DCIT, New Delhi v. M/s Info Edge India Ltd., New Delhi

ITA 2445/DEL/2013 | 2009-2010
Pronouncement Date: 31-07-2015 | Result: Allowed

Appeal Details

RSA Number 244520114 RSA 2013
Assessee PAN AAACI1838D
Bench Delhi
Appeal Number ITA 2445/DEL/2013
Duration Of Justice 2 year(s) 3 month(s) 5 day(s)
Appellant DCIT, New Delhi
Respondent M/s Info Edge India Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Department
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-07-2015
Date Of Final Hearing 29-07-2015
Next Hearing Date 29-07-2015
Assessment Year 2009-2010
Appeal Filed On 25-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL AM AND SHRI H.S. SIDHU JM ITA NOS.1896 2444 & 2445/DEL/2013 ASSESSMENT YEARS : 2007-08 2008-09 & 2009-10 DCIT CIRCLE 11(1) NEW DELHI. VS. INFO EDGE INDIA LTD. GF-12A 94 MEGHDOOT BUILDING NEHRU PLACE NEW DELHI. PAN: AAACI1838D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RUPESH JAIN ADVOCATE & SHRI SAMBHAV JAIN CA DEPARTMENT BY : SHRI T. VASANTHAN SR. DR DATE OF HEARING : 29.07.2015 DATE OF PRONOUNCEMENT : 31.07.2015 ORDER PER BENCH : THESE THREE APPEALS BY THE REVENUE RELATE TO ASSES SMENT YEARS 2007-08 2008-09 AND 2009-10. SINCE SOME OF THE IS SUES RAISED IN THESE ITA NOS.1896 2444 & 2445/DEL/2013 2 APPEALS ARE COMMON WE ARE DISPOSING THEM OFF BY TH IS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ASSESSMENT YEAR 2007-08 2. THE FIRST ISSUE IS AGAINST THE DELETION OF ADDIT ION OF RS.52 07 566/- MADE BY THE AO ON ACCOUNT OF EMPLOYEE STOCK OPTION SCHEME COMPENSATION (ESOS). 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE FIND THAT SI MILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE SPECIAL BENCH OF THE TRIBU NAL IN BIOCON LTD. VS. DCIT (2013) 144 ITD 21 (BANG.) (SB). IN THIS CASE THE TRIBUNAL HAS HELD THAT DISCOUNT ON ISSUE OF ESOP IS ALLOWABLE AS DEDUCTION IN COMPUTING INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. SINCE IT IS ON ACCOUNT OF AN ASCERTAIN ED AND NOT CONTINGENT LIABILITY IT CANNOT BE TREATED AS A SHORT CAPITAL RECEIPT. THEREAFTER THE SPECIAL BENCH HAS LAID DOWN THE MECHANISM FOR DETER MINING AS TO WHEN AND HOW MUCH DEDUCTION SHOULD BE ALLOWED. IT HAS B EEN HELD THAT THE LIABILITY TO PAY THE DISCOUNTED PREMIUM IS INCURRED DURING THE VESTING ITA NOS.1896 2444 & 2445/DEL/2013 3 PERIOD AND THE AMOUNT OF SUCH DEDUCTION IS TO BE FO UND OUT AS PER THE TERMS OF ESOP BY CONSIDERING THE PERIOD AND PERCENT AGE OF VESTING DURING SUCH PERIOD. DEDUCTION OF THE DISCOUNTED PR EMIUM DURING THE YEARS OF VESTING SHOULD BE ALLOWED ON STRAIGHT LINE BASIS. THEN DEALING WITH THE SUBSEQUENT ADJUSTMENT TO DISCOUNT THE SPE CIAL BENCH LAID DOWN THAT ANY ADJUSTMENT TO INCOME IS CALLED FOR AT THE TIME OF EXERCISE OF OPTION BY THE AMOUNT OF DIFFERENCE IN THE AMOUNT OF DISCOUNT CALCULATED WITH REFERENCE TO THE MARKET PRICE AT THE TIME OF G RANT OF OPTION AND MARKET PRICE AT THE TIME OF EXERCISE OF OPTION. 