DCIT 8(1), MUMBAI vs. APTECH LTD, MUMBAI

5. On facts and in the circumstances of the case the learned CIT(A) erred in law and on facts in upholding the disallowance by the learned Assessing Officer of provision of rebate amounting to Rs.2,50,00,000/-.

6. On facts and in the circumstances of the case the learned CIT(A) erred in law and on facts in upholding the disallowance by the learned Assessing Officer of provision for leave encashment to the extent of Rs.19,00,418/- (Rs.40,71,369/-being disallowance made by the learned Assessing Officer and confirmed by CIT(A) less Rs.21.70,951/70 being the leave encashment actually paid by the appellant during the year and directed by the CJT(A) to learned Assessing Officer to verify and allow the claim to such extent.) 7.1. On facts and in the circumstances of the case the learned CIT (A) erred in law and on facts in upholding the contention or the learned Assessing Officer that disallowance u/s 14A of the Act could be computed by applying the provisions of rule 8D of the Income Tax Rules. 1962 for assessment year 2007-08..

ITA No . 946 -723 -200 03-1 227- 1271-1 228- AP TEC H 4 7.1.1 On facts and in the circumstances of the case the learned CIT(A) erred in law and on facts in upholding the contention or the learned assessing officer that the Investments of the appellant as on 01-04- 2006 were Rs.63.97.33,668/- and R.s.10,00,000 as claimed by the appellant and as on 31.03.2007 were of Rs.82.52.36,269/- and not Rs.23,88,60,346/- as claimed by the Appellant and therefore the average investment were or Rs.73.24.84.968/- and Rs.11,99,30,173 as claimed by the appellant. 7.1.2 On facts and in the circumstances of the case the learned err (A) erred in law and on facts in upholding the contention of the learned assessing officer that the total assets of the appellant as on 1.4.2006 were Rs.142.10,95,818/- and not Rs.150,19,18,020/- as claimed by the appellant and as on 31.03.2007 were of Rs.172,33,26,035/- and not 1,76,74,75,925/- as claimed by the appellant and therefore, the average total assets were of Rs.157,22,10,927/- and not Rs.163,46,96,973/- as claimed by the appellant. 7.2 On [acts and in the circumstances of the case the learned CIT(A) erred in law and on facts in upholding the contention of the learned Assessing Officer that while computing deduction u/s 14A of the Act, . gross interest paid of Rs. 2,56,81,429/-is to be taken as amount of expenditure by way of interest and not the net interest of Rs.2,37,19,435/-. (Interest Paid R.s 2.56,81,429/- (-) Rs 19,61,994/-- being interest received) 8. On facts and in the circumstances of the case the learned CIT(A) erred in law and on facts in upholding the addition by the learned Assessing Officer u/s 68 of the Act to the extent of Rs.5,15.396/- on the basis of inadequate ITS information available with the department.

hereinabove is independent and without prejudice to each other.”

3. Facts of the case are that the assessee-firm filed its return of income for the assessment year 2007-08 on 30.11.2007 declaring total income at Rs.NIL after setting off of earlier years brought forward business losses and -723 -200 03-1 227- 1271-1 228- AP TEC H 5 unabsorbed depreciation. The said return was revised on 26.9.2008 declaring a loss of Rs.3,14,06,293/- which was processed u/s 143(1) of the Act. Thereafter, scrutiny proceedings were initiated against the assessee and statutory notices under section 143(2) and 142(1) were issued and served upon the assessee.

4. The issue raised in ground no.1 is against the confirmation of deletion of Rs.1,67,76,003/- by the ld.CIT(A) upholding the order of the AO that the assessee was not entitled to depreciation at the rate of 60% on the courseware of Rs.5,02,29,679/- and actually allowing the depreciation at the rate of 15%. Thus, the disallowance has arisen because of reduction in the rate of depreciation from 60% to 15% on cost of courseware.

