THE ACIT, CIRCLE-2(1)(1),, AHMEDABAD vs. GRUH FINANCE LTD.,, AHMEDABAD

Being aggrieved by the said order of the Ld.CIT(A), the assessee has come in appeal before us.

We have heard the rival contentions and gone through the record. Admittedly, the assessee has made the claim of ESOP expenses for the first time during the re-assessment proceedings u/s.147 of the Act. The said claim of the assessee was not related or connected to the issue of escaped income in relation to which the assessment was re-opened. In our view, such a fresh claim of the assessee is not admissible in the reopened assessment proceedings, since the original assessment proceedings have already been settled upto the level of the Tribunal. Even the matter travelled to the Hon’ble High Court but no such claim was made even in the appellate proceedings in relation to the original assessment proceedings carried out u/s.143(3) of the Act. The issue is squarely covered against the assessee by various decision of the Higher Court. Reliance in this respect can be placed of Hon’ble Supreme Court in the cases of CIT vs. Sun Engineering Works (P.) Ltd. (1992) 64 Taxman 442 (SC); CIT vs. Caixa Economica De Goa 210 ITR 719 (Bom); K. Sudhakar S. Shanbhag vs. ITO 241 ITR 865 (Bom) and CIT vs. Keshoram Industries Ltd. 144 Taxman 1 (Calcutta). It is to be noted that the Reliance of the Ld.Counsel on the decision of the Hon’ble Bombay High Court in the case of CIT vs. Caixa Economica De Goa (supra) is misconceived as in the said case, the assessment was re-opened on the ground that subsidy received by the assessee was assessee’s income, which had escaped assessment during the original assessment proceedings. The Hon’ble Bombay High Court held that in the re-assessment proceedings, the assessee was entitled to claim the expenditure relatable so such escaped subsidy income. The Hon’ble Bombay High Court observed that in the re-assessment proceedings, the assessee , 855/Ahd/2017, & 1126/Ahd/2017 Asst. Years : 2011-12, 2012-13 & 2014-15 cannot re-agitate the claim that was already made during the original assessment proceedings, however, it was open to assessee to put forward claim for deduction for any expenditure which was relatable to the income which was sought to be assessed as escaped income in the reassessment proceedings. However, it is settled proposition of law that when no such claim relating to ESOP cost was made in the original return of income and nor during original assessment proceedings u/s.143(3) of the Act, the matter had travelled upto the High Court and even no such claim was made relating to ESOP expenses even at any stage of the appellate proceedings, it was not open to the assessee to make a fresh claim for the first time during the re- assessment proceedings u/s.147 of the Act. The Hon’ble Supreme Court in the case of CIT vs. Sun Engineering Works (P.) Ltd. reported in [1992] 64 Taxman 442 (SC) has held that the object and purpose of the proceedings u/s.147 of the Act are for the benefit of the revenue and not an assessee, and that an assessee cannot be permitted to convert the reassessment proceedings as its appeal or revision in disguise, and seek relief in respect of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to escaped income and re-agitate the concluded matters. The various higher courts have subsequently followed the above proposition of law.

In view of this, there is no merit in the appeal of the assessee for the year under consideration and is hereby dismissed. for AY 2012-13: 7. The assessee, in this appeal, in the original grounds of appeal, has agitated against the confirmation of disallowance u/s.14A r.w. Rule 8D made , 855/Ahd/2017, & 1126/Ahd/2017 Asst. Years : 2011-12, 2012-13 & 2014-15 by the Assessing Officer to the extent of Rs.2,25,35,088/-. We note that the Ld.CIT(A) has restricted the disallowance to the extent of exempt income earned by the assessee. The Ld.CIT(A) while holding so, has relied upon the decision of the Tribunal in own case of the assessee for AY 2008-09 passed in ITA No.1880/Ahd/2015. The issue is otherwise settled by various High Courts, wherein it has been held that the disallowance u/s.14A cannot be exceed the exempt income earned by the assessee. Even the Ld.Counsel for the assessee has not advanced any arguments on this issue. This ground of assessee’s appeal is, therefore, dismissed.

