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2022 (1) TMI 1099 - AT - Income TaxRevision u/s 263 by CIT - allowability of ESOP expenditure - HELD THAT:- Vesting period from the date of grant of each ESOP scheme is only one year and only the exercise period is four years from the date of vesting. We find that the decision of Biocon Ltd. [2013 (8) TMI 629 - ITAT BANGALORE] says that the discount premium should be claimed evenly over the vesting period. In the instant case, from the aforesaid disclosures made in the audited financial statements, it is very much evident that the vesting period is only one year. Hence, the entire discount premium had to be claimed as expenditure in the year of vesting. We find that no ESOP expenses are debited by the assessee in A.Y. 2013-14 which is accepted by the ld. PCIT itself and which fact is also staring from the audited financial statements of the assessee. Hence, the additional compensation cost on account of ESOP has been debited as 'expenditure' by the assessee in the year of vesting i.e. A.Y. 2012-13 rightly, which is also in consonance with the decision of the Hon'ble Special Bench of Bangalore Tribunal in the case of Biocon Ltd., We find that the ld. PCIT had erroneously proceeded based on incorrect assumption of fact that the vesting period of the claim is four years. As stated earlier the vesting period is only one year and the same falls in A.Y. 2012-13. No hesitation in holding that assessee had rightly debited the ESOP compensation cost of ₹ 32.55 Crores in the year of vesting as an expenditure which is in accordance with Special Bench decision of Biocon Ltd., and that the ld. PCIT had invoked revisionary jurisdiction based on incorrect assumption of fact. Apart from this, we also hold that adequate enquiries were indeed made by the ld. AO in the course of assessment proceedings. The law is now very well settled that the revision jurisdiction u/s. 263 of the Act could be invoked only for 'lack of enquiry' and not for 'inadequate enquiry'. Hence, we have no hesitation in quashing the revision order passed by the ld. PCIT in this regard. Accordingly, the grounds raised by the assessee on account of ESOP expenditure are allowed. Allowability of provision of interest u/s. 234D of the Act, while computing the demand payable u/s. 115JB - From the initial paragraph of this order, it could be seen that the scrutiny assessment was ultimately completed by the ld. AO u/s. 143(3) of the Act dated 17/05/2016 and ultimately the income was determined under normal provisions of the Act. We also find from the said order, that the tax payable under normal provisions of the Act was much more than the prescribed percentage of tax payable u/s. 115JB - Hence, the income was finally determined only under normal provisions of the Act by the ld. AO. The ld. AR argued that even there is some error in the computation of book profits and consequently in the computation of tax and interest thereon, when the income is ultimately computed under normal provisions of the Act, the mistake in computation of book profits u/s. 115JB of the Act would not cause any prejudice to the interest of the Revenue. We are unable to accede to this argument advanced by the ld. AO, in view of the fact that the interest u/s. 234D of the Act indeed partakes the character of income tax and the income tax demand is supposed to be added back while computing book profits u/s. 115JB of the Act under Explanation 1(a) to Section 115JB(2) of the Act while computing the book profits. Hence, the action of the ld. PCIT in invoking revision jurisdiction is upheld in this regard. Decided partly in favour of assessee.
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