TMI Blog2010 (12) TMI 1263X X X X Extracts X X X X X X X X Extracts X X X X ..... f Ranbaxy Laboratories Ltd. (supra) shares were allotted by the assessee company to its employees under ESOP at price less than the market price and the resultant difference was claimed as expenditure relying, inter alia, on SEBI guidelines. The Tribunal, however, confirmed the disallowance made by the authorities below on account of the said expenditure after examining all the relevant aspects and after giving elaborate reasons as can be seen from the relevant portion of its order which is extracted from the held portion: ''The receipt of share premium is not taxable and hence any short receipt of such premium will only be a notional loss and not actual loss for which no liability is incurred. SEBI guidelines are relevant for the purpose of accounting but are not conclusive for the purpose of allowing the same as expenditure. Therefore, such notional losses are not allowable under the Act. Therefore, such pay any liability under the claim. Therefore, such notional loss cannot be held to be allowable under the scheme of the Act. It is now settled law that entry or absence thereof in books of account is not conclusive either for treating the amount as income or allowabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... together, heard together and disposed off vide this common order for the sake of convenience. 2. The issues in assessees appeals in ITA Nos.1099/H/2006 1114/H/2008 are with regard to disallowance of expenditure incurred towards Employees Stock Option Scheme. The issue involved in the Revenue appeal in ITA No.749/H/2009 is with regard to levy of penalty u/s 271 (1) (c) of the IT Act on account of disallowing the expenditure on the Employees Stock Option Scheme. In the above two assessment years, the assessee claimed expenditure on allotment of 54,000 equity shares at ₹ 100/- each amounting to ₹ 54 lakhs for the assessment years 2003- 04. and allotment of 17,700 shares at ₹ 100/- each amounting to ₹ 17.70 lakhs under the employment scheme for the assessment years 2004-05 and The said expenditure has been claimed under the head Staff Welfare Expenses and u/s 37(1) of the IT Act. The same was disallowed by the lower authorities. On account of the same lapse penalty was levied in the assessment years 2004-05 at ₹ 19.25 lakhs and the same was confirmed by the CIT(A). Against the quantum addition confirmed by the CIT(A), the assessee is in appeal befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness. For this proposition he relied the judgement in the case of EIMCO K.C.P. Ltd. Vs. CIT (242 ITR 659) (S.C) wherein held that when an expenditure is incurred after incorporation in the course of its carrying on its business to be treated as revenue expenditure. Regarding levy of penalty, he relied on the order of the CIT(A) and submitted that the disallowance of expenditure itself cannot be resulted in levy of penalty. The assessee claimed an expenditure which is not allowed by the lower authorities that itself cannot be termed as furnishing of inaccurate particulars of income or concealing of income and for this lapse, the provisions u/s 271(1) (c) cannot be applied. According to him the claim of assessee is bona fide and it is based on judicial precedents. He submitted that the judgement delivered by the Chennai Bench of this Tribunal in the case of SSI Ltd. cited supra is in favour of the assessee, as such the penalty cannot be leviable. 5. The learned departmental representative submitted that expenditure incurred by the assessee towards ESOPS cannot be considered as revenue expenditure, at best it can be capital expenditure and that it cannot be allowed as revenue expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the assessee company to its employees under ESOP at price less than the market price and the resultant difference was claimed as expenditure relying, inter alia, on SEBI guidelines. The Tribunal, however, confirmed the disallowance made by the authorities below on account of the said expenditure after examining all the relevant aspects and after giving elaborate reasons as can be seen from the relevant portion of its order which is extracted from the held portion: The assessee was to issue shares of face value of ₹ 10/- by receiving a sum of ₹ 595/- per share from its employees. Thus the assessee was entitled to receive ₹ 585/- towards premium on issue of shares. The market price at ₹ 738.95 per share would have resulted in realization of higher share premium. The assessee has not accounted for the difference between ₹ 738.95 and ₹ 10 as its income during the year. Thus there is no loss of income held to be taxable. What is loss to the assessee is by way of short receipt of share premium amount and not by way of any expenditure or incurring any liability for such expenditure. By issuing shares at below market price, the same does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The same may be relevant for the purpose of accounting but for allowability of expenditure under IT Act the direction of SEBI does not determine the allowability of expenditure. For the purpose of allowability of expenditure under IT Act the same has to be consonance with the scheme of the Act. In the instant case the entry made in books of accounts as per direction of SEBI cannot be held to be conclusive for the purpose of allowing expenditure u/s 37 unless the provision of s.37 is complied with, the deduction if not permissible. New India Industries Ltd. Vs. ACIT (2007) 112 TTJ (Del.) (SB) 917: (2008) 1 DTR (Del.) SB (Trib) 247 and TVS Finance Services Ltd. Vs. JCIT (2009) 23 DTR (Mds.) 33 applied. 8. At the time of hearing before us, the learned counsel for the assessee has made an attempt to point out that certain aspects have not been considered by the tribunal while rendering its decision in the case of Ranbaxy Laboratories Ltd. (supra) on the similar issue. In our opinion, the said aspects pointed out by the counsel for the assessee, however, are not material enough to have any direct bearing on the well considered and well reasoned decision rendered by the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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