ACIT, Hyderabad v. M/s Medha Servo Drives (P)Ltd.,, Hyderabad

ITA 749/HYD/2009 | 2003-2004
Pronouncement Date: 30-12-2010 | Result: Dismissed

Appeal Details

RSA Number 74922514 RSA 2009
Assessee PAN AABCM3917A
Bench Hyderabad
Appeal Number ITA 749/HYD/2009
Duration Of Justice 1 year(s) 6 month(s) 24 day(s)
Appellant ACIT, Hyderabad
Respondent M/s Medha Servo Drives (P)Ltd.,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-12-2010
Date Of Final Hearing 01-12-2010
Next Hearing Date 01-12-2010
Assessment Year 2003-2004
Appeal Filed On 05-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C. GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA. 1099/HYD/2006 ASSESSMENT YEAR 2003-04 MEDHA SERVO DRIVERS (P) LTD. IDA NACHARAM HYDERABAD (PAN AABCM 3917 A) VS THE ACIT CIRCLE 16(2) HYDERABD (APPELLANT) (RESPONDENT) ITA. 1114/HYD/2008 ASSESSMENT YEAR 2004-05 MEDHA SERVO DRIVERS (P) LTD. HYDERABAD (PAN AABCM 3917 A) VS THE ACIT CIRCLE 16(2) HYDERABD (APPELLANT) (RESPONDENT) ITA. 749/HYD/2009 ASSESSMENT YEAR 2003-04 THE ACIT CIRCLE 16(2) HYDERABD VS MEDHA SERVO DRIVERS (P) LTD. HYDERABAD (PAN AABCM 3917 A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G. SARANGAN & SH. C.N. PR ASAD RESPONDENT BY : SMT. V. MADHUVANI & SH. KVN C HARYA O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: THESE APPEALS OF THE ARE DIRECTED AGAINST DIFFE RENT ORDERS PASSED BY THE CIT(A) V HYDERABAD AND PERTAINS TO THE ASSESSMENT YEARS 2003-04 AND 2004-05. SINCE CERTAIN ISSUES INVOLVED IN THESE APPEALS ARE COMMON IN NATURE THEY ARE CLUBBED TOGETHER HEARD TOGETHER AND DISPOSED OFF VIDE THIS COMMON ORDER FOR THE SAKE OF CONVENIE NCE. ITA NO.1099 1114 & 749/2009 MEDHA SERVO DRIVERS (P) LTD. HYDERABAD 2 2 2. THE ISSUES IN ASSESSEES APPEALS IN ITA NOS.10 99/H/2006 & 1114/H/2008 ARE WITH REGARD TO DISALLOWANCE OF EXPE NDITURE INCURRED TOWARDS EMPLOYEES STOCK OPTION SCHEME. THE ISSUE INVOLVED IN THE REVENUE APPEAL IN ITA NO.749/H/2009 IS WITH REGARD TO LEVY OF PENALTY U/S 271 (1) (C ) OF THE IT ACT ON ACCOUNT OF DISALL OWING THE EXPENDITURE ON THE EMPLOYEES STOCK OPTION SCHEME. IN THE ABOVE TW O ASSESSMENT YEARS THE ASSESSEE CLAIMED EXPENDITURE ON ALLOTMENT OF 54 000 EQUITY SHARES AT RS.100/- EACH AMOUNTING TO RS.54 LAKHS FOR THE ASSE SSMENT YEARS 2003- 04. AND ALLOTMENT OF 17 700 SHARES AT RS.100/- EAC H AMOUNTING TO RS.17.70 LAKHS UNDER THE EMPLOYMENT SCHEME FOR THE ASSESSMENT YEARS 2004-05 AND THE SAID EXPENDITURE HAS BEEN CLAIMED U NDER THE HEAD STAFF WELFARE EXPENSES AND U/S 37(1) OF THE IT ACT. THE SAME WAS DISALLOWED BY THE LOWER AUTHORITIES. ON ACCOUNT OF THE SAME L APSE PENALTY WAS LEVIED IN THE ASSESSMENT YEARS 2004-05 AT RS.19.25 LAKHS A ND THE SAME WAS CONFIRMED BY THE CIT(A). AGAINST THE QUANTUM ADDIT ION CONFIRMED BY THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. THE P ENALTY LEVIED BY THE ASSESSING OFFICER WAS DELETED BY THE CIT(A). AGA INST THIS THE REVENUE IS IN APPEAL BEFORE US. 3. