TMI Blog2022 (2) TMI 1382X X X X Extracts X X X X X X X X Extracts X X X X ..... isions, we set aside the order of the learned CIT(A) and delete the addition. - ITA No. 5266/Del/2016 - - - Dated:- 10-2-2022 - SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND SH. AMIT SHUKLA, JUDICIAL MEMBER For the Appellant : Sh. Rohit Jain, Advocate, Ms. Somya Jain, CA For the Respondent : Sh. T. Kipgen, CIT DR ORDER PER N. K. BILLAIYA, AM: This appeal filed by the assessee is preferred against the order of the CIT(A)-7, New Delhi dated 20.07.2016 for A.Y. 2011-12. 2. The first grievance of the assessee relates to the disallowance made u/s. 14A of the Act. 3. Briefly stated the facts of the case are that during the year under consideration the assessee earned dividend income of Rs. 84942157/- which was claimed as exempt u/s. 10 (34) / 10 (35) of the Act. In the revised return of income the assessee suo-moto disallowed Rs. 4286933/- u/s. 14A of the Act. 4. During the course of the scrutiny assessment proceedings the AO asked the assessee why disallowance should not be made u/s. 14A read with rule 8D. The assessee explained that it has suo-moto disallowed Rs. 42,86,933/- and, therefore, no further disallowances need to be made. The AO was not conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be taken into consideration. Strong reliance was placed upon the decision of the Hon ble Jurisdictional High Court of Delhi in the case of ACB India 374 ITR 108. 7. The Counsel further stated that in so far as investment in the shares of Karnataka Bank Limited is concerned the same was invested in A.Y. 2007-08. It is the say of the Counsel that on identical set of facts this Tribunal in A.Y. 2010-11 has deleted the disallowances made u/s. 14A of the Act. 8. Per contra the DR strongly placed reliance on the findings of the lower authorities. 9. We have carefully perused the orders of the authorities below. We find force in the contention of the counsel. This Tribunal in A.Y. 2010-11 in ITA No. 2559/Del/2016 order dated 10.12.2021 has considered a similar disallowance. The relevant findings of the coordinate Bench read as under :- 15. Now coming to ground No. 2, it relates to disallowance u/s. 14A of the Income-tax Act (for short the Act ) read with Rule 8D of the Income-tax Rules. It could be seen from the record that during the year under consideration, the assessee received a dividend income to the tune of Rs. 3,36,85,137/- and claimed the same as exempt. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute. Only dispute is relating to the disallowance u/r. 8D(2)(ii) of the rules, i.e., interest component. In view of the decision of Hon ble jurisdictional High court in the case of Acb India Ltd. vs. ACIT 374 ITR 108, for the purpose of computing the disallowance u/s. 14A of the Act only such investments which yielded exempt income during the year should be taken into consideration, but not the entire investment. Going by that principle, we find that during the year, the investment in Karnataka Bank Ltd. alone yielded dividend income. Assessee s contention that such an initial investment to the tune of Rs. 35.35 crores was made in the assessment year 2007-08 and for that year, the assessee had free cash reserves to the tune of Rs. 81.70 croes, was considered by the coordinate Bench of this Tribunal in ITA No. 1947/Del/2018 and batch (supra) and the Tribunal accepted the contention of the assessee as far as the investment in shares of Karnataka Bank Ltd. was concerned. It is, therefore, clear that no disallowance could be made towards interest expense u/r. 8D(2)(ii) of the rules. We accordingly uphold the finding of the ld. CIT(A) on this aspect and dismiss ground No. 2 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- being capital in nature. During the appellant proceedings, Ld. AR has referred that addition of ₹ 78,18,311/- has been restricted to ₹ 50,29,087/- only by the AO by passing rectification order u/s. 154 of the Act dated 06.11.2015. a copy of which has been furnished while submissions dated 23.11.2015. Hence, above grounds of appeal are allowed. The remaining addition of ₹ 27,89,224/- has been treated as withdrawn considering the following submissions made by the Ld. AR: While passing the assessment order the AO has disallowed a sum of ₹ 78,18,311 being the SAR expenses claimed as a deduction by the Appellant. Vide order dated November 6, 2016 passed under Section 154 of the Act the AO has rectified the said disallowance by restricting it to ₹ 50,29,087. The copy of the rectification order has been filed with your office vide our letter dated November 23, 2015 and letter dated June 17, 2016. Therefore, the ground of appeal no. 6 has been withdrawn by the appellant. 9.7 We have perused the addition made by the Assessing Officer. The Assessing Officer in para 3 of the assessment order has mentioned that the total number of SAR that were vested a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al precedents of special bench of tribunal and decision of the Hon ble Delhi and Madras High Courts, we respectfully hold that stock Appreciation right expenses claimed by the appellant, amounting to ₹ 393714/ is not in a capital expenses, but revenue expenditure and ascertained liability therefore it is allowable expenses. In the result the disallowance made by the Ld. and assessing officer of ₹ 1147623/ and enhancement made to that taxable income of the appellant by Ld. 1 st appellate authority of ₹ 2789501/ is held to be erroneous and therefore set aside. In the result the appeal of the assessee for AY 2008-09 is allowed. 4.4 Thus, respectfully following the above findings in the above order, grounds no. 1 to 2.2 of the appeal are allowed. 9.9 Further, the Hon ble Delhi High Court in the case of Religare Securities Limited (supra) has held as under: The Revenue s appeal under Section 260A of the Income Tax Act alleges that the Income Tax Appellate Tribunal (ITAT) erred in allowing 2,09,63,780/- as a capital expense. That amount was the quantum of discount given in respect of the SAR (Stock Appreciation Rights) - similar to Employee Stock Option ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to induce employees to work in the best interest of the assessee. The allotment of shares was done by the assessee in strict compliance of SEBI regulations, which mandate that the difference between the market prices and the price at which the option is exercised by the employees is to be debited to the Profit and Loss Account as an expenditure. The Tribunal pointed out that what had been adopted was not notional or contingent as had been submitted by the Revenue. Pointing out to the Employees Stock Option Plan, the Tribunal in its order stated that it was a benefit conferred on the employee. So far as the company is concerned, once the option was given and exercised by the employee, the liability in this behalf got ascertained. This was recognised by SEBI and the entire Employees Stock Option Plan was governed by guidelines issued by SEBI. On the facts thus found, the Tribunal held that it was not a case of contingent liability depending on the various factors on which the assessee had no control. The expenditure in this behalf was an ascertained liability, thus the expenditure incurred being on lines of the SEBI guidelines, there could be no interference in the relief granted by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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