ACIT 3(2)(2), MUMBAI vs. KORN FERRY INTERNATIONAL P. LTD, MUMBAI

Per Manoj Kumar Aggarwal (Accountant Member)

read as under:- 1. “Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 78,974/- u/s 14A r.w.s 8D without appreciating the fact that the amount of disallowance u/s 14A of the I.T.Act, 1961 has to be computed as per Rule 8D of I.T. Rules, 1961 as held in the order of the Hon’ble High Court in the case of M/s. Godrej & Boyce Manufacturing Co .Ltd.

2. Whether on the facts and circumstances and in law, the Ld. CIT(A) has erred in deleting the claim of loss of Rs.32,02,850/- on allotment of Employees Stock Option Scheme (ESOP) without appreciating the fact that the ESOP was not allotted by the assessee but the holding company and therefore the loss of Rs.32,02,850/- was wrongly claimed by the assessee. 2.1 During assessment proceedings, it was noted that the assessee earned exempt dividend income of Rs.3.25 Lacs and made suo moto disallowance of Rs.50,000/- u/s 14A, being portfolio management fees paid by the assessee. However, not convinced, Ld. AO, by applying Rule 8D, computed additional disallowance of Rs.78,974/- which comprised- off of interest disallowance u/r 8D(2)(ii) for Rs.4,115/- and expense disallowance u/r 8D(2)(iii) for Rs.74,859/-. 2.2 The second addition pertains to Employee Stock Option Scheme [ESOP] expenditure of Rs.32.02 Lacs reimbursed by the assessee to its holding company. This expenditure was nothing but the difference between market price and the share allotment price. The assessee contended that the said payment was in the nature of compensation to its employee which was taxable as perquisite u/s 17(2) and applicable TDS was deducted thereupon at the time of vesting of these stocks. It Korn Ferry International Private Limited Assessment Year-2012-13 was further contended that the shares were issued by the holding company and not by the assessee and therefore, the expenditure was deductible u/s 37(1). However, Ld. AO following the earlier years, disallowed the same and added the same to the income of the assessee.

3. Aggrieved, the assessee contested the same successfully before Ld. CIT(A) vide impugned order dated 14/10/2016 wherein Ld. CIT(A) following the orders of this Tribunal in assessee’s own case for AY 2008- 09, 2010-11 & 2011-12 allowed the claims of the assessee. Aggrieved, the revenue is in further appeal before us.

Korn Ferry International Private Limited Assessment Year-2012-13