THOMAS COOK (INDIA) LTD MUMBAI vs DY CIT 1 (3)92) MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS.

KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No.

7807/MUM/2019 Assessment Year: 2015-16 Thomas Cook (India) Ltd., A Wing, 11th floor, Marathon Futurex, N.M.

Joshi Marg, Lower Parel (East), Mumbai-400013.

Vs.

Dy.

CIT-1(3)(2), Room No.

540, 5th floor, Aayakar Bhavan, M.K.

Road, Mumbai-400020.

PAN No.

AAACT 4050 C Appellant Respondent Assessee by : Mr.

Ketan Ved Revenue by : Ms.

Richa Gulati, DR Date of Hearing : 30/05/2023 Date of pronouncement : 31/05/2023 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against final assessment order dated 30.10.2019 passed by the Dy.

Commissioner of Income-tax Circle-1(3)(2), Mumbai [in short ‘the Ld.

Assessing Officer’] for assessment year 2015-16 pursuant to the direction of the Ld.

Dispute Resolution Panel (DRP) dated 28.09.2019, which was further rectified on 06.12.2019.

The grounds raised by the assessee are reproduced as under: 1.

The Asse erred in The under sectio Rules, 1962 expenditure exempt incom 2.

The Asses The Id.

A0 section 14A 1962 under that Section section 115]B 3.

The Asses Rs.8,70,45,1 Option Plan of grant of vesting perio 4.

The Ass additional cl (being differ exercise of o options), of R of the Act.

T additional c income, can officer / DRP 5.

The learn excess Divid 6.

The Id.

As penalty und inaccurate p 7.

As under sectio 2.

Briefly stated, fa is engaged in the Thom essing Officer / Dispute Resolution P e Id.

A0 erred in disallowing Rs.

76 on 14A read with Rule 8D of the In without appreciating that no direct was incurred by the company fo me; ssing Officer / Dispute Resolution Pan erred in disallowing Rs.

76,98,65 read with Rule 8D of the Income section 115JB of the Act without ap 14A the Act cannot be extended and B which is a complete code in Itself; ssing Officer / DRP erred in making d 135/- pertaining to discount on Emplo (being the difference of market price a opti ice a option and exercise price) claimed od under section 37(1) of the Act; sessing Officer / DRP erred in not laim of discount on Employee Stock O rence between market price at the options and market price at the time o Rs.10,01,36,178/- claimed under sec The Assessing officer / DR erred in ho claim of deduction, not made in the nnot be directly made before the P. ned A has erred in not granting the dend DistributionTax (DDT) of Rs.

83,5 ssessing Officer / DR erred in propos der section271(1)(c) of the Act for articulars of income; ssessing Officer / DRP erred in levyin n 234B and section 234C of the Act; acts of the case are that the ass business of authorized for mas Cook (India) Ltd.

2 ITA No.

No.

7807/M/2019 Panel (DR) 6,98,652/- Income tax or indirect or earning nel erred in 52/- under tax Rules, ppreciating d read into disallowing oyee Stock at the time d over the t allowing Option Plan e time of, of grant of ction 37(1) olding that e return of Assessing refund of 50,980/-; ing to levy furnishing ng interest sessee company reign exchange dealer,travel agent, to For the year under income on 30.11.201 The case was selecte Income-tax Act, 196 with.

In view of the assessee with its Ass consideration, the d transactions was refe The Ld.

TPO propos account of short rec 115A of the Act.

The order proposed this Ld.

Assessing Officer alia,disallowance u/s share option schem objections against th The Ld.

DRP vide o order dated 06.12.2 Officer.

Pursuant to t Officer passed the im impugned final asses the transfer pricing a however retained th scheme expenses as Thom our and operator and other asso r consideration, the assessee 15 declaring total income at Rs. ed for scrutiny and statutory no 1 (in short ‘the Act’) were issue international transactions car sociated Enterprises (AE) during determination of arm’s length ferred to the Ld.

Transfer Pricin sed an adjustment of Rs.3,79, covery of share dividend distri e Ld. stri e Ld.

Assessing Officer in the d transfer pricing adjustment fo r also proposed additions on oth s 14A of the Act, the disallowan me expenses etc.

The asse he draft assessment order befor rder dated 28.09.2019 r.w.s. t 2019 issued direction to the the direction of the Ld.

DRP, th mpugned final assessment ord ssment order, the Ld.

Assessing adjustment as per the direction he disallowance for employee well as disallowance u/s 14A mas Cook (India) Ltd.

3 ITA No.

7807/M/2019 ociated services. filed return of 52,56,47,110/-. otices under the ed and complied rried out by the g the year under price of those ng Officer (TPO).

01,11,500/- on ibution tax u/s raft assessment or addition.

The her issues, inter ce of employee’s essee preferred re the Ld.

DRP. the rectification Ld.

Assessing he Ld.

Assessing der.

In the said g Officer deleted of the Ld.

DRP, s share option r.s.r.

8D of the Income Tax Rules,19 ground of the asses discount on employ market price at the t at the time of grant 37(1) of the Act, whic of income.

2.1 Aggrieved with before the Tribunal b 3.

Before us, the pages 1 to 150.

4.

The ground No disallowance u/s 14A Assessing Officer mad “10.12 Mumbai, the furnished th 14A r.w.s.

8D S.

1.

Dir 2 Inte Ave 22, 18, 3.

