TMI Blog2023 (3) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... wable deduction under the Act while computing the profit and gains of business and profession that the AO has correctly appreciated the said position while passing the assessment order. Hence, we hold that the directions given in the order u/s. 263 are not valid. Interest on Late Payment of TDS - as argued that the definition of tax under the Act read with provisions of section 40(a)(ii) of the Act, the interest paid under section 201(1A)/206C(7) on late payment of TDS does not fall within the meaning of 'tax' and hence no adjustment is warranted in the returned income - We find that the AO has failed to disallow above mentioned interest expenditure while passing the order u/s. 143(3) and hence rendering the assessment erroneous and prejudicial to the interest of revenue. The order of the ld. PCIT u/s. 263 is upheld on this issue. - ITA No. 1036/Del/2021 - - - Dated:- 16-3-2023 - Sh. C. N. Prasad, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. K. M. Gupta, Adv. Sh. Shruti Khimta, AR For the Revenue : Sh. M. Baranwal, CIT DR ORDER Per Dr. B. R. R. Kumar, Accountant Member : The present appeal has been filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at interest on late payment of TDS/TCS of INR 6,96,533 paid under section 201(1A)/206C(7) is not allowable as business expenditure under section 37(1) of the Act. 3. The assessee filed revised return of income on 05.02.2016 declaring loss of Rs. 68,69,71,022/-. The assessee company is engaged in the business of providing warehousing and last mile logistics services. It is also involved in designing and deploying logistics management systems. The assessee was incorporated as SSN Logistics Private Limited on June 22, 2011 under the provisions of Companies Act, 1956. Its name was changed to Delhivery Private Limited as of December 8, 2015 and currently called as Delhivery Limited. 4. The Assessment Order under Section 143(3) was passed by making addition of Rs. 68,41,731/- resulting in assessed loss of Rs. 68,01,29,291/-. The following additions were made: Disallowance u/s. 14A of the Act - Rs. 14,19,351/- Disallowance of bad debts - Rs. 19,15,657/- Difference of income as per Form 26AS - Rs. 11,74,968/- Ad hoc disallowance of 15% of certain expenses - Rs. 23,31,755/- 5. Subsequently, based on an audit objection, the Ld. PCIT while exercising the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, disallowance of ESOPS expenses made in that case was confirmed. I find that the AO failed to consider the above position of facts and law while completing the assessment u/s. 143(3) and hence the assessment order requires review u/s. 263. 8. Against this direction, the ld. AR argued that the issue of allowability of the ESOP expenses is no more res-integra, the Special Bench of Bangalore Tribunal in the case of Biocon Limited ( [2013] 35 taxmann.com 335) held that discount on shares under the ESOP is an allowable deduction for the following words: ...11.3 We, therefore, sum up the position that the discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t. the market price of shares at the time of grant of options to the employees. The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time. However, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Travelling and conveyance 76,674 6. Vehicle Rental Expenses 42,00,255 TOTAL 79,10,087 13. It was submitted that the AO had made specific inquiries pertaining to prior period expenses during the course of assessment. The Appellant had vide response dated November 29, 2017 and December 28, 2017 in response to notice dated 12 December 2017 provided the details of prior period expenses and made submissions on its allowability. Hence, it can be reasonably concluded that it was only after being satisfied with the documents filed and the submissions made that the AO decided to allow the claim of prior period expenses. Thus, it is specific submission of the appellant that the AO had allowed the above claim in the original assessment after making proper enquires and examining the issue in light of the facts and position of law. 14. The relevant part of the order u/s. 263 is as under: 3.1 It is also noticed that Prior Period Expenses of Rs. 79,10,087/- have been allowed by the AO without exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by the AO in the course of original assessment. In the present case, the appellant already submitted above that the AO not only made sufficient enquiries but had also issued show cause that why such expenses would not be disallowed in the year under consideration. In addition to the above, the assessee not only provided justification of its allowability but also submitted the additional that the expenses are relatable to immediately preceding year, but the liability is confirmed in the year under consideration, and these were not claimed as deduction in the said preceding year. Incidentally, the Ld. PCIT had in fact alleged the same issue i.e. whether deduction in the earlier is claimed by the assessee and prior period expenses belonged to which year. Thus, from the above facts on record, it is clearly evident that the proper enquiry was done by the AO on this issue. 17. Reliance is being placed on the judgment of Hon'ble Delhi High Court in case of CIT vs. Vikas Polymers 236 CTR 476 (Del) wherein it was held that 13. It is also trite that there is a fine though shuttle distinction between lack of inquiry and inadequate inquiry . It is only in cases of lack of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above facts and circumstances and the position of law, the aforesaid expenses are an allowable deduction under the Act while computing the profit and gains of business and profession that the AO has correctly appreciated the said position while passing the assessment order. Hence, we hold that the directions given in the order u/s. 263 are not valid. Interest on Late Payment of TDS: 21. For the year under consideration in Tax Audit Report, the Tax Auditor had in clause 34c had reported the liability of interest under section 201(1A) or section 206C(7) of the Act amounting to Rs. 6,96,533/-. The appellant in the course of original assessment duly placed the said Tax Audit Report and the Computation of Income. The appellant in the computation of income also carried out adjustments taking into account the disclosures in the Tax Audit Report such as allowances under section 43B of the Act. The appellant had claimed deduction of interest on late payment of TDS for the year under consideration as the term 'tax' defined in section 2(43) of the Act does not include such amount. 22. It was argued that Section 201(1A) of the Act, any person who defaults in deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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