TaxTMI 
TaxTMI 
2023 (3) TMI 1037
X X X X Extracts X X X X
X X X X Extracts X X X X
....s in nature and is prejudicial to the interest of revenue in terms of section 263 of the Act. 3. Disallowance of Employee Stock Option Plan (ESOP) expenses of INR 3,76,75,732. 3.1 On the facts and circumstances of the case & in law, the Ld. Pr. CIT erred in observing that the grant of ESOPs to the employee does not amount to incurring of expenditure wholly and exclusively for the purpose of business, thereby upholding revision proceedings under section 263 of the Act. 3.2 On the facts and circumstances of the case & in law, the Ld. Pr. CIT grossly erred in not appreciating that claim of the Appellant on account of ESOP expenditure is duly allowable under section 37 of the Act. 4. Disallowance of Prior Period expenses of INR 79,10,087 4.1 On the facts and circumstances of the case & in law, the Ld. Pr. CIT erred in invoking the provisions of section 263 of the Act for an issue which has been examined, considered and concluded by the Ld. AO during the assessment proceedings. 4.2 On the facts and circumstances of the case & in law, the Ld. Pr. CIT erred in ignoring the submissions of the Appellant that the expenses had crystallized in the current year, that the Appellant h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the ESOP expenses and interest on TDS. Employee Stock Option (ESOP) Scheme expenses : 7. The ld. PCIT held that the ESOP expenses of Rs. 3.76 Cr. needs to be disallowed. The relevant part of the order of the ld. PCIT is as under: "3. I have carefully considered the facts on record of submissions of the Ld. ARs. Undisputedly, the assessee has claimed ESOP expenses at Rs. 3,76,85,732/- during the year under consideration which is on account of difference between the market price and the price at which stock option was allowed to the employees. Admittedly, ESOPS is granted at the time of appointment of an employee, but the shares are actually allotted on reaching a particular milestone such as completion of specific number of years of service, satisfactory performance etc. Further, shares are allotted in phased manner in different years. Accordingly, the assessee has not incorporated the value of ESOPS as perquisite in the salary of employees of the year under consideration. As per the detail furnished during the course of proceedings u/s. 263, it emerges that the tax has been deducted on amount booked for ESOPS in October and December, 2019 only. This fact also shows the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Delhi Television Ltd. - [2018] 99 taxmann.com 401 (Delhi) SSI Limited v. Deputy Commissioner of Tax [ (2004) 85 TTJ 1049] Murugappa Management Services Ltd. [2013] 40 taxmann.com 451 (Chennai - Trib.) 11. It was brought to our notice that the order relied by the ld. PCIT in the case of Ranbaxy Laboratory Ltd. Vs. Addl. CIT (2009) 124 TTJ 771(2009) 26 DTR 420 stands considered by Special Bench wherein the case of Ranbaxy Laboratory Ltd. Vs. Addl. CIT has been examined in the case of Biocon Limited (supra) which has been confirmed by the Hon'ble Karnataka High Court and hence the order relied upon by the ld. PCIT is no more good law. Hence, we hold that the directions given in the order u/s. 263 are not valid. Prior Period expenses : 12. It was submitted that for the subject year, the Appellant claimed prior period expenses amounting to Rs. 79,10,087 which were debited to the Profit and Loss Account which are as under : S. No. Description Amount (in INR) 1. Power & Fuel 12,44,725 2. Miscel laneous Expenses 32,654 3. Rent 4,84,287 4. Repair and Maintenance - Bui lding 8,68,925 - Computers 10,02,567 5. Travelling and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e may be, shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 16. The clause (a) of Explanation to section 263 of the Act states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made and not were enquires have been 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open.'' 19. The Hon'ble Delhi High Court in the case of CIT vs Anil Kumar Sharma [335 ITR 83], also held that where there was no "lack of enquiry" by AO even if it could be said to be inadequate, proceedings under section 263 of the Act was not valid since the AO had applied his mind to complete details filed by the assessee. 20. In light of the facts submitted in the original assessment, the above expenses are crystallized during the year and no deduction of the same is claimed in the earlier year. Hence, in view 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 appreci....