The assessee has also raised an additional ground of appeal, where by, for the first time, during the appellate proceedings before the Tribunal, the assessee has claimed deduction on account cost of ESOP borne by the assessee on the issue of shares to the employees at the rate lower than the fair market value amounting to Rs.3,24,89,420/-. Admittedly, the issue on merits is squarely covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in the case of Commissioner of Income Tax, LTU v. Biocon Ltd. [2020] 121 taxmann.com 351 (Karnataka) and further by the decision of Hon’ble Madras High Court in the case of Commissioner of Income tax vs. Shriram City Union Fiannce Ltd. [2024] 161 taxmann.com 218 (Madras). The Co-ordinate Bench of Kolkata Tribunal, in the case of M/s.Bandhan Bank Limited vs. DCIT, in dated 26/08/2024, has decided the aforesaid issue of claim of deduction on account of ESOP cost in favour of the assessee. Further, the issue is also squarely covered in favour of assessee by the decision of Coordinate Bench of Kolkata Tribunal, in the case of DCIT vs. Bandhan Bank Ltd., in vide order dated 27/03/2023, wherein the Coordinate Bench has taken the ITA Nos.1228/Ahd/2019, 855/Ahd/2017, & 1126/Ahd/2017 Asst. Years : 2011-12, 2012-13 & 2014-15 view that the ESOP expenses are the allowable deduction u/s.37(1) of the Act. The said decision of the Tribunal has been further affirmed by the Hon’ble Calcutta High Court in ITAT/296/2023 - IA No:GA/1/2023, GA/2/2023, in the case of Principal Commissioner of Income Tax 2, Kolkata vs. Bandhan Bank Ltd.,dated 07/02/2024.

The Ld.DR Could not controvert the aforesaid legal position.

We note that the claim by the assessee is based on the facts which are already on the file and no new facts have to be investigated. In view of this, this ground of appeal is allowed and the Assessing Officer is directed to allow the claim of deduction to the assessee on account of ESOP cost/expenses.

This appeal of the assessee is partly allowed.

Ground No.1:- The Revenue vide Ground No.1 has agitated the action of CIT(A) in allowing excess claim of deduction u/s.36(1)(viii) of the Act, amounting to Rs.35,33,371/-.

The Assessing Officer had made the impugned disallowance holding that out of the total deduction claimed u/s.36(1)(viii), the amount recoverd as bad debts was cannot be held as income derived from the eligible business of Long Term Housing Finance. The Ld.CIT(A) relied upon the decision of the Tribunal in own case of assessee for AYs 2005-06 to 2009-10 in dated 17/08/2006, has granted deduction u/s.36(1)(viii) of the Act holding the recovery of bad debts as derived from the eligible business of the assessee.

The Ld.DR could not show any distinguishing case-laws. In view of this, there is no merit in this ground of Revenue and the same is, accordingly, dismissed.

Ground No.2:- The Revenue vide Ground No.2 has agitated the action of the Ld.CIT(A) in restricting the disallowance u/s.14A of the Act to Rs.2,25,35,088/- as against Rs.2,41,27,024/- made by the Assessing Officer.

We have asked a specific question to the Ld.DR as to whether he can point out as to any defect or infirmity in the order of the Ld.CIT(A) so far as the allowability of the aforesaid claim on merits was concerned. The Ld.DR, however, has replied that though he has nothing to say in respect of allowability of the claim on merits, however, only plea of the Revenue is that the Assessing Officer should have been given an opportunity to rebut the aforesaid claim. We are not convinced with the aforesaid arguments of the 855/Ahd/2017, & 1126/Ahd/2017 Asst. Years : 2011-12, 2012-13 & 2014-15 Ld.DR. The Ld.CITA) is a Higher Officer and Appellate Authority over the Assessing Officer. It has been held, time and again, that the powers of the appellate Commissioner are co- terminous with that of the Assessing Officer. The Ld.Commissioner has examined the evidence before him and allowed the claim of the assessee. The Ld.DR could not point out any ambiguity or infirmity in the order of the Ld.CIT(A) regarding the merits of the allowability of claim of deduction in this respect, even before us. Remanding the matter to the AO for the sake of just procedural infirmity will not yield any purposeful result except the further prolonging and multiplicity of litigation. No useful purpose will be served in remanding the matter to the AO, when the Revenue has nothing to say otherwise, about the validity of allowability of the claim allowed by the Ld.CIT(A). ‘There is no merit in this ground of appeal of the Revenue and the same is, accordingly, dismissed.

This appeal of the Revenue is hereby dismissed. for AY 2014-15:

The assessee in this appeal is aggrieved by the action of the CIT(A) in dismissing its application moved u/s.154 of the I.T. Act.

Before us, the Ld.Counsel has neither pressed this ground nor raised any arguments on this issue. This ground is, therefore, dismissed.

Apart from the aforesaid ground of appeal, the Ld.Counsel for the assessee has raised an additional ground for the first timeregarding claim of ESOP cost.

We summarize the result as under: (1)