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I.  Useful Case laws :

1.     CIT Vs. M/s PVP Ventures Limited, TC(A). No. 1023 of 2005, Dated: 19.06.2012, High court of Madras

Difference between market price & option price of ESOP shares deductible

The assessee allotted shares to its employees under an ESOP scheme. In accordance with the Employees Staff Option Plan and Employee Staff Purchase Scheme Guidelines, 1999 issued by SEBI, the difference between the market value of the shares and the value at which they were allotted to the employees was debited to the P&L A/c. This was claimed as a deduction under the head “staff welfare expenditure”.

The AO allowed the claim though the CIT revised the assessment u/s 263 and held that the expenditure was notional and contingent in nature and not allowable as a deduction. On appeal, the Tribunal (S.S.I Ltd vs. DCIT 85 TTJ 1049) held that as the SEBI regulations required the difference between the market price of the shares and the price at which the option is exercised by the employees to be debited to the P&L A/c as expenditure, it was an ascertained expenditure and not contingent in nature. On appeal by the department to the High Court, HELD dismissing the appeal:

As far as the Employees Stock Option Plan is concerned, as rightly pointed out by the Tribunal, the assessee had to follow SEBI direction and by following such directions, the assessee claimed the ascertained amount as liability for deduction. There is no error in the order of the Tribunal.

(Please click here for judgment)

 

2.  Global Green Company Limited,Vs. Dy. CIT, I.T.A. No. 1390/Del/2011, Dated: 13/07/2012, ITAT- Delhi

A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee and consequently penalty u/s 271(1)(C) cannot be levied.

Held:

The assessee did not produce any evidence whatsoever of writing off of the said amount in the books of account. The character of this loss was nothing but basically a provision for decrease in the value of assessee’s assets. The AO while completing the assessment has not mentioned a word that there was furnishing of inaccurate particulars or concealment of income. The AO had made addition merely on the ground that the assessee was not able to produce any evidence for writing off of the amount in the books of account. Therefore, the satisfaction that the assessee had concealed income or furnished inaccurate particulars of such income is not discernible from the assessment order. Hence the penalty order suffers from lack of jurisdiction to impose penalty.

(Please click here for judgment)

  

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Key of Success :

"When you are right, No need to be angry,
when you are wrong, you have no right to be angry" 
                                       …. Mahatma Gandhi" 

  

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"Voice of CA"  

   

CA. Sidharth Jain, Co-Moderator 
sidhjasso@yahoo.com  
   
CA. Mukesh K Bansal, Co-Moderator-FEMA 
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CA. Avinash Gupta, Co-Moderator-International Taxation 
caavinashgupta@gmail.com