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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S. JAYARAMAN
: Mr.T.Vasudevan, Adv. अपीलाथ' क* ओर से/ Appellant by : Mr.N.Madhavan, ACIT ()यथ' क* ओर से /Respondent by : सुनवाई क* तार"ख/Date of Hearing 07.05.2018 घोषणा क* तार"ख / : 07.05.2018 Date of Pronouncement आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER: is an appeal filed by the assessee against the Order of Commissioner of Income Tax (Appeals)-5, Chennai, in dated 11.01.2016 for the AY 2011-12.
Shri N.Madhavan, ACIT, represented on behalf of the Revenue and Shri T.Vasudevan, Adv., represented on behalf of the assessee. :- 2 -:
In the assessee’s appeal, the assessee has raised the following grounds:
1. The order of the Commissioner of Income-Tax (Appeals) dismissing the appeal of assessee is contrary to law, erroneous and unsustainable on the facts of the case.
2. The CIT(A) ought to have seen that the order of the Assessing Officer was barred by limitation and hence is unsustainable and non-est in law.
3. The CIT(A) ought to have seen that the dispatch and service of Assessment Order on the assessee was beyond the statutory period of limitation and needs to be annulled.
4. The CIT(A) erred in confirming the disallowance of deduction claimed under sec.80G of the Act on the donation made to Sri Krishna Trust for the purpose of construction of Shikshaa International School as not falling for consideration in the year.
5. The CIT(A) failed to appreciate that the Irrecoverable Deed of Donation made on 28.3.2011 along with a cheque was the source for donation which falls within the financial year 2010-11 and hence the claim of assessee u/s.80G is justified and tenable in law.
6. The CIT(A) further failed to appreciate that the subsequent act of cancellation of the cheque due to unchecked errors and issue of fresh cheques with even date would not invalidate the donation already made by the assessee and hence the observations of the authorities to negate the spirit of donation is uncalled for, unjustified and only a ruse to reject the valid and statutory claim of deduction allowable u/s.80G of the Act.
7. The CIT(A), in any event, ought to have appreciated that the Courts have held the date of encashment by the donee is not the criterion for allowability of claim u/s.80G in the hands of donor, rather it is date of donation by the donor and accordingly allowed the deduction under sec.80G in the impugned Assessment year.
8. The CIT(A) erred in holding that the value of ESOP shares received by assessee in April 2011 is to be assessed in the current year considering the payment has crystallized by way of exercising the option in this year by the assessee.
9. The CIT(A) failed to appreciate that the assessee has offered the amount in the asst. year 2012-13 and paid taxes thereon.
10. The CIT(A), in any view of matter, ought to have considered the contentions in the proper perspective, allowed the claim u/s.80G and accepted the income returned by assessee.
4. Ground No.1 is general in nature which does not require any specific adjudication.
5. At the time of hearing, the Ld.AR submitted that he did not wish to press Ground Nos.2 & 3 and consequently, the same are dismissed as not pressed. :- 3 -:
6. In regard to Ground Nos.4 to 7 & 10, it was submitted by the Ld.AR that the assessee had made donation of Rs.8.50 Crs. to M/s.Shri Krishna Trust, for the purpose of construction of a school building. It was a submission that as the permission for the construction of the building was delayed, the cheque was processed only in September, 2011. However, it was noticed that the cheque had certain defects and consequently, the cheque was returned to the assessee and the assessee had re-issued 17 cheques of Rs.50.00 lakhs each for the same amount but dated 28.03.2011 to 30.03.2011. It was a submission that the assessee had claimed the benefit of deduction u/s.80G in so far as the Trust M/s.Shri Krishna Trust had the benefit of registration u/s.80G of the Act. It was a submission that as the cheques were encashed in September, 2011, the AO had held that the assessee was not entitled to the claim of deduction u/s.80G for the relevant Assessment Year. It was a submission that the assessee may be granted the benefit of deduction u/s.80G as claimed.