9. The issue raised in the second ground of appeal

is qua the confirmation of disallowance of Rs.10,48,050/- by the ld. CIT(A) as made by the AO at the rate of 10% of Rs.1,04,80,500/- being the expenditure incurred on Lucknow School Project. During the course of assessment proceedings, the AO found that the percentage of expenses in relation to revenue is increased substantially and disproportionately from financial year 2003-04 and therefore the assessee was asked to produce vouchers etc in order to justify such steep hike in the expenses which were 55% in the financial year 2003-04 and 75% in the financial year 2006-07. The AO disallowed 10% of the expenditures claimed for the reasons that the assessee failed to produce any bills and vouchers or failed to give any justification for the said steep rise in the expenses and thus worked out disallowance at Rs.23,34,728/- being 10% of Rs.2,33,47,380/-. The ld. -723 -200 03-1 227- 1271-1 228- AP TEC H 11 CIT(A) confirmed the disallowance to the extent of Rs.10,48,050/- by holding that the AO had wrongly taken the figure of Rs.2,33,48,380/- which were the total of expenses from the financial years 2004-05 to 2006-07 and thus sustained the disallowance at the rate of 10% of the total expenses incurred in respect of Lucknow School project after calling remand report from the AO who admitted in the remand report dated 20.11.2011 that the disallowance was wrongly calculated by taking wrong figure of expenses. The ld. CIT(A) rejected the submissions and pleas of the assessee that these expenses were actually incurred for the business of the assessee wholly and exclusively and the books of account were audited as per the Companies Act, 1956 and also as per the Income Tax Act, 1961.

10. The ld. AR submitted before us that the increase in expenses was bonafide and therefore there was no justification in making adhoc disallowance. The ld. AR submitted that the payments were duly vouched and audited and were made through account payee cheques. The ld. AR finally submitted that the expenditures incurred by the assessee for its business could not be disallowed on the basis of mere conjecture and surmises and it was a settled law that the disallowance of expenditure on adhoc basis could not be sustained which was made without any reasons and justification. Finally ld AR prayed that the disallowance be deleted by setting aside the order of the ld. CIT(A) on this issue. -723 -200 03-1 227- 1271-1 228- AP TEC H 12

is with regard to the confirmation of disallowance of Rs.11,06,563/- by the ld. CIT(A) which was made by the AO in respect of ESOP charges. During the course of assessment proceedings, the AO found that the assessee has claimed ESOP charges to the tune of Rs.11,06,563/- which the AO found to be of capital nature and accordingly issued show cause notice dated 14.9.2009. As per the AO, the assessee did not reply to the show cause notice and as a result of which he treated the said expenditure as capital in nature as being incurred for issue of equity shares which were issued to the eligible employees. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld. CIT(A).

14. The ld CIT(A) also dismissed the appeal of the assessee on this issue by upholding the order of AO by rejecting the various submissions and arguments of the assessee which have been incorporated 7.2 of the appeal order. The assessee submitted before the CIT(A) that ESOP expenses were wrongly treated by the AO as expenses incurred to increase the share capital whereas as a matter of fact employees stock options were given at a discounted price as against the prevailing market price and the difference was amortised and written off on straight line basis over vesting period and included the same under the head of “Salaries and Other Allowances” and therefore these were actually incurred on employees and have been treated as such after following the procedure laid down by the regulator SEBI. As -723 -200 03-1 227- 1271-1 228- AP TEC H 14 such these were not of capital nature and not incurred as share issue expenses. However the CIT(A) not convinced with the submissions of the assessee dismissed the ground raised by the assessee by giving detailed findings as incorporated in para 7.3 of the appeal order by holding as under.- “….. The circumstances in the present case in appeal are similar, options have been offered by the company to its employees and vesting period and period over which options can be exercised has been mentioned, however loss remains notional in absence of anything to show that options were actually exercised. Thus the claims remain a contingent liability which is not allowable under the Act In these circumstances and in view of the above discussion both on facts “ and law the assessing officer’s action in not allowing deduction is confirmed. .”

