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M/s. Vascon Engineers Limited Versus The Addl. Commissioner of Income Tax, Range-10 (3) , Mumbai

2017 (9) TMI 1228 - ITAT MUMBAI

Assessability of profits offered by the assessee in its return of income - taxation on who's hands - Held that:- The additional ground of appeal requiring no investigation of facts, is admitted. We have already in assessment year 2008-09 of even date order in the case of M/s. Vascon Hadapsar Ventures held that the said amount is to be taxed in the hands of M/s. Vascon Engineers Ltd. i.e. the assessee before us. Consequently, there is no merit in the additional ground of appeal raised by the asse .....

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nses being equivalent to one half percent of average of the value of investments - Held that:- Referring to assessee's pleadings that in case the disallowance is to be made, then the value of strategic investments made by the assessee in Special Purpose Vehicles needs to be excluded for computing the aforesaid disallowance, we find merit in the plea of assessee in this regard and accordingly, direct the Assessing Officer to re-compute the disallowance in the hands of assessee. The assessee has s .....

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ch activities of assessee are to create and establish image of assessee company in the eyes of public. The business carried on by the assessee is relatable to public at large, where the tenements built by the assessee were to be picked up by the public. Hence, the expenditure incurred by the assessee in this regard is duly to be allowed as business expenditure in the hands of assessee. Here, it may be pointed out that in some cases, the assessee has receipts of donations under section 80G of the .....

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ce of ESOPs discount expenses - Held that:- The issue of allowability of ESOP expenses on the date of exercising of option by the assessee was held to be an ascertained liability and not contingent liability by the Special Bench of Bangalore Tribunal in Biocon Ltd. Vs. DCIT (2013 (8) TMI 629 - ITAT BANGALORE). The Special Bench held the said discount on ESOP was to be allowed as deduction under section 37(1) of the Act, during the years of vesting on the basis of percentage of vesting during suc .....

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evenue : Shri Hitendra Ninawe ORDER PER SUSHMA CHOWLA, JM: The appeal filed by the assessee is against order of CIT(A) -22, Mumbai dated 17.08.2011 relating to assessment year 2008-09 against order passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and facts in confirming the disallowance of ₹ 1,27,39,650/- on account of expenses u/s.14A of .....

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1,58,745/- on account of employees compensation expenses. 5. The appellant craves leave of your Honour to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal. 3. The assessee has also raised the following additional ground of appeal:- 1. The Learned CIT(A) ought to have appreciated that the income of ₹ 13,82,94,326/- offered by the appellant in the return has also been assessed substantively in the hands of Vascon Hadapsar Ventures for A.Y. 2008-09 by its Asses .....

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he hands in which the same is to be assessed. The additional ground of appeal requiring no investigation of facts, is admitted. We have already in ITA No.1285/PUN/2013, relating to assessment year 2008-09 of even date order in the case of M/s. Vascon Hadapsar Ventures held that the said amount is to be taxed in the hands of M/s. Vascon Engineers Ltd. i.e. the assessee before us. Consequently, there is no merit in the additional ground of appeal raised by the assessee and the same is dismissed. 5 .....

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uo moto disallowed sum of ₹ 5,01,956/- i.e. on account of expenditure relatable to investments in AOPs and firms and ₹ 1 lakh in respect of investments in mutual funds. The auditor had reported that the investments in shares of Special Purpose Vehicles was made with ultimate object of earning capital gains on transfer of the same at a later date. The assessee was asked to give the basis of working expenses incurred for earning exempt income and also justify the same. In response ther .....

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ssessing Officer. 8. The assessee is in appeal against the order of CIT(A). 9. The plea of assessee before us is that the assessee has sufficient own funds in the form of share capital and reserves and interest free funds in the form of current liabilities, against which the total investments considered by the Assessing Officer for calculating disallowance are only ₹ 41.25 crores. The plea of assessee was that since the own funds were sufficient and more than the amount invested, then no d .....

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artners and the same should be excluded from total investments considered for the disallowance under section 14A r.w.s. 8D of the Rules. 10. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. 11. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is two-fold i.e. disallowance made under section 14A of the Act on account of interest expenses which has been worked out u .....

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t the total investments made at ₹ 41.25 crores stand covered from the own funds available with the assessee. We find merit in the plea of assessee, in view of the ratio laid down by the Hon ble Bombay High Court in HDFC Bank Ltd. Vs. DCIT (supra). Consequently, we hold that because of availability of interest free funds with the assessee vis-à-vis total investments made, there is no merit in disallowing any part of interest expenditure debited to the Profit and Loss Account, as attr .....