7. In regard to Ground Nos.8 & 9, it was a submission that the assessee had been held to be eligible for ESOP shares to an extent of 5,93,336 Nos. during the relevant Assessment Year. The assessee had exercised his option in respect of ESOP shares on 25.02.2011 and remitted the perquisite tax amount to his employer on 04.03.2011. The ESOP shares were allotted by the Stock Allotment Committee meeting on 22.04.2011 and the shares transferred to his Demat A/c on 27.04.2011. It was a submission that the assessee had erroneously disclosed the said :- 4 -: value of the ESOP shares for the relevant Assessment Year but had subsequently by filing a revised return for the relevant Assessment Year 2012-13 and had disclosed the ESOP shares for the relevant Assessment Year 2012-13 and had paid taxes thereon also. It was a submission that the AO proceeded to treat the value of the ESOP shares as the income of the assessee in the form of perquisites for the AY 2011-12. It was a submission that in the revised computation filed before the AO for the AY 2011-12, the assessee had specifically withdrawn the claim of the income in respect of the ESOP shares for the AY 2011-12. It was a prayer that the ESOP shares which had been allotted to the assessee was liable to be treated as perquisite only during the relevant Assessment Year 2012-13.
8. In reply, the Ld.DR vehemently supported the order of the AO and the Ld.CIT(A). The Ld.CIT(DR) also filed a Written Submission which is extracted as follows:
Before the Hon’ble “C” Bench, ITAT, Chennai Shri Narasimhan Ranjit – Appellant – (AY 2011-12) Written Submission by SR.AR-3, O/o CIT(DR), Chennai. *********** The assessee filed appeal for the above assessment year against the orders of the CIT(A) appeal dated 11.01.2016. In the Grounds of Appeal filed before The Hon’ble ITAT, the assessee prayed for 1.Taxing the perquisite value of ESOP Shares in the assessment year 2012-13 and 2) ) Allowance of Deduction u/s.80G The written submission on the above issues is furnished here under. The Assessment for AY: 2011-12 was selected for manual scrutiny with the approval of CCIT-3, Chennai. As per the Form 16 issued by the assessee’s employer namely M/s.HCL Technologies Ltd, his earnings were as here under. SALARY — Rs.69,35,061 PERQUISITES-Rs.41,53,94,838 :- 5 -:
INCOME TAX AND SURCHARGE amounting to Rs.12,99,40,075 (including that of on the perquisite value of shares) was deducted by the employer and paid to the Government Account.
Since the assessee exercised his option for 926668 shares valued at Rs.41,51,90,900/- and remitted the taxes of Rs.12,82,93,988/- within the FY:2010-11 relevant to AY:2011-12, inclusion of the perquisite value of ESOP shares in the total income of the assessee for the AY:2011-12 has been correctly made. This view was also taken by the employer and the perquisite value and taxes paid were taken into account, while issuing Form-16 for the assessment year 2011-12. This was also admitted by the assessee in his return of income for the said assessment year. However, in order to substantiate the donation given to his family trust, he filed a revised return for the AY: 2012-13 admitting a portion of the ESOP shares as perquisite. Hence, the entire value of ESOP shares should be assessed in the AY 2011-12 during which he exercised the option.