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE SHARES WERE ALLOTTED TO THE ESOP SCHEME ON ACCOUNT OF SERVICE RENDERED BY THE ASSESSEES EMPLOYEES. IT I S NOTHING BUT STAFF AND WELFARE EXPENDITURE AND IS ALLOWABLE U/S 37 OF THE IT ACT. HE DREW OUR ATTENTION TO THE CIRCULAR NO. 7 & 10 DATED 24.2.199 5 ISSUED BY THE CBIT UNDER SECTION 17(2)(III) AS PER WHICH THE COMPANY C AN FORMULATE STOP OPTION SCHEME AND ISSUE SHARES AT DISCOUNT OR CONCE SSIONAL RATE AND THE SAME IS A PERQUISITE UNDER THE DEFINITION OF SALAR Y. FURTHER HE SUBMITTED THAT THIS HAS BEEN DULY APPROVED BY THE SEBI AND IT IS ISSUED UNDER THE SEBI (ESOS) AND (ESPS) SCHEME GUIDELINES 1999. FUR THER HE SUBMITTED THAT SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL I N THE CASE OF SSI LIMITED VS. DCIT (85 TTJ 1049) (CHENNAI) WHEREIN T HE CLAIM OF THE ITA NO.1099 1114 & 749/2009 MEDHA SERVO DRIVERS (P) LTD. HYDERABAD 3 3 ASSESSEE HAS BEEN UPHELD. FURTHER HE RELIED ON TH E JUDGEMENT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. V S. CIT (225 ITR 802) (S C) WHEREIN IT WAS HELD: THE LIABILITY TO PAY THE AMOUNT OVER AND ABOVE TH E AMOUNT RECEIVED FOR THE DEBENTURES WAS A LIABILITY INCURRED BY THE COMPANY FOR THE PURPOSE OF ITS BUSINESS IN ORDER TO GENERATE FUNDS FOR ITS BUSINESS ACTIVITIES. IT WAS THEREFORE EXPENDITURE. THE A SSESSEE COMPANY HAD IN ITS RETURN CORRECTLY CLAIMED A DEDUCTION ONLY I N RESPECT OF THE PROPORTIONATE PART OF DISCOUNT OF RS.12 500 OVER TH E RELEVANT ACCOUNTING PERIOD IN QUESTION. THIS WAS ALSO IN CO NFORMITY WITH THE ACCOUNTING PRACTICE OF SHOWING THE DISCOUNT IN THE DISCOUNT ON DEBENTURES ACCOUNT WHICH WAS WRITTEN OFF OVER THE PERIOD OF THE DEBENTURES. THE ASSESSEE COMPANY WAS ENTITLED TO DEDUCT A SUM OF RS.12 500/- OUT OF THE DISCOUNT OF RS.3 LAKHS IN TH E RELEVANT ASSESSMENT YEAR. THE BALANCE EXPENDITURE OF RS.2 8 7 500 COULD NOT BE DEDUCTED IN THE ASSESSMENT YEAR 1968-69. 4. HE SUBMITTED THAT THE JUDGEMENT RELIED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THE CASE OF RANBAXY LABORATORIES LTD. VS. ADDL. CIT ( 26 DTR 420) (DELHI BENCH) IS NOT APPLICABLE TO THE FA CTS OF THE PRESENT CASE. ACCORDING TO THE AUTHORISED REPRESENTATIVE THIS EX PENDITURE HAS BEEN INCURRED AFTER SETTING UP OF THE INDUSTRY AND NOT A T THE TIME OF COMMENCEMENT OF THE ASSESSEES BUSINESS. FOR THIS PROPOSITION HE RELIED THE JUDGEMENT IN THE CASE OF EIMCO K.C.P. LTD. VS. CIT (242 ITR 659) (S.C) WHEREIN HELD THAT WHEN AN EXPENDITURE IS INCURRED A FTER INCORPORATION IN THE COURSE OF ITS CARRYING ON ITS BUSINESS TO BE TREATED AS REVENUE EXPENDITURE. REGARDING LEVY OF PENALTY HE RELIED ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE DISALLOWANCE OF E XPENDITURE ITSELF CANNOT BE RESULTED IN LEVY OF PENALTY. THE ASSESSEE CLAIM ED AN EXPENDITURE WHICH IS NOT ALLOWED BY THE LOWER AUTHORITIES THAT ITSELF CANNOT BE