4. BOTH THE SIDES ARE IN AGREEMENT THAT THE FA CTS AND CIRCUMSTANCES OF THE INSTANT ISSUE ARE SQUARELY COVERED BY THIS SPEC IAL BENCH DECISION. RESPECTFULLY FOLLOWING THE PRECEDENT WE SET ASIDE THE IMPUGNED ORDER AND SEND THE MATTER TO THE FILE OF AO FOR DECIDING IT IN CONFORMITY WITH THE DECISION TAKEN BY THE SPECIAL BENCH IN THE AFOR ENOTED CASE. NEEDLESS TO SAY THE ASSESSEE WILL BE ALLOWED A REASONABLE O PPORTUNITY OF HEARING BY THE AO IN SUCH FRESH PROCEEDINGS. ITA NOS.1896 2444 & 2445/DEL/2013 4 5. THE SECOND GROUND IS AGAINST THE DELETION OF ADD ITION OF RS.38 75 625/- MADE ON ACCOUNT OF DEPRECIATION ON I NTANGIBLE ASSETS. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE CLAIMED DEPRECIATION TO THE ABOVE EXTENT ON OPERATING AND MARKETING RIGH TS. FOLLOWING THE VIEW TAKEN FOR THE AY 2006-07 THE AO DISALLOWED DE PRECIATION ON INTANGIBLE ASSETS BY OBSERVING THAT THERE WAS NO TR ANSFER OF INTANGIBLE ASSETS BY JEEVAN SATHI INTERNET SERVICES PVT. LTD. AND ALSO THE ASSESSEE HAD NOT SATISFIED THE BASIC TWO CONDITIONS FOR THE ALLOWANCE OF DEPRECIATION. THE LD. CIT(A) REVERSED THE ASSESSME NT ORDER ON THIS POINT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE AO DISA LLOWED THE CLAIM OF DEPRECIATION ON INTANGIBLE ASSETS BY FOLLOWING HIS OPINION FOR THE AY 2006-07. THERE IS NO ELABORATE DISCUSSION ABOUT TH IS ISSUE IN THE ASSESSMENT ORDER FOR THE INSTANT YEAR. THE LD. AR OR THE LD. DR FAILED TO THROW ANY LIGHT ON THE FINAL VIEW TAKEN BY THE TRIB UNAL ON THIS ISSUE IN ITS ORDER FOR AY 2006-07. IN THE ABSENCE OF ANY DI SCUSSION ON THE ISSUE ITA NOS.1896 2444 & 2445/DEL/2013 5 ON MERITS WE ARE HANDICAPPED TO GIVE OUR INDEPENDE NT OPINION. WE THEREFORE SET ASIDE THE IMPUGNED ORDER AND REMIT T HE MATTER TO THE FILE OF AO FOR DECIDING THIS ISSUE IN CONFORMITY WITH THE F INAL VIEW TAKEN ON THIS ISSUE FOR THE AY 2006-07. 7. THE ONLY OTHER GROUND WHICH SURVIVES FOR CONSIDE RATION IS AGAINST THE DELETION OF ADDITION OF RS.60 14 667/- MADE BY THE AO U/S 14A READ WITH RULE 8D OF THE INCOME-TAX RULES 1962. 8. THE AO HAS DISCUSSED THIS ISSUE IN PARA 5 OF HIS ORDER WHEREIN HE INITIALLY NOTICED THAT THE ASSESSEE HAS INCOME FROM MUTUAL FUND TO THE TUNE OF RS.4.61 CRORE WHICH WAS CLAIMED AS EXEMPT U /S 10 OF THE ACT. THEREAFTER HE OPINED THAT THE PROVISION OF RULE 14 A READ WITH RULE 8D REQUIRE COMPUTATION OF DISALLOWANCE. THAT IS HOW H E COMPUTED THE AMOUNT DISALLOWABLE AT RS.60 14 667/-. THE LD. CIT (A) HAS GIVEN HIS CONCLUSION ON THIS ISSUE ON THE LAST PAGE OF HIS OR DER BY OBSERVING THAT THE PROVISIONS OF RULE 8D ARE APPLICABLE FROM AY 20 08-09 AS PER THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF GODREJ & BOYCE (2010) 328 ITR 81 (BOM). THAT IS HOW HE DELETED THE ADDITION. ITA NOS.1896 2444 & 2445/DEL/2013 6 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE HONBLE JURISDICTIONAL HIG H COURT IN MAXOPP INVESTMENTS LTD. VS. CIT (2012) 347 ITR 272 (DEL) HAS HELD THAT THE PROVISIONS OF RULE 8D CANNOT BE INVOKED FOR MAKING ANY DISALLOWANCE U/S 14A BEFORE AY 2008-09. AS THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2007-08 IT IS BUT NATURAL THAT RULE 8D CANNOT BE APPLIED. 10. NOW COMING TO THE MAKING OF ANY ADDITION U/S 14A WE FIND THAT SUB-SECTION (2) PROVIDES AS UNDER:- `THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT O F EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED IF THE ASSESSING OFFICER HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. 