The Second issue is with regarded to claim of donation made to M/s. Shri Kishna Trust Rs.8.5 Cores. The assessee claimed to have issued 17 cheques of HDFC bank for Rs.50 Lakhs each dated between 28.03.2011 and 31.03.2011 and claimed the same u/s.80G for the assessment year 2011-12. In this regard the assessee furnished two sets of Receipts issued by the said trust having Sl. numbers from 107 to 123 and 125 to 141. The first set of receipts were issued for 17 Cheques of HDFC Bank dated between 28.03.2012 to 31.03.2012. On verification of the second set of receipts bearing Nos.125 to 141, it was noticed by the AO that those receipts were issued against cheque Nos.244216 to 224225 & 263752 to 263758 drawn on HDFC Bank dated 28/3/2011, 29/3/2011, 30/3/2011 and 31/03/2011. The interesting point noted by the AO was that the said cheque leaves were issued to the assessee only on 21/04/2011 & 23/09/2011. Hence, the question for consideration is that when the assessee was not in possession of the cheque leaves as on 28/3/2011 to 31/3/2011, how he could have issued the same and obtained receipts from his family trust. Also, the assessee could not give any convincing reply as to why he furnished receipts bearing Sl. Nos. 107 to 123 purported to be issued against cheques issued during 28/3/2012 & 31/3/2012 during the course of assessment for AY 2011-12. The amount of donation claimed to be made to the Trust was only Rs.one crore as per the return of income for AY 2012-13. It is strange that the later receipts contained earlier numbers. It is also note worthy that the trust waited for six months (28/09/2011 was the date of encashment of cheques issued in March 2011), taken the consent of the assessee for deposit of the cheques in its bank a/c which normally do not happen. All the above facts go to establish that it was only an afterthought to avoid payment of tax on perquisites.
The assessee filed a revised return for AY 2012-13 admitting a portion of perks value of Rs.26,22,24,845/- and requested for deduction u/s.80 G (if not considered for AY 2011-12) by way of letters dated 19/3/2014 & 21/3/2014 filed before the JCIT, Salary Range V. This is quite contrary to the stand taken by him all along that since the Allotment Committee met on 22/4/2011 and the shares were transferred to his Demat a/c on 29/4/2011 only which fell in the next AY, the same should be taxed in AY 2012-13. On the petition filed by the assessee for the AY 2011-12 u/s.144A of the Act, the JCIT issued directions to the AO to bring to tax the perquisite value in that assessment year and not to consider the claim u/s.80-G. The AO completed the assessment for AY 2011-12 as directed by the JCIT and did not accept the income declared in the Revised Return for AY 2012-13. During the course of hearing the AR claimed that the Assessment Order for AY 2011-12 was served on the assessee on 15/04/2014 which was “Beyond the statutory period of limitation and needs to be annulled”. However, he failed to establish which is the “statutory period of limitation” and where it is mentioned. The above contention does not hold good since the assessment records contain a “tear off acknowledgement” evidencing service of Demand Notice u/s.156 Penalty Notice u/s.271 (1) (c) Assessment Order u/s.143 (3) and IT Computation Form on 31/03/2014 on one Shri. B.Ananth. No one can dispute that the said documents could not have been served on the said Ananth without any valid authorization from the assessee. In other words, the said Mr. Ananth would not have accepted the service of the :- 6 -: above documents on him unless he was specifically authorized by the assessee to receive the same on his (assessee’s) behalf. The system generated Income Tax Computation Form also evidences the completion of Scrutiny Assessment on 31/03/2014 itself. The second acknowledgement bearing the signature of the assessee with date as 15/04/2014 contains the address of the assessee’s family trust (at T.Nagar, Chennai-17) whereas the acknowledgement evidencing service on 31/03/2014 bears the communication address (at Maduravoyal, Chennai-95) as furnished by the assessee including Form No.35 and Form No.36. Since a huge demand of around Rs.73 Iakhs was raised, the AO, for abundant caution and to protect the interest of Revenue, could have sent the second set of documents to the Trust address which can, in no way, defeat the service made on 31/03/2014. Since the above facts clearly establish that the scrutiny assessment was made within the statutory time limit, Assessment order etc. were served on the very next day of passing the order, Perk value of ESOP shares properly assessed and Claim of deduction u/s 80-G was logically disallowed. It is requested that the CIT (A) order confirming the Assessment Order be upheld and the Assessee’s appeal be dismissed. (N. Madhavan) Sr.A.R.-3
It was a submission that in respect of Sec.80G claim, the assessee having issued the fresh cheques in September, 2011, though dated March, 2011, the claim of Sec.80G was liable to be considered only for the AY 2012-13. It was a further submission that the assessee having disclosed the perquisite representing the ESOP shares allotted to the assessee and having paid the taxes for the AY 2011-12, the same was liable to be considered as the income for the AY 2011-12 only. He vehemently supported the order of the AO and the Ld.CIT(A).