TERMED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME OR C ONCEALING OF INCOME AND FOR THIS LAPSE THE PROVISIONS U/S 271(1) (C ) CANN OT BE APPLIED. ACCORDING TO HIM THE CLAIM OF ASSESSEE IS BONA FIDE AND IT IS BASED ON JUDICIAL PRECEDENTS. HE SUBMITTED THAT THE JUDGEMENT DELIVER ED BY THE CHENNAI ITA NO.1099 1114 & 749/2009 MEDHA SERVO DRIVERS (P) LTD. HYDERABAD 4 4 BENCH OF THIS TRIBUNAL IN THE CASE OF SSI LTD. CITE D SUPRA IS IN FAVOUR OF THE ASSESSEE AS SUCH THE PENALTY CANNOT BE LEVIABLE. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS ESOPS CANNOT BE CONSIDERED AS REVENUE EXPENDITURE AT BEST IT CAN B E CAPITAL EXPENDITURE AND THAT IT CANNOT BE ALLOWED AS REVENUE EXPENDITUR E. HE SUBMITTED THAT SIMILAR ISSUE WAS CONSIDERED IN FAVOUR OF THE DEPA RTMENT BY THE ORDER OF THIS TRIBUNAL IN THE CASE OF RANBAXY LABORATORIES LTD. VS. CIT (124 TTJ 721) AND ALSO HE RELIED ON THE ORDER OF THIS TRIBUN AL MUMBAI BENCH DATED 17.9.2010 IN THE CASE OF VIP INDUSTRIES LTD. IN ITA NO.1742/M/2008 FOR THE ASSESSMENT YEARS 2005-06. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY PERUSED THE CASE LAWS CITE D BY THE LEARNED REPRESENTATIVES OF BOTH THE SIDES. IN OUR OPINION THE DECISION OF DELHI BENCH OF ITAT IN THE CASE OF RANB AXY LABORATORIES LTD. (SUPRA) CITED BY THE DR IS DIRECTLY APPLICABLE IN T HE PRESENT CASE AND THE SAME SQUARELY COVERS THE ISSUE UNDER CONSIDERATION AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. IN THE SAID CASE TH E DECISION OF CHENNAI BENCH OF ITAT IN THE CASE OF SSI LTD. (SUPRA) HEAVI LY RELIED UPON THE LEARNED COUNSEL FOR THE ASSESSEE IN THE PRESENT C ASE WAS ALSO CITED ON BEHALF OF THE ASSESSEE. THE SAME HOWEVER WAS FOU ND BY THE TRIBUNAL TO BE DISTINGUISHABLE ON FACTS FOR THE FOLLOWING REASO NS GIVEN IN PARA 7.16 OF ITS ORDER: THE DECISION OF TRIBUNAL CHENNAI IN THE CASE OF SSI LTD. SUPRA RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IS ALSO DISTINGUIS HABLE ON FACTS. IN THE CASE THE ASSESSEE CLAIMED SIMILAR EXPENDITURE WHICH WAS ALLO WED BY THE ASSESSING OFFICER. THE LEARNED CIT IN HIS REVISION JURISDICTION U/S 263 JURISDICTION U/S 263 HELD SUCH EXPENDITURE AS NOTIONAL AND CONTINGENT IN NATURE. THE TRIBUNAL HELD THAT IN VIEW OF SEBI GUIDELINES WHICH THE ASSESSEE WAS REQUIRED TO FOLLOW SUCH EXPENDITURE ARE IN THE NATURE OF ASCERTAINED LIABILITY AND NOT CONTING ENT LIABILITY AND NOT CONTINGENT LIABILITY UPON HAPPENING OF CERTAIN EVENTS. HENCE IT WAS HELD THAT THE ORDER WAS NOT ERRONEOUS SO AS TO BE VALIDLY REVISED U/S 263 O F THE ACT. HOWEVER THE TRIBUNAL ITA NO.1099 1114 & 749/2009 MEDHA SERVO DRIVERS (P) LTD. HYDERABAD 5 5 IN THE SAID CASE HAS NOT ANSWERED THE ISSUE WHETHER THE LOSS IS NOTIONAL IN NATURE OR NOT. THE TRIBUNAL HAS ALSO NOT CONSIDERED THE DECISI ON OF HONBLE SC IN THE CASE OF EMICO KCP LTD. (SUPRA) AND THAT OF DELHI HIGH COURT IN THE CASE OF REINZ TALBROS (P) LTD. SUPRA WHICH IS