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2016 (5) TMI 536 - AT - Income TaxDisallowance of Employees Stock Option Plan (ESOP) expenses - Held that:- The shares were allotted to the employees and the expenses were incurred by the assessee to motivate the employees, therefore, the expenses were incurred for business purposes - Decided in favour of assessee Disallowance u/s 14A - Held that:- It is true that Assessing Officer has made adhoc disallowance which is not justified. It is necessary to evolve a system or basis for making disallowance u/s 14A. We upheld the disallowance to 1.5% of the exempt income, thus, the Assessing Officer is directed accordingly. Disallowance on account of entertainment expenses - Held that:- Considering the material available on record, factual matrix, submission of the assessee, the observation made in the assessment order/impugned order, argument of ld. DR, we find that no evidence was produced by the assessee at any stage, therefore, mere claim is not enough. In principle, we affirm the stand of the Commissioner of Income Tax (Appeal) . However, by taking a lenient view, the disallowance of ₹ 2,50,887/- is reduced to ₹ 2 lakh, thus, this ground of the assessee is partly allowed. Difference between service tax payable and the service tax paid - disallowance u/s 43B - Held that:- We find that section 43(2) define certain terms relevant to income from profit & gains of business or profession and sub-section (2) speaks about the word “paid” which means actually paid or incurred according to method of accounting. Whereas, section 43B starts with non-obstante clause and permits the deduction of any sum payable by way of tax, duty, cess or fee, by whatever name called, in the year in which the sum is actually paid. Therefore, it can be said that adjustment, if any made, is as good as duty paid and it amounts to actual payment. If the payment has been made/adjusted before due date of filing of return u/s 139(1) of the Act. Identical ratio was laid down by Hon’ble High Court of Bombay in Lloyds Steels India Ltd. vs UOI [2001 (2) TMI 150 - HIGH COURT OF JUDICATURE AT BOMBAY ] holding that utilizing CENVAT credit to pay duty on clearance of final product is as good as making payment by debiting current account. Considering these decisions, the ld. Assessing Officer is directed to examine the factual matrix and decide in the light of the aforesaid decisions. This ground of the assessee is disposed off in terms indicated hereinabove.
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