0.5 (Rs Tot Thom 962.

The Ld.

DRP also rejected ssee for claim of expenses in yees stock option plan (being time of exercise of the option an of option) amounting to Rs.100 ch was not claimed at the time o the final assessment order, t by way of raising grounds as rep assessee has filed a Paper B o.

1 of the appeal of the asse A of the Act in the final assessm de disallowance u/s 14A r.w.r.

8 In view of the above direction of Ho e assessee vide its submission dated he computation of disallowance to b D of the Act as under: Particulars ect expenses attributable erest Expenses X Average Investment erage of Total assets 83,88,171/- X 62,53,18,827/- 55,07,05,474/- % of Average Investments .62,53,18,827/-) tal mas Cook (India) Ltd.

4 ITA No.

7807/M/2019 d the additional n the nature of g it is between nd market price 0,136,178/- u/s of filing of return the assessee is roduced above.

Book containing essee relates to ment order.

The 8D as under: on’ble DRP-2, 18.10.2019, be made u/s Amount (Rs.) -- 76,89,652/- i.e.

31,26,594/- 1,08,25,246/- 4.1 The only dispu Officer is in respec 8D(2)(ii) of the Incom the Ld.

DRP the as mutual funds aggreg resources.

The Ld. assessee rejected th mainly on the ground of the funds at the tim finding of the Ld.

DRP “6.3.6 We n interest exp under rule 8 assessee w especially in High Court r The assesse not apply in interest-free were availab taken vide le (i) own fund per particula position of fr and (ii) with resp vear of mak 'dated' as t and, hence, funds as on 6.3.7 The d assessee du Thom ute between the assessee and ct of proportionate disallowan me-tax Rules, 1962 (in short ‘the sessee contended that the inv ating to Rs.1,19,15,487/- was m DRP after considering the sub e contention of the availability d that the assessee failed to pro me of investment in mutual fun P is reproduced as under: ow advert to the disallowance of pro penditure proposed by the Assessi 8D(i) of the Rules and examine the cl with the aid of evidences adduced n view of the decisions of Hon'ble Jur relevant for adjudication of the issue ee's prime argument is that rule 8D(2) case where investments have been m funds available and, such interest-f ble with it.

In this connection, the tw etter dated 23.07.2019, is as under: ds exceeded the investments during th ars furnished for March 31, 2015 free funds in AY 2015-16 should be c pect to the position of interest-free fu king the investments, the same was they were acquired vide several res it was difficult to collate details of in the date of investment. difficulty in accepting the contentio ue is evident.

The verification of the ad mas Cook (India) Ltd.

5 ITA No.

7807/M/2019 d the Assessing nce under Rule e Rules’). e Rules’).

Before vestment in the made out of own bmission of the y of own funds ovide availability ds.

The relevant oportionate ng Officer laim of the before us risdictional e at hand. ) (il) would made from free funds in position he year as and that onsidered, unds in the said to be structuring nterest-free on of the dequacy of self-generate one.

Firstly, in the tax-ex actually ma funds at tha made invest the any pa investments this backdro greater amo claim and n paramount i own and/o investments in this case, made.

In an day of the germane unl were acquire not the fact argued that disallowance interest, the the borrowed tenable.

Th relevant inv available by knowledge a assessee, w bearing fund onus lies o investment when the sa the Assessin by law.

In straightway foundational appellant th record any expenditure cannot be ap stated that investment Thom ed funds for making investments is it has to be ascertained when the inv xempt income yielding investments/sh ade and, secondly, what was the p at point of time.

The appellant has a tment in mutual funds, but is unable articulars whatsoever as to how could be said to be made out of ow op, asserting that it was in posses ount of interest-free funds is merely nothing more.

In our humble view, w importance is the position of investi or borrowed at the time of ma and not at a time posterior to the eve is the year for which scrutiny assess ny case, the position of funds on the assessment year under considerat less all the investments yielding exem ed in the very same assessment year of this case.

The assessee has also c t if the Assessing Officer wants to e under section 14A of the Act on a n he has to prove that there is nexu d funds and the investments made.

T e basic details/documents as to vestments were made, has to be f y the assessee since these are in its alone.

Moreover, there is the claim ma which it has to support cogently, that n ds were used for this purpose. s purpose.

Hence, n it to lead the primary details li with the nature of funds deployed, ame is adequately discharged, does ng Officer to make his inferences as n other words, there is no nega on the Assessing Officer to l facts.

For this reason, the content hat the Assessing Officer has not b thing which proves that there incurred towards earning exemp approved.

At the risk of repetition, it the exercise of determining the in specific investments made in p mas Cook (India) Ltd.

6 ITA No.

7807/M/2019 a two-fold vestments) hares were position of admittedly to provide the said wn funds.In ssion of a y a facile what is of ible funds, aking the ent - which sment was e first/last tion is not mpt income r - which is collaterally o make a account of us between This is not when the first made s exclusive ade by the no interest- , the initial inking the and only it shift to warranted ative onus lead the tion of the brought on was any pt income has to be source of rior years cannot conc investment p Sheet date of 6.3.8 The ap Bombay Hig Reliance Ut Taxman 135 interest-free investments a loan, it ca the interest-f available bo taken, then would be available, if the investm unquestionin the assessee decision (sup the sister co In other investments existence, e investments denying the f by the Hon'b sufficiency of the favour of the relevant Court, in par case as belo «5.From the respect of d crores prefer contention of Rs.

