TMI Blog2014 (4) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees. CIT(A) has rightly pointed out that, when company provides benefit or amenity to its employees through intermediary institution, it is not necessary to that such intermediary institute should operate solely for the similar company - What is important is that value of benefit has been conferred to employees irrespective of manner in which or through whom they obtain the benefit as long as source of benefit is employer of benefit get taxed in hands of employees - CIT(Appeals) remitted file back to Assessing Officer with direction to proportionately disallow expenditure if shares have been allotted to employees of other group companies - However, disallowance so made shall be allowed in hands of respective group companies - Do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees opt for the scheme. The assessee advanced a loan of Rs. 5.50 Crores to the Trust without charging interest. The Assessing Officer was of the view that since the assessee has not charged any interest on loan of Rs. 5.50 Crores given to Murugappa Employees Foundation whereas it has paid interest to the tune of Rs. 79.95 Lakhs, the expenditure on payment of interest is not admissible as expenditure. The Trust has invested the loan fund in shares of Murugappa Group Companies from which it had earned a dividend income of Rs. 31 Lakhs which exempt from tax. On the one hand, the assessee-company bears an interest cost whereas on the other, the Trust enjoys tax free income on investments made by the group companies. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otted to employees of their group companies will be disallowed in the hands of the appellant, though may by allowed in the hands of those respective companies. Subject to this verification the claim of the appellant is allowable. The AO, therefore, is directed to allow the claim of the appellant company after verification. The grounds are considered allowed for statistical purposes". Aggrieved against the order of the CIT(Appeals), the Revenue has come in appeal before the Tribunal. 3. Shri Arun C. Bharat, appearing on behalf of the Revenue submitted that the Assessing Officer has rightly disallowed the interest paid by the assessee on borrowed funds as the assessee has advanced interest bearing funds to the Trust without charging any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The cost of perquisites which is taxable in the hands of the employees is on allowable expenditure in the hands of the assessee-company. The ld. Counsel for the assessee further contended that the entire amount of borrowings is used for purchase of the shares of group companies under ESOP scheme only. In order to support his contentions, the ld. Counsel relied on the judgment of Hon'ble Madras High Court in the case of PVP Ventures Ltd. (supra) and the order of the Special Bench of the Tribunal in the case of DCIT Vs. M/s. Biocon Ltd., reported as 2013-TIOL-625-ITAT-BANG-SB. 5. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below as well as the judgment/order reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e acquired by the Trust and the value at which the employees were allotted shares is assessable as perquisite in the hands of the employees. As has been rightly pointed out by the CIT(Appeals) when the company provides the benefit or amenity to its employees through intermediary institution, it is not necessary to that such intermediary institute should operate solely for the similar company. What is important is that the value of benefit has been conferred to the employees irrespective of the manner in which or through whom they obtain the benefit as long as the source of the benefit is the employer of the benefit get taxed in the hands of the employees. We agree with the observations of the CIT(Appeals). 6. The CIT(Appeals) has remitted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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