A JURISDICTIONAL HC FOR US. FO R ALL THE REASONS STATED ABOVE WE THEREFORE HOLD THAT THE EXPENSES AS CLAIMED BY THE ASSESSEE ARE NOT ALLOWABLE AS SUCH. 7. IN THE CASE OF RANBAXY LABORATORIES LTD. (SUPR A) SHARES WERE ALLOTTED BY THE ASSESSEE COMPANY TO ITS EMPLOYEES U NDER ESOP AT PRICE LESS THAN THE MARKET PRICE AND THE RESULTANT DIFFER ENCE WAS CLAIMED AS EXPENDITURE RELYING INTER ALIA ON SEBI GUIDELINES . THE TRIBUNAL HOWEVER CONFIRMED THE DISALLOWANCE MADE BY THE AUTHORITIES BELOW ON ACCOUNT OF THE SAID EXPENDITURE AFTER EXAMINING ALL THE RELEVA NT ASPECTS AND AFTER GIVING ELABORATE REASONS AS CAN BE SEEN FROM THE RE LEVANT PORTION OF ITS ORDER WHICH IS EXTRACTED FROM THE HELD PORTION: THE ASSESSEE WAS TO ISSUE SHARES OF FACE VALUE OF R S.10/- BY RECEIVING A SUM OF RS.595/- PER SHARE FROM ITS EMPLOYEES. THUS THE ASSESSEE WAS ENTITLED TO RECEIVE RS.585/- TOWARDS PREMIUM ON ISSUE OF SHARES. THE MA RKET PRICE AT RS.738.95 PER SHARE WOULD HAVE RESULTED IN REALIZATION OF HIGHER SHARE PREMIUM. THE ASSESSEE HAS NOT ACCOUNTED FOR THE DIFFERENCE BETWEEN RS.738.95 AND RS.10 AS ITS INCOME DURING THE YEAR. THUS THERE IS NO LOSS OF INCOME HELD TO B E TAXABLE. WHAT IS LOSS TO THE ASSESSEE IS BY WAY OF SHORT RECEIPT OF SHARE PREMIU M AMOUNT AND NOT BY WAY OF ANY EXPENDITURE OR INCURRING ANY LIABILITY FOR SUCH EXP ENDITURE. BY ISSUING SHARES AT BELOW MARKET PRICE THE SAME DOES NOT RESULT IN INC URRING ANY EXPENDITURE. BY ISSUING SHARES BELOW THE MARKET PRICE THE SAME DOE S NOT RESULT INTO INCURRING ANY EXPENDITURE RATHER IT RESULTS INTO SHORT RECEIPT OF SHARE PREMIUM WHICH THE ASSESSEE WAS OTHER WISE ENTITLED TO. THOUGH THE GUIDELINES OF SEBI REQUIRES THE ASSESSEE TO ACCOUNT FOR SHORT RECEIPT OF SHARE PREMIUM AS EMPLO YEES COMPENSATION EXPENSE FOR CLAIMING SUCH EXPENSE AS ALLOWABLE THE ASSESSEE HA S TO QUALIFY THAT EXPENSES ARE INCURRED AND THE SAME ARE WHOLLY AND EXCLUSIVELY FO R THE PURPOSE OF BUSINESS. BY ISSUING SHARES AT LESSER THAN MARKET PRICE THE ASS ESSEE CANNOT SAID TO HAVE INCURRED ANY EXPENDITURE RATHER IT AMOUNTS TO SHORT RECEIPT OF SHARE PREMIUM. THE RECEIPT OF SHARE PREMIUM IS NOT TAXABLE AND HENCE A NY SHORT RECEIPT OF SUCH PREMIUM WILL ONLY BE A NOTIONAL LOSS AND NOT ACTUAL LOSS FOR WHICH NO LIABILITY IS INCURRED. SEBI GUIDELINES ARE RELEVANT FOR THE PUR POSE OF ACCOUNTING BUT ARE NOT CONCLUSIVE FOR THE PURPOSE OF ALLOWING THE SAME AS EXPENDITURE. THEREFORE SUCH NOTIONAL LOSSES ARE NOT ALLOWABLE UNDER THE ACT. T HEREFORE SUCH PAY ANY LIABILITY UNDER THE CLAIM. THEREFORE SUCH NOTIONAL LOSS CANN OT BE HELD TO BE ALLOWABLE UNDER THE SCHEME OF THE ACT. WHAT IS ALLOWABLE U/S 37 IS ANY EXPENDITURE NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTION 30 TO 36 AND NOT BE ING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENDITURE OF THE ASSESSEE . SUCH EXPENDITURE SHOULD BE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THUS