389.60 Reliance St themselves The compan in the energy January, 20 Thom ceivably be done on the basis of position as at the Opening and th of the financial year under scrutiny. ppellant has relied on the decision of t gh Court in Commissioner of Inco ilities & Power Ltd. (2009] reporte 5, where it has been held that if funds available sufficient to and at the same time, the assessee h n be presumed that the investments free funds available. available.

That is, if there oth interest-free and overdraft and a presumption would arise that in out of the interest-free fund gen f the interest-free funds were sufficie ments.

The aforesaid principle laid ngly binding.

However, a vital fact un e is that in the Reliance Utilities & P pra), the Respondent had made inve oncerns during January, 2000 to Ma words, the requisite co-relation made and the source of funds enabling, therefore, a co-relation and nature of funds.

Thus, there co fact that to apply the above principle ble High Court, it is necessary to ex of material available to raise the presu f the assessee as to availability of ow point of time.

The Hon'ble Jurisdict ra (5) of the order, recorded the facts o w (emphasis supplied): order of the Assessing Officer the as disallowance of interest amounting to rred an appeal to the CIT (Appeals). f the assessee that the assessee had in Reliance Gas Limited and Rs trategic Investments Limited.

The were in the business of generation nies in which the investments were m y sector.

Investments were made mai 000 to March, 2000.It was the submis mas Cook (India) Ltd.

7 ITA No.

7807/M/2019 f fund-net e Balance the Hon'ble me-tax vs ed in 178 f there be meet its had raised were from are funds d/or loans nvestments nerated or nt to meet down is nnoticed by Power Lid. estment in rch, 2000. between s was in between ould be no laid down xamine the umption in wn fund at tional High of the said ssessee in o Rs.

4.40 It was the d invested s.

1.01 in assessee of power. made, were inly during sion of the assessee th from distribu the compani build long-te regular cour interest can purpose of respondent h of Debenture expenditure submission gone into in funds are co operation of evenly distri Considering earned Rs.

3 capital of Rs deposit of Rs from its debt 6.3.9 It was observed th balance she would be ba the learned c the balance showed tha purpose of f account and shareholders argument ha 6.3. nt ha 6.3.10 The H of the said o that both in Appellate Tr assessee ha generated in 1999.

Apart was a furthe 180 crores o Thom hat they had earned regular busine ution of power and investments mad ies in energy sector and were with erm business prospects.

Investments w rse of business and accordingly n be disallowed when the fund is utiliz business.

It was also pointed had borrowed Rs.

43.62 crores by wa es and the said amount was utilized and inter-corporate deposit.

It that no part of the interest bearing f nvestments in the two companies.

I oncerned it was pointed out that inc the company was Rs.

418.04 crores w ibuted. this, till December, 1999 the appe 313.53 crores from its operation.

It h s.

7.90 crores and had also received in s.

10.03 crores.

Also it had recovered tors. s in this context, that the Hon'ble H hat "Firstly, we are not concerned eet as of 31-3-1999.

What would b alance sheet as on 31-3-2000.

Apart counsel has been unable to point out sheet that the balance sheet as on t the shareholders funds were utiliz fixed assets.

To our mind the profit d the balance sheet would not show s funds have been utilised for investm as to be rejected on this count also.

Hon'ble High Court has further, noted order that "Apart from that we have no n the order of the CIT (Appeals) as ribunal, a clear finding is recorded ad interest-free funds of its own which n the course of the year commencing t from that in terms of the balance s er availability of Rs.

398.19 crores inc of share capital.

In this contexi, in ou mas Cook (India) Ltd.

8 ITA No.

7807/M/2019 ess income de were in a view to were in the no part of zed for the out that ay of issue as capital was the fund have Insofar as come from which was ellant had had raised nterest-free d Rs.

39.04 High Court with the e relevant from that, to us from 31-3-1999 zed for the t and loss w whether ments.

The in para (9) oted earlier s also the d that the h had been g from 1-4- sheet there cluding Rs. luding Rs. ur opinion, the finding o availability o 6.3.11 We investments 1999, there December, 1 crores from evidential in sufficient m sufficient ow free income this, in the c wise details which in our sufficiency a assessee ha investments. regard, the f tax Rules.

19 the estimate 6.3.12 Thus determining bearing fund time when undeniable particulars o would lead p of the formu comes into disallowance formula pre contemplatio us, where th give the afor investments. statutorily o of the Act in the prescribe the enunciat discussion o becomes aca Thom of fact recorded by CIT (Appeals) and of interest-free funds really cannot be f may observe here that in respe made during the period of January was a finding of fact by the AO 1999 the appellant had earned R m its operation"', which provided nsight as to the presumption that t material to conclude that the asse wn funds to make the investment yie in the immediate coming months.

A case before us we have a mere finan s of the own fund and the investme r considered view is inadequate and as material to raise the presumption ad sufficient own fund at the time of m .

Once the assessee is unsuccessf formula incorporated in rule 8D(i) of th 962 would inevitably come into play f . s, it is not possible to ignore the e without any haziness as to whethe ds or interest-bearing funds were grea the underlying investments were m inability of the assessee to fu of when the tax-exempt investments w precisely to the situation where the a ula engrafted in rule 8D(2)(il) would m o play for estimating the pro e of interest expenditure.

The escribed in the statute was in on of a situation similar to the one tha he assessee for whatever reasons, is resaid details at the time of making th .