11. A BARE PERUSAL OF THIS PROVISION INDICATES THAT THE AO SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN REL ATION TO EXEMPT INCOME IF HE HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF ITA NOS.1896 2444 & 2445/DEL/2013 7 SUCH EXPENDITURE INCURRED IN RELATION TO EXEMPT INC OME. IT SHOWS THAT SATISFACTION OF THE AO ABOUT THE INCORRECTNESS OF T HE ASSESSEES CLAIM IS SINE QUA NON FOR MAKING ANY DISALLOWANCE U/S 14A. IN SOME OF T HE DECISIONS IT HAS BEEN HELD THAT WHERE THE AO OMITS TO RECORD SATISFACTION BEFORE MAKING DISALLOWANCE U/S 14A AND THE CIT(A) M AKES GOOD THE DEFICIENCY BY RECORDING SUCH SATISFACTION THERE CA N BE NO ILLEGALITY IN MAKING DISALLOWANCE UNDER THIS PROVISION BECAUSE TH E POWERS OF THE FIRST APPELLATE AUTHORITY ARE COTERMINOUS WITH THAT OF TH E AO INASMUCH AS THE FIRST APPELLATE AUTHORITY CAN DO ANYTHING WHICH THE AO COULD HAVE DONE AND OMITTED TO DO SO. WHEN WE TURN TO THE FACTS OF THE INSTANT CASE WE FIND THAT THE AO HAS NOT RECORDED ANY SATISFACTION WHATSOEVER ABOUT INCORRECTNESS OF THE ASSESSEES CLAIM ABOUT THE EXP ENDITURE INCURRED IN RELATION TO EXEMPT INCOME. WHAT TO TALK OF RECORDI NG SATISFACTION THERE IS NO WHISPER IN THE ASSESSMENT ORDER ON THIS SCORE . HE SIMPLY NOTICED THE EXTENT OF EXEMPT INCOME IN FIRST TWO LINES AND THEREAFTER STARTED COMPUTING DISALLOWANCE BY APPLYING RULE 8D. THE LD . CIT(A) HAS ORDERED THE DELETION OF DISALLOWANCE AND AS SUCH HE HAD NO OCCASION TO MAKE GOOD THE DEFICIENCY LEFT BY THE AO IN THIS REG ARD. ONCE THE PRE- ITA NOS.1896 2444 & 2445/DEL/2013 8 REQUISITE CONDITION OF RECORDING SATISFACTION BY TH E AO BEFORE COMPUTING DISALLOWANCE U/S 14A IS NOT SATISFIED THERE CAN BE NO COMPUTATION OF DISALLOWANCE AS HAS BEEN HELD IN SEVERAL JUDGMENTS. WE FIND THAT THE ABSENCE OF SATISFACTION BY THE AO IN THE INSTANT CA SE HAS THE EFFECT OF TAKING AWAY THE JURISDICTION TO MAKE DISALLOWANCE U /S 14A IN THIS REGARD. WE THEREFORE UPHOLD THE IMPUGNED ORDER ON THIS LE GAL ASPECT. ASSESSMENT YEARS 2008-09 & 2009-10 12. THE REVENUE HAS FILED REVISED GROUND FOR THE AY 2008-09 IN WHICH THERE IS CHALLENGE TO THE DELETION OF ADDITIO N OF RS.1 89 15 284/- MADE ON ACCOUNT OF EMPLOYEE STOCK OPTION SCHEME COM PENSATION (ESOS). THERE IS NO OTHER GROUND TAKEN BY THE REVE NUE. IN ITS APPEAL FOR THE AY 2009-10 THE ONLY GROUND IS AGAINST THE DELETION OF ADDITION OF RS.1 29 58 000/- MADE ON ACCOUNT OF ESOS. 13. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES OF THE APPEALS FOR THESE TWO YEARS ARE MUTATIS MUTANDIS SIMILAR TO THOSE FOR THE AY 2007-08. FOLLOWING THE VIEW TAKEN HEREINABO VE WE SET ASIDE ITA NOS.1896 2444 & 2445/DEL/2013 9 THE IMPUGNED ORDERS AND REMIT THE MATTER TO THE FIL E OF AO FOR DECIDING THIS ISSUE AFRESH IN ACCORDANCE WITH OUR ABOVE DIRE CTIONS. 14. IN THE RESULT THE APPEAL FOR AY 2007-08 IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEALS FOR AY 2008-09 AND 2009-10 ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.201 5. SD/- SD/- [H.S. SIDHU] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 31 ST JULY 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT AR ITAT NEW DELHI.