15. The AR vehemently submitted before us that the ESOP charges are not of capital in nature as these were neither incurred on issue of shares nor were of contingent nature as held by the ld CIT(A). The ld. AR submitted that the ESOP charges amounting to Rs.11,06,563/- were not incurred for the purpose of increasing the share capital and thus facts were grossly misunderstood by the AO. The ld. CIT(A) upheld the action of the AO by holding that the same were contingent in nature. The ld.AR further submitted that the employees of the company were given stock option at discounted price vis a vis the prevailing market price and the said discount was written off on straight line basis over the vesting period, and the amount written off each year used to be shown under the head salary and allowances as these were incentives given to the employees and accordingly treated as -723 -200 03-1 227- 1271-1 228- AP TEC H 15 expenditure incurred on employees in the respective period over the vesting period and thus, these were not incurred on capital account or were not of contingent nature. The ld. AR submitted that the assessee has followed the procedure as they drawn from SEBI with regard to the employee’s stock option scheme. The ld AR further submitted that the deduction of the said expenses by amortising and writing off over the vesting period were allowable as revenue expenditure as held by the Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd. v. CIT (1997) 225 ITR 802 (SC). These expenditures were incurred for the benefit of the employees and these options were not transferable. It was also argued that the guidelines issued by the SEBI and ICAI have been followed in giving accounting treatment to these expenses. The ld. Counsel submitted that Special Bench of the Bangalore Tribunal in the case of Biocon Ltd. Vs Deputy Commissioner of Income-tax (LTU), Bangalore [2013] 25 ITR(T) 602 (Bangalore - Trib.) have set at rest all the doubts with regard to the treatment of ESOP charges. The Special Bench held that the objective of stock employees option was not to raise share capital but simply the mode of compensating the employees. The Special Bench of the Tribunal further held that issue of shares at an discounted price on a future date in view of the services satisfactorily rendered by the employees was nothing but an expenditure u/s 37(1) of the Act. It was further held that the expenditures is incurred on the date of vesting of option. Further the ld.AR relied on the decision of the Hon’ble Madras High Court in the case of CIT v. PVP -723 -200 03-1 227- 1271-1 228- AP TEC H 16 Ventures Limited (2013) 90 DTR 340 (Mad.)(HC) and the decision of Hon’ble Delhi High Court in the case of CIT Vs LEMON TREE HOTELS LTD in ITA 107/2015 dated 18.8.2015 which fully endorsed the view that ESOP charges is allowable as revenue expenses. It was submitted by the ld.AR that the assessee’s ESOP Scheme 2004 and it’s accounting in the books of account of the assessee were made on the vesting date of exercising of option by the employees and also submitted that the amount of options which left for the want of exercise of option by the employees have been duly written back in the books of accounts of assessee as per the SEBI guidelines and offered the same for taxation.

19. We have considered the rival submissions and perused the material on record including the order of ld. CIT(A) and AO. We find that the AO made the disallowance of entire hire charges of Rs.36,75,372/- by referring the provisions of section 40(a)(ia) or the Act as amended with effect 1.4.2015 which was reduced by the first appellate authority to Rs.4,46,593/- after calling the remand report dated 20.11.2011 which is reproduced by the ld.CIT(A) at page 19 of the impugned order. It was also submitted before the ld. CIT(A) that the said amount comprised of expenditures incurred by the staff for hiring vehicle out of transport advances given to them on behalf -723 -200 03-1 227- 1271-1 228- AP TEC H 19 of the assessee. The ld. CIT(A) upheld the disallowance on the ground that the payment exceeding Rs.20,000/- in each instance and aggregate of payments to each employee/payee exceeding Rs.50,000/. The ld. AR vehemently submitted before us that the ld. CIT(A) has not specified the provision under which the assessee was liable to deduct the tax at sources from these payment by referring to page 617 of the paper book. The ld. AR also submitted that these expenses were incurred by employees out of their tour advances while they were on tour. Looking into the facts and circumstances of the case, we find that the assessee had incurred these expenses through employees out of their travelling advances for hiring motor vehicles during the course of their employment and the expenditures incurred by them out of travelling advances. In our view, the same are not liable for deduction u/s 40(a)(ia) of the Act as it is the settled law that re- imbursement to the employees is not laible to the provisions of TDS . Accordingly, we direct AO to delete the addition.