THE PREREQUISITE IS THAT THE ASSESSEE SHOULD HAVE INCURRED AN EXPENDITURE. EXPENDITURE IS WHAT IS PAID OUT OR AWAY AND IS SOMETHING WHICH HAS GONE IRRETRIEVAB LY. A BENEFIT OR INCOME FORGONE ITA NO.1099 1114 & 749/2009 MEDHA SERVO DRIVERS (P) LTD. HYDERABAD 6 6 CANNOT BE CONSIDERED BUT HAS MERELY RECEIVED LESSER AMOUNT OF SHARE PREMIUM THE SAME DOES NOT AMOUNT TO EXPENDITURE WITHIN THE MEAN ING OF S.37 THEREFORE THE CLAIM OF THE ASSESSEE IS NOT ALLOWABLE. EMICO KCP LTD. VS. CIT (2000) 159 CTR 242 ITR 659(SC) AND CIT VS. REINZ TALBROS (P) LTD. (2001) 252 ITR 637 (DEL.). IT IS NOW SETTLED LAW THAT ENTRY OR ABSENCE THER EOF IN BOOKS OF ACCOUNT IS NOT CONCLUSIVE EITHER FOR TREATING THE AMOUNT AS INCOME OR ALLOWABILITY OR OTHERWISE OF THE EXPENDITURE. THUS ONLY ON THE BA SIS OF ENTRY IN THE BOOKS OF ACCOUNT THE CLAIM OF EXPENDITURE IS NOT ALLOWABLE. THE ENTRY IS MADE ON THE BASIS OF RECOMMENDATION OF SEBI WHICH IS SAID TO BE MANDA TORY FOR A LISTED COMPANY. THE SAME MAY BE RELEVANT FOR THE PURPOSE OF ACCOUNTI NG BUT FOR ALLOWABILITY OF EXPENDITURE UNDER IT ACT THE DIRECTION OF SEBI DOES NOT DETERMINE THE ALLOWABILITY OF EXPENDITURE. FOR THE PURPOSE OF ALLOWABILITY OF EXPENDITURE UNDER IT ACT THE SAME HAS TO BE CONSONANCE WITH THE SCHEME OF THE AC T. IN THE INSTANT CASE THE ENTRY MADE IN BOOKS OF ACCOUNTS AS PER DIRECTION OF SEBI CANNOT BE HELD TO BE CONCLUSIVE FOR THE PURPOSE OF ALLOWING EXPENDITURE U/S 37 UNLESS THE PROVISION OF S.37 IS COMPLIED WITH THE DEDUCTION IF NOT PERMISS IBLE. NEW INDIA INDUSTRIES LTD. VS. ACIT (2007) 112 TTJ (DEL.) (SB) 917: (2008) 1 DTR (DEL.) SB (TRIB) 247 AND TVS FINANCE & SERVICES LTD. VS. JCIT (2009) 23 DTR (MDS .) 33 APPLIED. 8. AT THE TIME OF HEARING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS MADE AN ATTEMPT TO POINT OUT THAT CERT AIN ASPECTS HAVE NOT BEEN CONSIDERED BY THE TRIBUNAL WHILE RENDERING ITS DECISION IN THE CASE OF RANBAXY LABORATORIES LTD. (SUPRA) ON THE SIMILAR ISSUE. IN OUR OPINION THE SAID ASPECTS POINTED OUT BY THE COUNSEL FOR THE ASS ESSEE HOWEVER ARE NOT MATERIAL ENOUGH TO HAVE ANY DIRECT BEARING ON THE W ELL CONSIDERED AND WELL REASONED DECISION RENDERED BY THE TRIBUNAL. AS HEL D BY THE TRIBUNAL ANY SHORT RECEIPT OF SHARE PREMIUM WOULD ONLY BE A NOTI ONAL LOSS TO THE ASSESSEE AND NOT AN ACTUAL LOSS. AS FURTHER HELD B Y THE TRIBUNAL ANY BENEFIT OR INCOME FORGONE BY THE ASSESSEE CANNOT BE CONSIDERED AS EXPENDITURE AND SINCE THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE BUT HAD MERELY RECEIVED LESSER AMOUNT OF PREMIUM THE S AME COULD NOT AMOUNT TO EXPENDITURE WITHIN THE MEANING OF SECTION 37. IN OUR OPINION THE ISSUE INVOLVED IN THE PRESENT CASE AS WELL AS A LL THE MATERIAL FACTS RELEVANT THERE TO ARE THUS SIMILAR TO THE THERETO A RE THUS SIMILAR TO THE CASE OF RANBAXY LABORATORIES (SUPRA) AND THE DECISION RE NDERED IN THE SAID CASE BY THE COORDINATE BENCH OF THIS TRIBUNAL IS SQUAREL Y APPLICABLE IN THE PRESENT CASE. