered for DCF method in its submission dated 18.02.2020 in the para 6. The same is reproduced as under: From the above statement actuals are little higher than the valuation as per DCF method and hence the estimates are reasonably good and are not made with intention to value share at higher price to claim expenses at a higher rate. From above, it is noted that the three years average cash flow as taken by the valuer for DCF method at the time of issuance was 31.95, whereas as per actual as on today, the three years cash flow is 32.29. Thus, the DCF method has estimated a fair value of the company by considering correct financials. In view of the above, the method adopted by the appellant is reasonable and therefore there is no change required in the valuation. To sum up, the ESOP expenses are allowable and the ESOP has been calculated at a fair value and therefore the sum of ₹ 2,31,02,829/- is allowable as revenue expenditure. In view of the above the ground No. 1 is allowed. The ground No. 2 relates to addition on account of section 14A of ₹ 13,45,71 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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