21. The brief facts of the case are that the assessee entered into a contract with Directorate of Education, Delhi for imparting computer education and also supplying the related accessories in the government and government aided schools in the National Capital region of Delhi. The -723 -200 03-1 227- 1271-1 228- AP TEC H 20 assessee raised the bills to the Directorate of Education and Directorate of Education withheld certain payments on the ground of delayed installation of infrastructure, non performance of infrastructure and faculty absenteeism etc. The assessee reduced the amount billed and raised to Delhi Government by way of a provisions of rebate to the extent the amount withheld for deficiency in the services by the assessee. The AO disallowed the amount of Rs.2,50,00,000/- on the ground that the assessee did not submit details of all these expenses and same were in the nature of contingent liability. Before the ld.CIT(A), during the course of appellate proceedings it was submitted that the assessee did not make any provision for anticipated liability but short payment received from Directorate of Education, Government of Delhi was provided on actual basis. It was also submitted that the said withholding of the amount were still not received in the subsequent years and there were no dispute pending for recovery against the customer qua the said amount. The ld. CIT(A) held that the amount written off by the assessee as a provision of rebate but it was claimed as bad debt. The ld. CIT(A) further noted that under the provisions of section 36(1)(vii) of the Act the deduction for debts written off can be allowed only where the said amount have been claimed as income by the assessee which had been included as income of the assessee in the earlier years. Since the assessee did not fulfilled the primary condition laid down in the above section, the ld.CIT(A) upheld the disallowance made by the AO. -723 -200 03-1 227- 1271-1 228- AP TEC H 21

The ld.counsel further submitted that the assessee fulfilled all the conditions enumerated under section 37(1) of the Act. The ld. Counsel also submitted that Rs.2,50,00,000/- was part of the billed amount which was already treated and included in the assessee’s income by referring to the ledger account of the Directorate of Education in the books of account of the assessee which is submitted at page 621 to 628 of the paper book. The similar provisions for rebate were made in earlier years qua the amount billed but not acknowledged by the Directorate of Education Delhi. The provisions for rebate of Rs.3,00,00,000/- for the assessment year 2006-07 and Rs.10,80,00,000/- for the AY 2010-11 were allowed by the revenue in the assessment proceedings completed u/s 143(3) of the Act. Finally the ld. AR -723 -200 03-1 227- 1271-1 228- AP TEC H 22 prayed that since the assessee has already credited the billed amount in its books of accounts and treated as income after raising bills on the Directorate of Education, Delhi, which was partly admitted by the customer and therefore the AR of the assessee submitted that part of the amount which was not acknowledged by the customer is allowable as genuine business loss and therefore prayed for the deletion of disallowance which stands allowed by the department in the succeeding and preceding years.

We find that the facts of the case before us is identical as decided by the coordinate bench in the decisions(supra) and therefore by following the decision of the bench respectfully , we restore the matter back to the file of the AO by setting aside the order of CIT(A) and decide the issue accordingly. The ground raised by the assessee is allowed for statistical purposes.

29. The brief facts of the case are that during the course of assessment proceedings, the AO noted that the assessee has received a dividend income of Rs.2,67,21,188/- from M/s Bejing Aptech Jade Bird Information Technology Co. Ltd. The AO also observed that the assessee made investments of Rs.23,85,10,346/- in the subsidiary companies in India and these subsidiary companies did not declare dividend during the year. According to the AO the investments made by the assessee in the subsidiary companies in India were with the motive to earn dividend income which would be exempt from tax as and when declared by the subsidiary companies. Accordingly the AO held that the interest paid by the assessee on the borrowed capital which was utilized to finance investments in the -723 -200 03-1 227- 1271-1 228- AP TEC H 27 subsidiary companies was not allowable and computed the disallowance by application of provisions of section 14A read with rule 8D of the Rules by relying on the decision of the Hon’ble Special Bench of ITAT, Delhi in the case of Cheminvest Ltd V/s ITO (2009) 121 ITD 318 (Delhi) (SB) and the M/s. Daga Capital Management Pvt. Ltd. (2008) reported in 26 SOT 603. Finally the AO computed the disallowance at Rs.1,56,27,270/- by applying the ratio laid down on the decision of Special Bench of the Delhi Tribunal on account of interest paid.

by the assessee was rendered infructuous in view of the rectification application and order thereon by the AO however the ld.CIT(A) sustained the disallowance to the extent of Rs.5,15,396.