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Purpose Vehicles needs to be excluded for computing the aforesaid disallowance. We find merit in the plea of assessee in this regard and accordingly, direct the Assessing Officer to re-compute the disallowance in the hands of assessee. The assessee has suo moto disallowed ₹ 6,01,956/- which may be considered as disallowance under Rule 8D(2)(iii) of the Rules. Accordingly, the ground of appeal No.1 raised by the assessee is partly allowed. 13. Now, coming to the issue in ground of appeal No .....

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es of the assessee, the labourers often asked for contribution towards festival donations like Ganpati, Diwali and community celebrations, etc. Further, certain Donations were made to various organizations viz. Rotary Club, Educational Institutions, etc. The assessee claims that the said exercise was to build and establish better image of the company in the eyes of public. The assessee claimed that the expenditure was allowable as business expenditure under section 37(1) of the Act and the provi .....

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, which in turn, would help in its business activities and the expenditure incurred for business exigency, was to be allowed as business expenditure. He further pointed out that certain certificates under section 80G of the Act were available and the said Donations are to be allowed in the hands of assessee. 18. The learned Departmental Representative for the Revenue on the other hand, referred to the ratio laid down by the Hon ble High Court of Allahabad in Electra India Ltd. Vs. CIT (2008) 303 .....

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r welfare and to other public welfare organizations. The list of expenses incurred by the assessee are placed at pages 40 to 43 of the Paper Book. The perusal of the details reflect the first item of ₹ 1,01,000/- on account of purchase of painting, wherein bill in which it is mentioned that voluntary contribution towards labour welfare fund is placed. The necessary certificate from Promoters & Builders Association is enclosed. The assessee has further paid sum of ₹ 1 lakh on 23.0 .....

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ith quotations received. Further amounts have been given to the said school. The assessee has also enclosed certified donation receipts, wherein the recipient is duly registered under section 80G of the Act for which, 80G receipts are enclosed. In view of the facts and circumstances and evidences available, the assessee is carrying out the activities of upliftment of public at large and by way of making contributions for upgradation of Science lab or providing ambulance to organizations or contr .....

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ad in Electra India Ltd. Vs. CIT (supra), where advertisement material was given in the last three days of accounting year and where it was not possible to publish or advertise the name through medium of Board, then such expenditure was held to be being marginal advertisement content and was disallowed in the hands of assessee. However, the facts before us are at variance and we find no merit in the reliance placed upon by the learned Departmental Representative for the Revenue in this regard. A .....

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eave encashment of ₹ 1,10,81,202/-. The assessee during the year under consideration had claimed the provision for leave encashment which was disallowed in terms of section 43B(f) of the Act. The CIT(A) confirmed the order of Assessing Officer. 21. The assessee before us has raised the limited plea on without prejudice basis that the claim to the extent of payment of leave encashment in terms of section 43B(f) of the Act be allowed. We find merit in the said plea of assessee and direct the .....

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rder dated 08.05.2009 had stayed the operation of said judgment. Accordingly, the ground of appeal No.3 raised by the assessee is partly allowed. 22. Now, coming to the issue raised vide ground of appeal No.4 is against the disallowance of ESOPs discount expenses of ₹ 41,58,745/-. 23. Brief facts relating to the issue are that the assessee had debited sum of ₹ 6,58,85,245/- under the head Employees Compensation Expenses . The assessee had allotted 16,50,000 shares of the company to t .....

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ount on issue of ESOPs to various employees was ₹ 1,24,76,235/-. The said expenditure was amortized over a period of three years starting from assessment year 2008-09 to 2010-11. The assessee during the year had claimed 1/3rd of total expenditure towards discount on issue of ESOPs to employees. The Assessing Officer did not allow the claim of assessee as no Fringe Benefit Tax (FBT) was paid on the said sum of ₹ 41,58,745/-. The plea of assessee that allowability of ESOP expenses and .....

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Tribunal in Sandvik Asia Pvt. Ltd. Vs. ACIT in ITA Nos.1841 & 1842/PN/2012 and in cross appeals in ACIT Vs. Sandivk Asia Pvt. Ltd. in ITA Nos.2053 & 2054/PN/2012, relating to assessment years 2002-03 & 2003-04, order dated 31.12.2014 had allowed the deduction on account of ESOP and hence, the same is to be allowed as revenue expenditure. 25. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. 26. We have heard .....

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