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RANBAXY LABORATORIE S LTD. (SUPRA) WE UPHOLD ITA NO.1099 1114 & 749/2009 MEDHA SERVO DRIVERS (P) LTD. HYDERABAD 7 7 THE IMPUGNED ORDER OF THE CIT(A) CONFIRMING THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ESOP EXPENSES CLAIM ED BY THE ASSESSEE AND DISMISS THE GROUND TAKEN BY THE ASSESSEE 9. IN THE RESULT THE ASSESSEES APPEALS IN ITA NO S.1099/H/2006 & 1114/H/2008 ARE DISMISSED. 10. COMING TO THE DELETION OF PENALTY IN REVENUE APPEAL IN ITA NO.749/H/2009 IN OUR OPINION THE PENALTY PROCEEDI NGS STOOD ON DIFFERENT FOOTINGS. THE DISALLOWANCE OF CLAIM OF EXPENDITURE BY THE ASSESSEE IN RESPECT OF ESOPS CANNOT BE CONSTRUED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALING OF INCOME. THE CLAIM OF THE ASSESSEE IS BASED ON JUDICIAL PRECEDENTS IN THE CASE OF SSI LIM ITED CITED (SUPRA) WHEREIN IT WAS HELD THAT 15 . ESOP WAS THE ORDER IN THOSE TIMES. THAT WAS HE ME DIUM THROUGH WHICH THE TALENT WAS ATTRACTED AND CASTLED. IN A HIGHLY COMPETITIVE FIELD OF CUTTHROAT COMPETITION HE ONLY WAY IN WHICH A COMPAN Y ENGAGED IN SOFTWARE DEVELOPMENT COULD ATTRACT AND CONFIDENTLY RETAIN TA LENT TO ITSELF WITHOUT BEING POACHED BY OTHERS WAS ESOP IT WAS KNOWN ME THOD BY WHICH A COMPANY OFFERED STOCKS TO ITS EMPLOYEE WHICH THE E MPLOYEE COULD ENCASH AT ANY TIME. IT WAS A BENEFIT CONFERRED ON THE EMP LOYEE AND A BENEFIT WHICH COULD NOT BE TAKEN BACK BY THE COMPANY. SO FAR AS THE COMPANY IS CONCERNED ONCE THE OPTION IS GIVEN AND EXERCISED B Y THE EMPLOYEE THE LIABILITY IN THIS BEHALF IS ASCERTAINED. THE FACT IS RECOGNIZED EVEN BY SEBI AND THE ENTIRE ESOP SCHEME ARE GOVERNED BY THE GUID ELINES ISSUE BY THE SEBI. IT IS NOT THE CASE OF CONTINGENT LIABILITY D EPENDING UPON VARIOUS FACTORS ON WHICH THE ASSESSEE HAD NO CONTROL. AS C LEARLY BROUGHT OUT IN THE SUBMISSIONS MADE THE EXPENDITURE IN THIS BEHALF WA S AN ASCERTAINED LIABILITY AND HENCE THE ARGUMENT THAT IT WAS CONTIN GENT UPON HAPPENING OF CERTAIN EVENTS HAD NO FORCE . 11. IN VIEW OF THIS IN OUR OPINION THERE IS A BASIS FOR CLAIMING OF DEDUCTION BY THE ASSESSEE AND IT CANNOT BE SAID THA T THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCE ALED THE INCOME. AS SUCH LEVY OF PENALTY IS NOT JUSTIFIED. ACCORDINGL Y WE DO NOT FIND ANY ITA NO.1099 1114 & 749/2009 MEDHA SERVO DRIVERS (P) LTD. HYDERABAD 8 8 INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETION OF PENALTY AND THE SAME IS CONFIRMED. 12. IN THE RESULT ALL THE APPEALS FILED BY THE A SSESSEE AS WELL AS REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 30.12.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 30 TH DECEMBER 2010 COPY FORWARDED TO: 1. SHRI V.G. RAO & ASSOCIATES 4-1-898 306 OASIS PLAZA TILAK ROAD ABIDS HYDERABAD 2. THE ACIT CIRCLE 16 (2) HYDERABAD 3. CIT(A)-V HYDERABAD. 4. CIT HYDERABAD 5. THE D.R. ITAT HYDERABAD. NP