36. We have considered the rival submissions on the issue. It was vehemently argued before us by the ld.AR that some items of ITNS aggregating amount Rs.5,15,396/- could not be reconciled in absence of information. The ld. Counsel drew our attention to the page 719 to 750 of the paper book by pointing out that the amount of Rs.5,15,396/- is made up of so many parties with whom the assessee never had any business dealings and it was also submitted that the assessee has not even claimed credit of TDS deducted by the parties on the said amount. The ld. AR submitted that since the assessee was not aware of the fact and the assessee had never rendered any services to those parties and therefore, the same could not be treated as income of the assessee on the basis of mere ITNS information ITA No . 946 -723 -200 03-1 227- 1271-1 228- AP TEC H 31 without making any inquiries from those parties when the assessee has disowned transactions. The ld.AR prayed that the addition was required to be deleted as there is no proper enquiry or verification on the part of the AO and addition was made just by rejecting an ITNS information.

1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not upholding the AO's view that the brand building expenses are capital in nature and hence not deductible as revenue expenditure." -723 -200 03-1 227- 1271-1 228- AP TEC H 32

is against the deletion of addition by the ld.CIT(A) to the tune of Rs.1,01,60,695/- by the ld. CIT(A) by holding that the brand building expenses were of revenue in nature as against the finding of the AO that such expenses were of capital nature.

41. Brief facts of the case are that the assessee has debited an amount of Rs.1,01,60,495/- to the profit and loss account towards brand building expenses. The AO found that these expenses are capital in nature and therefore issued noticed dated 14.9.2009 calling upon the assessee as to why the such expenses should not be treated as capital expense and ultimately disallowed the same and added the same to the total income of the assessee.

42. The assessee filed reply vide letter dated 6.11.2009 submitting therein that these expenses were in the form of retainer-ship fees, marketing expenses, art work charges for CD’s designs for leaflets, brochures, colour prints, campaign illustrations etc. Thus, these were incurred in the normal course of business as routine expenses. It was submitted before the AO that -723 -200 03-1 227- 1271-1 228- AP TEC H 33 these expenses do not give any benefit of enduring nature and were incurred for existing and running business. In support of these contentions, the assessee relied on number of decisions which were reproduced by the AO at page 6 of the assessment order. Finally, the AO disallowed these expenses under the head “brand building expenses” by observing that that the brand building expenses were not routing expenses and not incurred in the ordinary course of business of the assessee and observed that these expenses were incurred for building a brand name/image of the assessee from which the assessee got enduring benefit over the period of time. However, the AO allowed depreciation at the rate of 25% thereby making an addition of Rs.76,21,871/-. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) 43. Before the ld. CIT(A), the assessee submitted that these expenses is debited under the head Brand building expenses were in the nature of marketing/advertising incurred in the normal course of business and incurred in the normal course of business thereby not creating any fixed assets nor resulted into any value addition to existing fixed assets. The brand building expenses incurred did not provide any benefit of enduring nature. These expenses were recurring in nature and were incurred for running and operation of business of the assessee in order to increase the sales by effective advertising and marketing thereby enable the assessee to do business more effectively and profitably while creating no fixed benefit of permanent nature. In defence of argument, the ld.AR relied on number of -723 -200 03-1 227- 1271-1 228- AP TEC H 34 decisions including the decision of the Hon’ble Apex Court in the case of Empire Jute Co. Ltd. reported in 124 ITR (SC).

2. The l.d CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance u/s 14A of the Act read with rule 8D(2) of Rs.38,72,836/-, 2.1. The l.d CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance u/s 14A of the Act ignoring the fact that the appellant had not incurred any expenditure on interest and in fact had earned net interest of Rs.48,63,712/- 3. The l.d CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance of provision for leave encashment of Rs.44,94,048/- (correct amount Rs.4,94,098/) 4. The l.d CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance of Rs.1,04,08,418/-. 5. Each ground of appeal

hereinabove is independent and without prejudice to each other ;

6. The CIT(A) order being contrary to law, evidence and facts of the case should be set aside amended or modified in the light of the ground deduced above”

46. Grounds of appeal raised by the assessee in this appeal bearing Ground No.1,2 and 3 are identical to that of appeal filed by the assessee bearing therefore, and our decision taken therein by ITA No . 946 -723 -200 03-1 227- 1271-1 228- AP TEC H 36 us would be applied to these grounds as well. The grounds raised by the revenue are dismissed.

47. The issue raised in the grounds of appeal no.4 is against the confirmation of disallowance of Rs.1,04,08,418/- as made by the AO on account of writing off advances.

