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

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ITA 748/MUM/2017Status: DisposedITAT Mumbai04 July 2018AY 2012-134 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, noting that the issues had been decided in the assessee's favor in previous assessment years by the Tribunal itself. The revenue failed to present any new facts or circumstances to warrant a different view.

What were the facts?

The revenue appealed against the CIT(A)'s order deleting disallowance under Section 14A and a claim of loss on ESOP. The assessee had claimed exempt dividend income and made a suo moto disallowance, but the AO applied Rule 8D for a higher disallowance. The ESOP loss was claimed as reimbursement to the holding company.

What were the issues?

Whether disallowance under Section 14A should be computed as per Rule 8D, and whether a loss on ESOP reimbursement to a holding company is deductible.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “H” BENCH, MUMBAI

Before: SHRI JOGINDER SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM

Per Manoj Kumar Aggarwal (Accountant Member)

1.

Aforesaid appeal by revenue for Assessment Year [AY] 2012-13 contest the order of the Ld. Commissioner of Income-Tax (Appeals)-8 [CIT(A)], Mumbai, Appeal No.CIT(A)-8/IT-200/15-16 dated 14/10/2016 qua certain relief provided to the assessee. The assessment for Korn Ferry International Private Limited Assessment Year-2012-13 impugned AY was framed by Ld. Deputy Commissioner of Income Tax- 3(2)(2), Mumbai [AO] u/s 143(3) of the Income Tax Act,1961 on 28/03/2015 wherein the income of the assessee has been assessed at Rs. 14.41 Crores after certain disallowance as against returned income of Rs.14.08 Crores e-filed by the assessee on 29/11/2012. The effective grounds of appeal

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.

4.

Upon due consideration, it is noted that first appellate authority has followed the decision of this Tribunal in earlier years wherein the claims of the assessee has been allowed by the Tribunal after considering the factual matrix. The orders of the Tribunal for AYs 2008-09 to 2011-12 has been placed before us, a perusal of which reveal that both the issues have been decided in assessee’s favor by this Tribunal. The first appellate authority, following the same, has allowed the claims of the assessee. The revenue is unable to point out any change in facts or circumstances which necessitate us to take a different view in the matter. Nothing has been brought on record to suggest that the above decisions have been overruled by higher judicial authorities in any manner. Therefore, factual matrix being the same, taking consistent view in the matter, we dismiss revenue’s appeal.

5.

Resultantly, the revenue’s appeal stand dismissed. Order pronounced in the open court on 04th July, 2018.

Korn Ferry International Private Limited Assessment Year-2012-13

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