Ex consequenti, the Assessing bliged to apply the provisions of sect such a situation and, therefore, boun ed method as per 8D(2)(il) of the Ru tion of law by the Hon'ble Bombay Hig on other case laws relied upon the ademic in nature. mas Cook (India) Ltd. ndia) Ltd.

9 ITA No.

7807/M/2019 ITAT as to faulted." ect of the y to March O that "till Rs.

313.53 a crucial there was essee had elding tax- As against ncial year- ents made, d lacks the n that the making the ful in this he Income- for making exercise of er interest- ater at the made.

The urnish the were made application mandatorily oportionate estimation nserted in at is before s unable to he tax-free Officer is tion 14A(2) nd to follow ules.

Given gh Court, a e assessee 6.3.13 On th vs Addl.

CI taxmann.com the finding o under (emph "I have consi the argumen the AO has funds to su investments the opening and reserves the AO.

Fur connected ex forthcoming inclined to dismissed." 6.3.14 Ther Kamataka H been discha Assessing O formula prov 6.3.15 The a of short term short term in from any ev calculation incurred for taken and it is not kno investments this reason, expenditure interest on C untenable.

6.3.16 The argument in between i subsidiaries by investing Thom he other hand, in Bharath Beedi Wor IT, Range-2, Mangalore[2016] repor m 95, the Hon'ble Karnataka High C of the Appellate Commissioner which hasis supplied): idered the rival contentions carefully. nt of the appellant is vague in as much s asked to prove that the appellant ubstantiate the investment as and are made the appellant is only trying and figures of the current year sha s and surplus.

I find strength in the ar ther, since the appellant could not e xpenditure to the satisfaction of the A0 in arriving at the estimation.

Hen confirm the addition and the gro reafter, in the aforesaid decision, th High Court observed that the burde arged satisfactorily by the appellan Officer had correctly proceeded to vided under rule 8D(2)/section 14A of assessee claimed that funds received m investment were utilized for the pu nvestment in mutual funds.

This is not vidence, irrefutable or otherwise. otherwise.

Th to show that all the interest ex r the year pertains to working cap is not possible to do so in face of the f own whether or not the incom were sourced from borrowed funds o the tentative claim of the assessee th of Rs.

22.83 crores "mainly com Commercial Paper, NCD and Bank O assessee has pressed one mor n its attempt to show that there is nterest expenditure and invest .

It claimed that the downstream in -cum-operating entities are required t mas Cook (India) Ltd.

10 ITA No.

7807/M/2019 rks (P.) Lid rted in 74 Court noted h were as I find that h as when t has own when the g to explain are capital rgument of explain the 0 is clearly nce, I am ounds are he Hon'ble n has not nt and the apply the the Act. d from sale urchase of t borne out here is no xpenditure pital loans fact that it me-yielding or not.

For hat interest mprises" of verdraft is re indirect no nexus tment in nvestments o be made by bringing r borrowings w Notes issued be persuade for not subm and instead hypothetical factual defi granted for e law, rules o been so, the exception in sweeping, p ever utilize funds (curre is "generally some obviou such as pa investments were borrow greater than analysis.

6.3.17In the that the ave adequate in investments, supported presumption position, we available bef the presump of the Rules appellant ca 5.

Before us, the L funds being more th has been made out o own funds and invest Pa Thom requisite monies from abroad and dom were not permitted as per the applic d by the Ministry of Finance.

We are ed by this as it is difficult to fathom a mitting the details of investment in it d relying on tangential, circumsta explanations to get over this fun ciency.

No immunity under the Ac examining the facts merely because s or regulation prescribes something. en the Legislature would have provid the rule itself. le itself.

We are also unable to purely theoretical claim that no pers borrowings for making investment ent investments) as the return on mu y lower" than the borrowing cost.

The us situations in which this assertion arking of borrowed"idle" funds in sh till they are redeployed for the pur wed or a general expectation of earni n the interest cost based on market e light of the discussion as foregoing erments made to canvass the claim t nterest-free, self-generated funds to , are not firmly established and by credible documents, but b ns and general surmises.

This being t e are of the considered view that efore us could not be held as sufficie ption and, hence, the application of rul s by the Assessing Officer in the ca annot be rejected.

We direct accordingly Ld.

Counsel of the assessee reit an investment, it is presumed f own funds.

Counsel p tment as under: articulars Amount (in Rs.) mas Cook (India) Ltd.

11 ITA No.

7807/M/2019 mestic debt able Press e unable to a a reason ts position antial and ndamental ct can be some other Had this ed for this o accept its son would in mutual tual funds ere may be is untrue, hort-tenure rpose they ng returns reports or g, we find that it had make the d tangibly based on the factual the facts nt to raise le 8D(2) (ii) ase of the y.” terated that own that investment rovided detail of Equity Reserves Total : Investm Earning income 5.1 The Ld.

Counse Supreme Court of S 140 taxmann.com interest free own fu then disallowance u/ 6.

On the other ha relied on the finding of own funds has to which are eligible for of the scrutiny.

7.

We have heard dispute and perused dispute in the case funds with the asse examined in the yea has provided the deta to assessment year availability of the fun in assets eligible subsequently.

The L Thom 36,56,18,756 s and Surplus 1122,07,91,830 1158,64,10,586 ment 309,90,65,124 exempt (125,06,37,654 + 184,84,27,470) el further relied on the decision South India bank v. ia bank v.