We have considered the rival submissions.
On a specific direction, the assessee has placed before us a copy of the Assessment Order for the AY 2012-13. A perusal of the Assessment
Order for the AY 2012-13 at Page No.7 clearly shows that the assessee :- 7 -:
has a written letter dated 26.03.2014, which has been extracted from the Assessment Order which read as follows:
Subsequently, the assessee vide his letter dated 26.03.2014 stated that: “I fully accept the Joint Commissioner’s direction that the donation of Rs.8.50 crores given by me to M/s.Shri Krishna Trust need not be considered for claim of deduction u/s.80G for F.Y.2010-11 However, I respectfully submit that his direction that the perquisite value of Rs.26,22,24,845.00 in relation to 593336 share of HCL Technologies Ltd, is assessable in F.Y.2010-11 itself, is against the express provisions of law, directions of the Central Board of Direct Taxes and the principles of natural jurisprudence.
Thus, the assessee has accepted the Jt. Commissioner’s Direction that the donation of Rs.8.50 Crs. given by the assessee through M/s.Shri Krishna Trust, could not be considered for the claim of deduction u/s.80G for the Financial Year 2010-11 relevant to the Assessment Year 2011-12. Further, there is no evidence placed before us to show that the cheque originally issued on 28.03.2011 had been presented to the bank for encashment and which had been returned by the bank on account of defects. It is an admitted fact that fresh cheques about 17 in number for the same value had been issued by the assessee in September, 2011, though dated March, 2011. The cheques have been encashed by the Trust only in September, 2011.
A perusal of the provisions of Sec.80(2)(a) shows that the word used is “paid”. Admittedly, the amount has been paid only during the relevant Assessment Year 2012-13 and consequently, the assessee is not entitled to the claim of deduction u/s.80G for the AY 2011-12. Thus, on this ground, the claim of deduction u/s.80G is not liable to be allowed for :- 8 -: the relevant Assessment Year but is allowable only the year in which the amount has been paid.
Coming to the next issue of the taxation of the ESOP shares allotted to the assessee. A perusal of the provisions of Sec.17(2)(vi) shows that what is taxable as perquisite is the value of any specified security or equity shares “allotted or transferred” ……….. A perusal of the Explanation-c thereto shows that the value of the specified security is to be determined as on the date of which the option is exercised by the assessee. Thus, clearly the year in which the taxability of the ESOP shares allotted as per perquisite would be the year in which the shares had been allotted or transferred to the assessee and its valuation is to be done on the basis of the date of which the option is exercised. In the present case, it is an admitted fact that the shares had been allotted only on 22.04.2011 and transferred to the Demat A/c on 27.04.2007. Thus, clearly the ESOP shares which is perquisite in the hands of the assessee is liable to be assessed only during the relevant Assessment Year 2012-13 and not during the relevant Assessment Year 2011-12. However, for the purpose of determining the value of the ESOP shares, the date of exercise of this option being 25.02.2011 is to be considered. In these circumstances, the AO is directed to assess the perquisite in respect of the ESOP shares for the AY 2012-13 and delete the addition to such an extent, it has been assessed for the AY 2011-12, wherein, the allotment of the shares have taken place during the relevant AY 2012-13. :- 9 -:
Consequently, Ground Nos.2 & 3 of the assessee’s appeal stands dismissed as not pressed. Ground Nos.3 to 7 & 10 of the assessee’s appeal stands dismissed and Ground Nos.8 & 9 of the assessee’s appeal stands allowed.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the Open Court on May 07, 2018, at Chennai. (एस जयरामन) (जॉज" माथन) (S. JAYARAMAN) (GEORGE MATHAN) लेखा सद य/ACCOUNTANT MEMBER "या"यक सद य/JUDICIAL MEMBER