CPT V24P7-Art1 (Content).pmd - Taxmann

The Tribunal concluded the decision on the
following grounds:
(a) Admittedly, no allotment was done, but
still, the assessee had specified the number
of shares to be allotted;
(b) Pending the allotment, because few formalities
were to be completed, didn’t merit
the disallowance of said expenditure as
contingent liability;
(c) Merely because there was a lock-in-period
of five years under which if any
employee left before the expiry of five
years, the shares so allotted to him would
vest with the assessee company, didn’t
make the liability as contingent; and
(d) The case of Ranbaxy Laboratories Ltd. v.
ACIT [2010] 39 SOT 17 (Delhi) is to be
differed as in that case the issue was
allowance of notional value of shares which
is at variance with the facts of this case.
Therefore, the claim of assessee stood allowed.
ESOP expenses to be allowed if recognised
in compliance of SEBI norms
In CIT v. PVP Ventures Ltd. [2012] 23
taxmann.com 286 (Madras), assessee had debited
a sum of ` 66.82 lakhs in respect of Employees
Staff Option Plan. The shares were allotted by
the assessee in compliance of SEBI regulations,
which mandate that the difference between
the market prices of shares and the price at
which the option is exercised by the employees
is to be debited to the Profit and Loss Account
as expenditure. During assessment proceedings,
AO allowed the ESOP expenses. However, during
proceeding under section 263, CIT disallowed
the same on the ground that the accounting
treatment prescribed by SEBI, nowhere suggests
that it was revenue expenditure, to be debited
to the profit and loss account, as it was only
a notional and contingent expenditure.
On appeal, the Tribunal held that it was not
a case of contingent liability. The expenditure
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in this behalf was an ascertained liability, thus
the expenditure incurred being on lines of the
SEBI guidelines, was correctly claimed by the
assessee.
The High Court held in favour of assessee -
It was held that the Tribunal was right in
holding that expenditure in this behalf was an
ascertained liability. Therefore, the High Court
upheld the order of Tribunal and allowed
deduction in respect of difference between market
prices of shares and the price at which the
option was exercised.
Belated return can’t nix section 54F
exemption if investment is made within
specified time limit
In R.K.P. Elayarajan v. Dy. CIT [2012] 23
taxmann.com 206 (Chennai - Trib.), the assessee
derived long-term capital gains on sale of shares.
It filed its return of income on 9-1-2009 claiming
deduction under section 54F in respect of
acquisition of a residential flat. AO denied the
deduction under section 54F on the ground
that due date for filing of return of income
in case of assessee was 31-7-2008 and the sale
deed for transfer of residential property was
executed on 19-9-2008, which was after the
due date for filing of return. On appeal, CIT(A)
allowed the deduction in respect of amount
paid at the time of entering into agreement
‘which was before the due date of filing of
return’ and upheld the disallowance for balance
amount.
The Tribunal held in favour of assessee - It
was held that deduction under section 54F
should be allowed to assessee on following
grounds:
(a) Amount was utilized by assessee for
purchase of new residential flat before
date of filing of return;
(b) Merely because investment is made after
due date of filing of return as specified
under section 139(1), section 54F exemption
cannot be denied; and
August 1 to 15, 2012 u TAXMANN’S CORPORATE PROFESSIONALS TODAY u Vol. 24 u 65
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