CIT repo 178 wherein it is held that nds exceed investment in tax /s 14A r.w.r.

8D(2)(ii) is not warr and, the Ld.

Departmental Rep of the Ld.

DRP and submitted be examined at time of invest r yielding exempted income and rival submission of the parties d the relevant material on recor is the year of availability of t essee.

According to the Ld.

D ar of making the investment, wh ail of the funds as on 31.03.201 under consideration.

We are nd has to be examined at the tim for yielding exempted inc Ld.

Counsel of the assessee su mas Cook (India) Ltd.

12 ITA No.

7807/M/2019 n of the Hon’ble orted in (2021) in cases where free securities, ranted. resentative (DR) that availability tment in assets, d not in the year on the issue in rd.

The issue in the interest free DRP it could be hereas assessee 5 i.e. in relation of opinion that me of investment come and not ubmitted that if issue is restored bac assessee will file de making investment i undertaking by the substantial justice, w the Assessing Officer Ld.

DRP, and restore for providing one mo the documentary evi funds at the time of m exempted income.

Th accordingly allowed f 8.

The ground No 14A r.w.r.

8D while Income-tax Act, 1961 9.

We find that on the Assessing Offi Rs.2,08,08,691/- ma u/s 115JB of the Ac submitted that no ad the Special Bench in Ltd. in (17) 58 ITR 3 is held that disallowa Thom ck to the file of the Ld.

Assessi etails of availability of funds in mutual funds from year to y Ld.

Counsel of the assessee we set aside the finding of the D r in the final assessment order e the matter back to the Ld.

A ore opportunity to the assessee dence in support of availability making investment in assets elig he ground No.

1 of the appeal of for statistical purposes. o.

2 of the appeal relates to di e computing book profit u/s 1. this issue the grievance of the ficer wrongly added the d ade u/s 14A to the book profit c ct.

Before us, the Ld. s, the Ld.

Counsel ddition could be made in view o n the case of ACIT v.

Vireet In 313, Delhi Tribunal Special Be ance u/s 14A cannot be added w mas Cook (India) Ltd.

13 ITA No.

7807/M/2019 ing Officer, the at the time of year.

In view of and interest of DRP or finding of pursuant to the Assessing Officer e for submitting y of interest free gible for yielding f the assessee is isallowance u/s 115JB of the assessee is that disallowance of computed made of the assessee f the decision of nvestment Pvt. ench, wherein it while computing book profit u/s 115J on the order of the lo 10.

We have heard dispute and perused the Ld.

DRP has refe order and also referr Ltd. (supra).

The Ld. reason that DRP proc proceedings and ther assessee in this rega the Ld.

DRP are repro “6.3.23We m is a continua draft assess The final a Assessing O authority an assessment decision of t Bombay in t Vodafone Commissione CTR 0030.

W of the possi High Court i held that co the Act, the the Act are prevailing j circumstance order of the The objectio rejected.” Thom B of the Act.

On the contrary, th ower authorities. rival submission of the parties d the relevant material on recor erred to the various decisions in ed to the decision of the Vireet DRP has retained the addition ceedings are in continuation of refore to keep the matter alive ard were rejected.

The relevant oduced as under: may observe here that the process bef ation of assessment proceeding as it sment order which is being challenge ssessment order is yet to be pass Officer.

Hence, the DRP is not an nd the proceeding before the DR is con proceedings.

This view is fortifi the division bench of the Hon'ble Hig the Writ Petition No.

1877 of 2013 in India Services Pvt.

Ltd. vs. er of Income Tax &Ors. (2014) repor We find that the Assessing Officer has ble views on this aspect because Ho in the case of CIT vs Goetze (India) L mputing the book profit under section necessary disallowances under sec required to be made. o be made.

In the given fa judicial cleavage on this contenti es of the case, we do not find any infi e Assessing Officer in keeping the m n of the assessee in this regard is mas Cook (India) Ltd.

14 ITA No.

7807/M/2019 he Ld.

DR relied on the issue in rd.

We find that n the impugned Investment Pvt. n mainly for the the assessment objection of the t observation of efore the DR t is only the ed before it. sed by the n appellate ntinuation of ied by the gh Court of the case of Additional rted in 264 s taken one on'ble Delhi Ltd. (supra) n 115 JB of ction 14A of acts and the ious issue, irmity in the matter alive. accordingly 10.1 In our opinion, of the Special Bench Pvt.

Ltd. (supra) and the ground that D continuation of the a dispute being covered Investment Pvt.

Ltd.

Officer is directed to is accordingly allowed 11.

The ground No disallowance of disc difference between addition amended of 12.

Briefly stated f assessee claimed e Rs.8,70,45,135/- in Assessing Officer th expenditure and be allowable in the yea other hand contend Rs.8,70,45,135/- wa scheme was introduc human talent by m business activities a Thom the issue in dispute is covered of the Tribunal in the case of Vi the Ld.

DRP has retained the a DRP is not for appellate pr assessment proceedings.

Howev d by the binding precedent in th (supra).

The addition made by be deleted the ground of appeal d. o.

3 of the appeal of the asse count of employee stock opti exercise price and at the tim Rs.8,70,45,135/-. facts qua the issue in disput employee stock option claim the profit and loss account.

A hese expenses were in the na eing contingent in nature, ar under consideration.