48. The facts of the case are that during the course of assessment proceedings, the AO observed that the assessee has written off some securities given for electricity/telephone connections aggregating to Rs.1,04,08,418/-. The assessee had written off the said advances as they were not recoverable and were adjusted against the company expenses against the outstanding bills of electricity and telephone. The AO came to the conclusion that these advances written off were not admissible expenses u/s 37 of the Act thereby rejecting the contentions of the assessee by holding that the these deposits were given for electric connections which were refundable and could be claimed as and when the assessee surrendered the connections to the concerned department and thus rejected the plea of the assessee that it could not be recovered or adjusted by the department concerned against the outstanding dues. Similarly the telephone advances were given for availing telephone facility which was written off by the assessee when the same could not be recovered from the telephone department or adjusted against the dues. Ultimately, the AO disallowed the whole some Rs. 1,04,08,418/- and added the same to the total income of the assessee. -723 -200 03-1 227- 1271-1 228- AP TEC H 37

49. Before the ld. CIT(A) the assessee submitted that the advances give to electricity department and telephone department were not recoverable. When the assessee was not able to get refund of deposits as the franchises operating form the (rented) premises had committed default in the payment of bills and violated the conditions for allotment of connections. Similarly, in the case of telephone deposits the department has adjusted the outstanding bills and penalty against the security deposits and cancelled these connections. It was also submitted that these amounts were written off as a matter of commercial exigency as pursuing recovery proceedings would have proved expensive as the cost of litigations would have been more than the amount recoverable. Ultimately, the ld. CIT(A) rejected the contentions of the assessee and dismissed the appeal on this ground by observing and holding as under : “7.3. The assessment order, submissions made for the appellant and materials on record have been considered. The benefit of the provision of section 36(1)(vii) deduction for debts written off can be allowed only where the said amounts have been claimed as income by an assessee. In the present case in appeal the deposits made are not shown to have been included as income of the assessee in earlier year/so For section 36(1)(vii) to be applied first the appellant must show that the amounts now written off were included as income In its accounts, and only then can it be treated as a bad debt and write off allowed without having to show that it is irrecoverable etc. The primary requirement of the amounts having been included as income has not been fulfilled and hence deduction u/ s 36(1)(vii) is not allowable. As regards the plea that the amount be allowed as a business loss, losses incidental to business are allowable as deduction despite there being no specific provision for the same. If there is a direct and proximate nexus between the business operation and the loss or its is incidental to, then the loss is deductible. The parameters for claim of business loss and the bad debts are different. In order to claim business -723 -200 03-1 227- 1271-1 228- AP TEC H 38 loss, the appellant has to produce sufficient evidences as to how and under what circumstances, it has incurred such losses. However, the appellant has, neither in the present appeal proceedings nor before the Assessing Officer adduced sufficient evidences to support its claim for such business loss, and has made statements regarding why it would not be cost effective to pursue refund of the deposits. Therefore. the claim cannot be entertained and is accordingly rejected. In the result the ground is dismissed.”

50. We have considered the rival submissions and perused the material placed before us. The ld. AR submitted before us that these telephone and electricity deposits were made throughout India in number of towns and cities wherever these deposits were made by SSI Limited which the assessee had taken over. It was also submitted that the assessee’s business mostly consisted on carrying out business activity all over India for which the assessee has entered into the large number of franchisee agreement. These advances were given by franchisee on behalf of the assessee for obtaining electricity and telephone connections. Out of these, in good number of cases, the franchisee could not pay their telephone and electricity bills and as result the of substantial part of these advances were consumed by way of adjustments of these deposits by the departments against the electric and telephone bills. The ld. AR also argued that these deposits were made in the ordinary course of business of the assessee and assessee could not recover at all from these franchisee. If in the subsequent years these advances were recovered the same would be chargeable to tax under section 40(1)(1). It was also argued by the ld.AR that the assessee’s record were damaged and destroyed due to unprecedented flood in Mumbai in 2005 and were also -723 -200 03-1 227- 1271-1 228- AP TEC H 39 received due amount of compensation from ICICI Lombard against the insurance policy taken by the assessee which were furnished before the authorities below and also forming part of this record at pages at 235 to 272 of the paper book. Due to all these reasons the ld. AR submitted that it became impossible to seek refund from the department like electricity and telephone without having the receipts/documents. Lastly, the ld. AR prayed that since these advances were given in the ordinary course of business for day to day running of the business of the assessee and therefore the amount written off by the assessee Rs.1,04,98,418/- be deleted being out of business exigency of the assessee.

