ACIT Vs Network 18 Media & Investment Ltd. (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) dismissed the Revenue’s appeal against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2013-14.
On the issue of transfer pricing adjustment relating to a corporate guarantee provided by the assessee to its overseas associated enterprise, the Transfer Pricing Officer had determined the arm’s length guarantee commission at 1.5% and proposed an adjustment of ₹1,99,80,691. The Commissioner (Appeals), following the decision in the assessee’s own case for Assessment Year 2012-13, restricted the guarantee commission to 0.5% and deleted the balance addition. The Tribunal upheld this decision, relying on the jurisdictional Bombay High Court decisions in CIT vs Everest Kento Cylinders Ltd. and CIT vs M/s Glennmark Pharmaceuticals Ltd., noting that the latter had also been upheld by the Supreme Court.
The Revenue also challenged the deletion of the disallowance of ESOP expenditure of ₹73,53,010. The Assessing Officer had treated the expenditure as a notional and uncrystallised liability. The Commissioner (Appeals), following the order in the assessee’s own case for Assessment Year 2012-13, allowed the deduction. The Tribunal upheld the order, observing that the Bengaluru Special Bench decision in M/s Biocon Ltd vs DCIT, holding that ESOP expenditure is not a contingent liability and is allowable under Section 37(1), had subsequently been affirmed by the Karnataka High Court. The Tribunal also noted that an identical issue had been decided in favour of the assessee for Assessment Year 2008-09.