The a ded that discount of expenses as claimed as revenue expen ced with an objective to attrac motivating the employees to co and to inculcate a sense of bel mas Cook (India) Ltd.

15 ITA No.

TA No.

7807/M/2019 by the decision ireet Investment addition only on roceedings and ver, the issue in he case of Vireet y the Assessing l of the assessee essee relates to ion plan (being me of grant of te are that the m expenses of According to the ature of capital samewere not assessee on the s amounting to nse.

The ESOP ct and retain its ontribute to the ongingness and instill a feeling of o during the year wa market price and the employees as cost t discount on issue of The detail of ESOP a DRP in the impugned 7.2.3 The aggregating to Rs.8 Partic Date of Grant Market Price Exercise Price Vesting Period (y Charge to P&L p Number of Optio Total charge Charge per year Total charge for 13.

Before the ld D Special Bench Banga 35taxmann.com 335 compensation recog accounting guideline Ld.

DRP however not of the assessment p Bench have been ap Karnataka High Cou Assessing Officer w Thom ownership in them.

The ESOP as accounted by the differenc e price at which the shares wer thereof on the date of grant f shares was claimed over the aggregating to Rs.8.70 crores rep d order, is extracted as under: assessee stated that the ESO 8.70 crores has been claimed as unde culars Scheme 2013 05-Sep-13 05 54.80 82 49.32 1.0 years) 3.00 4.0 er share 5.48 81 ons granted 8,48,210 42 0.47 crores 34 0.15 crores 8.5 r year 2014-15 DRP, the assessee relied on the alore Tribunal in the case of Bio 5, wherein it is held that am gnized in the book under es will be deductible u/s 37(1) ted that proceedings before it ar proceedings and the decision ppealed by the Department bef urt and therefore, the addition p was directed to be retained mas Cook (India) Ltd.

16 ITA No.

7807/M/2019 P scheme made ce between the re offered to the of options.

The vesting period. produced by Ld.

OP discount er: Execom ESOP 5-Dec-13 2.30 00 00 .30 2,02,438 4.16 crores 5 crores 8.70 crores decision of the ocon Ltd (2013) mount of ESOP the applicable of the Act. f the Act.

The ein continuance of the Special fore the Hon’ble proposed by the d in the final assessment order.

Th as under: “7.3.1 We advanced.

T that the sa Bangalore T also been ar in the empl employer wi note that the appealed ag decision of admitted th number of j Assessing Of 14.

We have heard dispute and perused Ld.

Counsel of the passing of the order Court in the case of upheld the finding of v.

Biocon Ltd (supra) High Court is reprodu 6.

We have conside the parties and ha arises for conside correct in holding t between the grant the date of gra under Section 37 to take note of Sec Thom he relevant finding of the Ld.

DR have carefully considered the The case of the assessee rests on the ame was considered in the decis Tribunal in Biocon Ltd v DCIT (SB) (su rgued that as the value of perquisite w oyee's hands, a disallowance in th ill mean double taxation.

In this con e said decision of the Id.

Special Benc gainst by the Department and is a the Hon'ble Karnataka High Court he Question of Law raised.

We als judicial authorities that have been c Officer and the assessee.” rival submission of the parties the relevant material on record assessee submitted that sub r of the Ld.

DRP the Hon’ble K f CIT v.

Biocon Ltd -21 taxman f the Special Bench Tribunal in .

The relevant finding of the Ho uced as under: ered the submissions made by learne ave perused the record.

The singular eration in this appeal is whether the that discount on the issue of ESOPs i. t price and the market price on the s ant of options is allowable as a of the Act.

Before proceeding further, ction 37(1) of the Act, which reads as mas Cook (India) Ltd.

17 ITA No.

7807/M/2019 RP is reproduced arguments e arguments sion of Id. upra).

It has was taxable he hands of nnection, we ch has been waiting the which has so note the cited by the on the issue in d.

Before us, the bsequent to the Karnataka High nn.com 351 has n the case of CIT n’ble Karnataka d counsel for issue, which e tribunal is e. unal is e., difference shares as on a deduction it is apposite under: Section 37(1) says the nature describ nature of capital ex laid out or expend business or profes chargeable under Profession".

Thus, from peru the aforesaid prov out or expnded and be a pay out.

If of Section 37(1) of note that Section 3 cash.

8.

Section 2(15A) stock option' to m officers or the e directors, officers subscribe at a futu free determined pr shares to its empl current market pr discount and the s between market pr offer price.

In ord scheme, the empl services to the com scheme.

On compl company, the optio 9.

In the instant ca of four years i.e., a year, the employee assessee is bound well settled in law accounting year, th liability may have On exercise of opt has to be determin place at a future reliance on decisio Thom s that any expenditure (not being ex bed in sections 30 to 36 and not xpenditure or personal expenses of th ed wholly and exclusively for the pur ssion shall be allowed in computing the head, "Profits and Gains of usal of Section 37 (1) of the Act, it is vision permits deduction for the expe d does not contain a requirement that f an expenditure has been incurre f the Act would be attracted.

It is also 37 does not envisage incurrence of ex of the Companies Act, 1956 defines mean option given to the whole tim employees of the company, which or employees, the benefit or right to ure rate the securities offered by a co rice.

In an ESOP a company underta loyees at a future date at a price low rice.