1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not upholding the AO's view that the brand building expenses area capital in nature and hence not deductible as revenue expenditure.

2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding brand building expenditure as revenue in nature merely because the said expenditure comprises advertising expenses etc, without appreciating that the said expenditure has not been incurred for the purpose of the business of the year under consideration only.

3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A)erred in holding brand building expenditure as revenue in nature, without considering the fact that admittedly, the assessee had incurred the said expenditure for the creation of a brand, which is a capital asset of enduring nature and intended to be used for revenue generation over several years/beyond the relevant assessment year.

4. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A)erred in deleting the addition of Rs.2,12,854/- as unexplained cash receipt, ignoring the fact that the assessee had failed -723 -200 03-1 227- 1271-1 228- AP TEC H 41 to reconcile the ITS details and to show that the said receipt did not pertain to it” 54. Grounds of appeal raised by the revenue in this appeal bearing Ground No.1,2, 3 and 4 are identical to that of appeal filed by the assessee bearing ITA No.946/Mum/2013. Therefore out decisions in would mutatis mutandis apply to these grounds as well. Accordingly these grounds are dismissed. I.T.A. No.1271/Mum/2014(by the assessee)

55. Grounds of appeal taken by the assessee read as under : “1. The Learned CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance of ESOP expenses of Rs.1,49,21,324/-.

2. The Learned CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance u/s 14A of the Act read with Rule 8D(2) of Rs.32,91,7S8/-. 2.1 The Learned CIT(A) erred in law and on facts and in the circumstances of the case in holding that in the formula given in rule 8D, it is the interest paid and not net interest which is to be considered for computing disallowance under section 14A of the Act. 2.2 The Learned CIT(A) while holding that in the formula given in rule 8D, it is the interest paid and not net interest which is to be considered for computing disallowance under section 14A of the Act erred- (a) in placing reliance on the decision of ITAT Ahmadabad in Advance Finstock Pvt Ltd and not following the decision of the co-ordinate Mumbai Bench in the case of Morgan Stanley Securities P. Ltd. which is binding on her and; (b) In not following the decision of the jurisdictional Bombay High Court in the case of Godrej & Boyce wherein at para 24 it was held "that the basic principle of taxation is to tax net income. This principle applies even for the purposes of Section 14A ITA No . 946 -723 -200 03-1 227- 1271-1 228- AP TEC H 42 and expenses towards nontaxable income must be excluded"; and ( c) in not following the basic principle of law that if there are contrary decisions in any matter, the decision which is in favour of the assessee is to be followed.

3. The Learned CIT (A) erred in law and on facts and in the circumstances of the case in confirming the disallowance of provision for leave encashment of Rs.22,11,564/-.

4. The order of the Commissioner (Appeals) being contrary to law, evidence and facts of the case should be set aside, amended or modified.

5. Each ground of appeal hereinabove is independent and without prejudice to each other.

6. The appellant craves leave to reserve to itself the right to add, to alter or amend annul any of the grounds of appeal at or before the time of hearing and to produce such further evidences, documents and papers as may be necessary.

56. The issue raised in grounds of appeal bearing Ground No.1,2 and 3 have already been decided by us in ITA No.946/Mum/2013, therefore, our decision in ITA No.946/Mum/2013 would mutatis mutandis apply to these grounds as well. Accordingly, appeal of the assessee is allowed.

taken by the revenue read as under :

1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.l0,90,275/- on account of brand building expenses relying on the decision of the CIT(A) in assessee's own case for A.Y. 2008-09 and not upholding the Assessing Officer's view that the brand building expenses are capital in nature and hence not deductible as revenue expenditure.

2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding brand building expenditure as revenue in -723 -200 03-1 227- 1271-1 228- AP TEC H 43 nature merely because the said expenditure comprised of advertisement expenses etc.,without appreciating that the said expenditure had not been incurred for the purpose of business of the year under consideration only.

3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding brand building expenditure as revenue in nature, without considering the fact that admittedly, the assessee had incurred the said expenditure for the creation of a brand, which is a capital asset of enduring nature and intended to be used for revenue generation over several years/beyond the relevant assessment year."