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2023 (12) TMI 541 - AT - Income TaxDisallowance u/s 14A - suo-moto addition made by assessee - CIT(A) upheld the contention of assessee that disallowance under Rule 8D(2)(iii) of the Rules should be made only on investment which yielded exempt income by referring to case law of Vireet Investment (P) Ltd [2017 (6) TMI 1124 - ITAT DELHI] and further directed AO to re-compute the disallowance u/s 14A of the Act by taking the average investment of those investment that have yielded the exempt income - HELD THAT:- We agree with the action of Ld. CIT(A), firstly because he has followed the ratio laid in Vireet Investment (supra) wherein it was held that for computing the average investment for the purpose of Rule 8D(2)(iii) of the Rules, the investment that yielded exempt income during the year only have to be considered and not the investment which did not yield any exempt income. And for such a preposition, we also rely on the decisions of ACB India Ltd. [2015 (4) TMI 224 - DELHI HIGH COURT] and we find nothing wrong in the direction given by the Ld. CIT(A) and therefore, reiterate the direction of Ld. CIT(A) to assessee to submit before AO the value of investment which yielded exempt income and then the AO to compute disallowance u/s 14A of the Act taking average investment of those investment that have yielded the exempt income. And if the assessee is able to demonstrate that suo-motto disallowance made by assessee is in consonance with the aforesaid discussion, then no more disallowance is warranted. With the aforesaid observation, AO is directed to re-compute disallowance in accordance to law. For completeness, we do not find any merit in the contention of Ld. DR that in the light of amendment/explanation inserted by Finance Act, 2022, the disallowance made by AO is justified. We find that this issue is also no longer res-integra. The explanation inserted by Finance Act, 2022 w.e.f. 01.04.2022 is applicable from AY. 2022-23 onwards as held by Hon’ble Delhi High Court in Era Infra Structure (India) Ltd. [2022 (7) TMI 1093 - DELHI HIGH COURT] Therefore, this contention of Ld. DR is also rejected. Nature of expenses - ESOP expenses - Revenue or capital expenditure - as decided by CIT(A) ESOP is allowable deduction u/s 37(1) - HELD THAT:- We note that Ld. CIT(A) has allowed the ESOP expenses by relying on the decision of his predecessor in assessee’s own case as well as the decision of Tribunal dated 31.10.2022 in assessee’s own case for AY. 2013-14 [2022 (11) TMI 1164 - ITAT MUMBAI] In such a scenario, we will be able to interfere only if the revenue is able to show that there is change in facts or law which warrant interference. Since revenue could not point out any change in facts or law vis-à-vis the decision of ours in assessee’s own case for earlier years, we have no other alternative but to uphold the impugned action of Ld. CIT(A). Revenue appeal dismissed.
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