The employees are given stock same amount of discount represents t rice of shares at the time of grant of op der to be eligible for acquiring share loyees are under an obligation to mpany during the vesting period as pro letion of the vesting period in the s on vest with the employees. employees. ase, the ESOPs vest in an employee o at the rate of 25%, which means at th e has a definite right to 25% of the sh d to allow the vesting of 25% of the w that if a business liability has a he same is permissible as deduction, e to quantify and discharged at a tion by an employee, the actual amou ned is only a quantification of liability, date.

The tribunal has therefore, ri ons of the Supreme Court in Bharat M mas Cook (India) Ltd.

18 ITA No.

7807/M/2019 xpenditure of being in the he assessee), rposes of the g the income Business or evident that enditure laid t there has to ed, provision o pertinent to xpenditure in s 'employees me directors, gives such purchase or ompany at a akes to issue wer than the k options at he difference ption and the es under the render their ovided in the ervice of the over a period he end of first hares and the options.

It is arisen in the even though, future date. unt of benefit which takes ightly placed Movers supra and Rotork Contro that discount on is ascertained liabilit 10.

From perusal of it is evident that an aforesaid provisio expression 'expen issuance of shares difference between value of the shar purposes of Sectio aforesaid exercise securing consisten same cannot be co therefore, in para incurring of the deduction under S condition.

11.

The deduction accordance with th been prepared in a India (Employee St Scheme) Guidelines 12.

So far as relia INFOSYS TECHNO the aforesaid dec proceeding under source and it wa employees.

The af issue of allowabili also pertinent to m Supreme Court in question was 199 not contain any ESOPs.

Section 17 effect from 01.04.2 real benefit in the reasons, the decisi of no assistance t revenue in Gajapa Thom ls India P.

Ltd., supra and has record ssue of ESOPs is not a contingent liabi ty. liabi ty. of Section 37(1), which has been refer n assessee is entitled to claim deducti on if the expenditure has been in nditure' will also include a loss an s at a discount where the assessee n the price at which it is issued and res would also be expenditure incu on 37(1) of the Act.

The primary o e is not to waste capital but to ear nt services of the employees and th onstrued as short receipt of capital. agraph 9.2.7 and 9.2.8 has rightl expenditure by the assessee entit Section 37(1) of the Act subject to fulfi of discount on ESOP over the vesting he accounting in the books of account accordance with Securities And Excha tock Option Scheme and Employee Sto s, 1999. ance place by the revenue in the cas OLOGIES LTD. is concerned, it is notew cision, the Supreme Court was dea Section 201 of the Act for non deduc as held that there was no cash in foresaid decision is of no assistance t ty of expenses in the hands of the em mention here that in the decision rend n the aforesaid case, the Assessm 7-98 to 1999- 2000 and at that time specific provisions to tax the 7(2)(iiia) was inserted by Finance Ac 2000.

Therefore, it is evident that law hands of the employees.

For the afo ion rendered in the case of Infosys Te to the revenue.

The decisions relied thy Naidu, Morvi Industries and Kesh mas Cook (India) Ltd.

19 ITA No.

7807/M/2019 ded a finding ility but is an rred to supra, ion under the ncurred.

The nd therefore, absorbs the d the market urred for the object of the rn profits by herefore, the The tribunal ly held that tles him for fillment of the g period is in ts, which has ange Board of ock Purchase se of CIT VS. worthy that in aling with a ction of tax at nflow to the to decide the mployer.

It is dered by the ment Year in e, the Act did benefits on ct, 1999 with recognizes a orementioned echnologies is upon by the hav Mills Ltd. supra support the definite legal liab accounting, the d expenditure in th agreement with th Tree Hotels Ltd.

Su 13. td.

Su 13.

It is also pert 2009-10 onwards of ESOP expenses in Radhasoami S revenue cannot be the Assessment Ye In view of preced framed by a bench and in favour of th in this appeal, the 14.1 Respectfully fol High Court(supra), th addition.

The groun allowed.

15.

In ground No. claim of discount of time of exercise an amounting to Rs.10,0 Ld.

DRP as addition contention mainly on are in the continuan the nature of the app Thom case of assessee as the assessee ha ility and on following the mercantil iscount on ESOPs has rightly been he books of accounts.

We are in he view taken in PVP Ventures Ltd. upra. tinent to mention here that for Asses the Assessing Officer has permitted t and in view of law laid down by Su Satsang vs.

CIT, (1992) 193 ITR 32 permitted to take a different stand w ear in question. ding analysis, the substantial quest h of this court are answered against he assessee.

In the result, we do not fi same fails and is hereby dismissed. llowing the finding of the Hon he Ld.

Assessing Officer is direct nd of appeal of the assessee 4, the assessee has prayed fo ESOP (difference between mar nd market price at time of g 01,36,178/-.

This ground was r nal ground however, the Ld.

D n the ground that proceedings nce of the assessment proceedi pellate proceedings and therefor mas Cook (India) Ltd.

20 ITA No.

7807/M/2019 as incurred a le system of n debited as n respectful And Lemon ssment Year the deduction upreme Court 21 (SC), the with regard to tions of law t the revenue ind any merit n’ble Karnataka ted to delete the is accordingly or admitting the rket price at the grant of option) raised before the DRP rejected the before the DRP ings and not in re, claim cannot be admitted otherwi relevant finding of th “8.3.7 The Bombay Hi Shareholders decisions of [1998] (229 jurisdiction t facts as foun the tax liabi decision of t same is not ground can The Hon'ble authorities h additional c discretion w jurisdiction.” 16. tion.” 16.

