ICICI Securities Limited Vs PCIT (ITAT Mumbai)
Entire Section 263 Revision Quashed—AO’s Plausible Views on ESOP, CSR–80G, Club Expenses, Penalties & Interest Upheld
The Mumbai ITAT (C Bench) allowed the appeal of ICICI Securities Ltd. for AY 2020-21 and quashed the revisionary order passed under section 263 by the PCIT in its entirety, holding that the assessment order was neither erroneous nor prejudicial to the interests of the Revenue.
The Tribunal held that:
- Scope of section 263: The PCIT cannot invoke revision merely on the ground of inadequate enquiry or because he holds a different opinion, when the AO has made enquiries and adopted a plausible view supported by law.
- Club membership expenses (₹40.23 lakh): Corporate club membership expenses incurred for business networking and professional purposes are allowable u/s 37(1). The issue is squarely covered by Supreme Court and High Court precedents; hence, revision was unjustified.
- ESOP expenditure (₹3.89 crore): ESOP cost, computed as per Ind AS 102 and taxed as perquisite in employees’ hands, is a legitimate business expenditure. The AO’s allowance was in line with Biocon Ltd. (Karnataka HC) and other binding precedents.
- CSR-related donations claimed u/s 80G (₹7.22 crore): Once CSR expenditure is disallowed u/s 37(1), there is no bar on claiming deduction u/s 80G, provided statutory conditions are met.
Section 37 and section 80G operate in different statutory compartments, and the AO’s view was fully supported by coordinate bench decisions. - Penalties paid to stock exchange (₹64.64 lakh): Charges levied for procedural and operational lapses are compensatory in nature, not penalties for offences or prohibited acts. Hence, Explanation 1 to section 37(1) does not apply.
- Interest on borrowings vis-à-vis CWIP (₹26.45 lakh): Borrowings were short-term and used for business operations, with no nexus to capital work-in-progress. Proviso to section 36(1)(iii) was therefore inapplicable.
- The PCIT merely relied on audit objections and attempted to substitute his judgment for that of the AO, which is impermissible under section 263.
Outcome:
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