Acuity Knowledge Centre (India) Pvt. Ltd Vs DCIT (ITAT Bangalore)
Incentive/ bonus paid to employees before due date of return filing allowed as deduction: ITAT Bangalore
ITAT Bangalore held that incentive/ bonus paid to employees before due date of filing the return is allowable as deduction under the Income Tax Act. Accordingly, disallowance of expenditure incurred towards incentive payment for executive gain sharing plan not sustained.
Facts- The assessee, a Pvt Ltd company, is engaged in the business of providing ITE Services to AE for which it was compensated at cost plus 18% Markup. The issue raised by the assessee through the appeal pertain to disallowances of expenditure being incentive payment for executive share plan amounting to Rs. 60,79,020/-. The assessee also contested exclusion of certain TPO’s comparable company and inclusion of certain assessee’s comparable company.
Conclusion- Held that CIT(A) erred in sustaining the disallowance of ₹60,79,020. The impugned amount being incentive / bonus paid to employees before the due date of filing the return is allowable as a deduction under the Act. Accordingly, the disallowance of ₹60,79,020 is directed to be deleted.
Held that we uphold the order of the learned CIT(A) insofar as it relates to the exclusion of eClerx Services Limited and inclusion of Jindal Intellicom Private Limited and Hartron Communications Limited. We further direct the exclusion of Vitae International Accounting Services Private Limited and inclusion of Allsec Technologies Limited, Microgenetics Systems Limited and R Systems International Limited in the final set of comparables. The Assessing Officer/TPO is directed to recompute the arm’s length price accordingly. Accordingly, the grounds raised by the Revenue are dismissed and the grounds raised by the assessee are allowed.