We have heard the relevant materia rejected the additiona before the Ld.

DR proceedings and not therefore, the Ld.

D additional claim oth However, the Tribuna such a claim if sam investigation of the Counsel of the asses submitted that all su therefore, same are Thom ise then filing revised return e Ld.

DRP is reproduced as und assessee relied on the decision of igh court in the case of Pruthvi s (ITA No 3098/2010), which rely f the National Thermal Power Comp 9 IT 383), held that the Id.

Tribu to examine a question of law which ar nd by the lower authorities and had ility of the company.

We have perus the Hon'ble Bombay High Court and f an authority for the proposition that be mechanically and automatically Bombay High Court observed that t have the discretion whether or not to claims to be raised and that the was entirely different from the e ” rival submissions of the parti al on record.

We find that th al claim mainly on the ground t RP are in continuance of t t in the nature of appellate p DRP was not authorized to a herwise then by revised retu al being appellate authority is e me is purely being legal in the fresh facts is required.

Befo see has filed all details in respe uch details were filed before th available on record.

In view o mas Cook (India) Ltd.

21 ITA No.

7807/M/2019 of income.

The der: f the Hon'ble Brokers & ying on the pany Limited unal had a rose from the a bearing on sed the said find that the t an addition be accepted. the appellate o permit such exercise of existence of ies and perused e Ld.

DRP has that proceedings the assessment proceedings and admit such an urn of income. entitled to admit nature and no ore us, the Ld. ect of claim and he Ld.

DRP and of the facts and circumstances, we a decision of the Hon’ Pruthvi Brokers & S the matter back to th the claim in accorda evidence submitted assessee is according 17.

The ground No. of excess of dividend Before us, the Ld.

Co issue is covered ag Tribunal, Special Ben No. al Ben No.

6997/Mum/201 finding of the Tribu under: CONCLUSIO 83.

For the r is declared, non-resident Tax (Tax on Act, such a company sh the Act and resident sha reference to conscious of protection to tax through Pvt.

Thom admit this claim of the assessee ’ble Bombay High Court in the Shareholders (ITA No.

3098/20 he file of the Ld.

Assessing Office ance with law after verifying th by the assessee.

The ground gly allowed for statistical purpos 5 of the appeal, the assessee r distribution tax amounting to ounsel of the assessee fairly con gainst the assessee by the d nch in the case of Total Oil Ind 9 for assessment year 2016-1 unal Special Bench (supra) is ON: reasons give above, we hold that wh distributed or paid by a domestic co t shareholder(s), which attracts Addit Distributed Profits) referred to in Sec. additional income tax payable by t hall be at the rate mentioned in Secti d not at the rate of tax applicable areholder(s) as specified in the relevan o such dividend income.

Neverthele f the sovereign's prerogative to exten domestic companies paying dividend the mechanism of Special Bench - To mas Cook (India) Ltd.

22 ITA No.

7807/M/2019 e relying on the e case of CIT v.

10 )and restore er for examining he documentary d No.

4 of the ses. relates to refund Rs.88,50,980/-. nceded that this decision of the dia P Ltd in ITA 7.

The relevant reproduced as here dividend ompany to a tional Income .115-O of the the domestic ion 115 O of to the non- nt DTAA with ess, we are nd the treaty d distribution otal Oil India DTAAs.

Thus intend to ext paying divid company ca question befo 17.1 Respectfully fo Tribunal (supra) ,the 18.

The ground No. of the Act which be dismissed as infruc interest u/s 234B an is concerned same is to the same is dismi u/s 234C is concern Assessing Officer.

W verify the levy of int law after providing assessee.

The groun allowed for statistical 19.

In the result, t statistical purposes. purposes.

Order pronoun Sd/ (KAVITHA RA JUDICIAL M Thom s, wherever the Contracting States to tend the treaty protection to the domes dend distribution tax, only then, t an claim benefit of the DTAA, if any fore the Special Bench is answered, ac ollowing the finding of the ground of appeal of the assesse .

6 relates to initiation of penal eing premature at this stage, ctuous.

The ground No.

7 rel nd 234C of the Act.

As far as int s consequential and therefore, issed as infructuous.

As far as ned, which is a matter of ver We accordingly direct the Asses erest u/s 234C of the Act in a adequate opportunity of bein nd No.

7 of the appeal is acc l purposes. he appeal filed by the assesse ced in the open Court on 31/0 - S AJAGOPAL) (OM PRAK MEMBER ACCOUNTA mas Cook (India) Ltd.

23 ITA No.

7807/M/2019 o a tax treaty stic company the domestic y.

Thus, the ccordingly.

Special Bench ee is dismissed. lty u/s 271(1)(c) the ground is lates to levy of terest u/s 234B grounds realted levy of interest rification by the ssing Officer to accordance with g heard to the cordingly partly e is allowed for 05/2023.

Sd/- KASH KANT) ANT MEMBER Mumbai; Dated: 31/05/2023 Rahul Sharma, Sr.

P.S.

Copy of the Order forwa 1.

The Appellant 2.

The Respondent.

3.

CIT 4.

DR, ITAT, Mumbai 5.

Guard file. //True Copy// Thom arded to : BY ORDE (Assistant R ITAT, M mas Cook (India) Ltd.

24 ITA No.

7807/M/2019 ER, Registrar) Mumbai