MM TAX CLUB

Bangalore Income Tax Appellate Tribunal (ITAT) allows Flipkart appeal to allow deductions towards ESOP expenditure.

The company filed a loss return of ₹139.61 crore, against which it was subjected to the addition of ₹1,708.39 crore on account of the valuation of marketing intangibles and ₹15.80 crore on account of ESOP expenses.

Division Bench of Bangalore ITAT comprising Shri George George K, Judicial Member, and Smt. Padmavathy S, Accountant Member ruled, “With regard to revenue’s appeal on marketing intangibles, ITAT relies on Flipkart’s case for AY 2015-16 wherein it was held that the profit margin foregone by the company cannot be held to be an incurred expenditure in creating intangible or goodwill. Thus, ITAT finds no reason to interfere with the commissioner of income-tax’s order and dismisses revenue’s appeal.”

ESOP expenses

On ESOP expenses, Flipkart contended before ITAT that the expenses qualify the conditions prescribed under Section 37, and are an unascertained liability and not contingent liability. The bench added that the expenses are also recognised in accordance with Indian Accounting Standard 102, among other observations.

ITAT relied on a coordinate bench ruling in Novo Nordisk wherein it was held that ESOP expenses incurred on the issue of overseas parent company’s share is to be considered as revenue expenditure.

The bench also relied on a special bench ruling in Biocon (upheld by jurisdictional HC) wherein it was held that the term ‘expenditure’ also includes a loss and therefore, issuance of shares at a discount where the company absorbs the difference between a price at which it is issued and the market value of the shares would also be expenditure incurred for the purpose of Section 37(1). Accordingly, the bench held that expenditure incurred towards ESOP is eligible for deduction under Section 37(1).

Flipkart did not respond to businessline queries on this development.

‘Relevant conditions’

Abhishek A Rastogi, founder of Rastogi Chambers said,  “ESOP expenses qualify the relevant conditions prescribed under Section 37 and are an unascertained liability but not contingent liability. These expenses are recognised in accordance with IND AS 102 by following a consistent accounting method.”

Rastogi added that it must be clearly understood that the term ‘expenditure’ also includes a loss and therefore, issuance of shares at a discount where Assessee (company) absorbs the difference between the price at which it is issued and the market value of the shares would also be expenditure .

“Further, profit margin foregone by the Assessee cannot be held to be an incurred expenditure in creating either intangible or goodwill and as a corollary this amount cannot be subjected to tax,” he said.

Traders having annual turnover of below Rs 20 lakhs will now get CA certificate free of cost from chartered accountants empanelled with the state government. This was announced by the Haryana CM Manohar Lal Khattar while launching the Vyapari Kshatipurti Yojana during a programme held at Haryana Niwas on Thursday. Members of the Haryana Traders Welfare Board were present on the occasion. According to sources, the order will come into force from April 1.

Addressing the gathering after the launch, Khattar said that small traders require a CA certificate for GST registration, for which they had to pay a small amount. “Now after this announcement, small traders with a turnover of less than Rs 20 lakhs will get the CA certificate from the government empanelled CAs,” the CM said.

Divulging further details, the CM said that in 2019, the state government had launched Mukhyamantri Vyapari Kshatipurti Yojana to give insurance benefits to traders having an annual turnover is up to Rs 1.50 crore. The CM shared that now under this scheme, insurance coverage ranging from Rs 5 to Rs 20 lakh is provided to the taxpayer traders against loss of stock and furniture and fixtures by fire, burglary and natural calamities.

Hon’ble Mr. Justice Dinesh Maheshwari, Judge, Supreme Court of India, will preside over as Chief Guest at inaugural function

Hon’ble Mr. Justice Satish Chandra Sharma, Chief Justice of Delhi High Court, will be the Guest of Honour

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) will commemorate 40 years of glorious and successful journey here tomorrow.  Hon’ble Mr. Justice Dinesh Maheshwari, Judge, Supreme Court of India, will be the Chief Guest of the Inaugural Session and Hon’ble Mr. Justice Satish Chandra Sharma, Chief Justice of Delhi High Court, would be the Guest of Honour. Justice Yashwant Varma, Judge, Delhi High Court; Shri Sanjay Malhotra, Secretary, Department of Revenue, Ministry of Finance; and, Shri Vivek Johri, Chairman, Central Board for Indirect Taxes and Customs (CBIC) will also join the inaugural commemoration function. A souvenir would also be released to mark the 40 glorious years of CESTAT.

Justice Dilip Gupta, President, CESTAT, will lead the commemoration with participation from Members of Delhi Principal Bench, besides 7 other Regional Benches of CESTAT and senior officials of the Tribunal. The programme will be attended by all the members of the Tribunal, the Bar members across the country, and the representatives of the department. In attendance would also be the Judges of the High Court, Members of the CBIC, as also the Principal Commissioners, Chief Commissioners and the Commissioners of the department.

The inaugural session would be followed by two working sessions. The First Session will see discussion on the ‘Use of Technology in Tribunals for Speedy Delivery of Justice’ and Hon’ble Mr. Justice Sanjeev Sachdeva, Judge, Delhi High Court would preside over this session. The Second Session will be on ‘Experiments of Tribunals – Triumphs and Tribulations’ and Hon’ble Mr. Justice Pankaj Mithal, Judge, Supreme Court of India, would preside over this session.

Justice Sunita Agarwal, Judge, Allahabad High Court, would also address the gathering.

ABOUT CESTAT:

It is under article 323 B of the Constitution of India and section 129 of the Customs Act, 1962 that the Customs, Excise and Service Tax Appellate Tribunal was constituted in the year 1982 on October 11. The Tribunal Reforms Act, 2021 has now been enacted to further amend certain Acts, including the Customs Act, 1962 and in exercise of the powers conferred by section 3 of the aforesaid Act, The Tribunal (Conditions of Service) Rules, 2021 have been framed.

The Principal Bench of the Tribunal is at Delhi. Initially, the Tribunal had 3 Regional Benches at Mumbai, Chennai and Kolkata. Thereafter, 5 more Regional Benches were constituted. The Bangalore Bench of the Tribunal was constituted on 30.11.2000, the Ahemdabad Bench on 03.03.2006, the Allahabad Bench on 14.08.2015, the Chandigarh Bench on 04.11.2015 and the Hyderabad Bench on 06.11.2015. The sanctioned strength of the Tribunal as on date, apart from the President of the Tribunal, is of 16 Judicial Members and 16 Technical Members.

During the COVID pandemic period, the Tribunal conducted virtual hearings at the Principal Bench as also at the 8 Regional Benches of the Tribunal. Anti-Dumping matters and matters before the Larger Benches of the Tribunal were also decided during this period.

Over the past four years, numerous steps have been taken to bring about an improvement in the working of the Tribunal. All orders passed by the Tribunal, whether in the nature of Final Orders or Interim Orders or Daily Orders, are uploaded on the website of the Tribunal without any delay. This has resulted in not only providing timely information about the proceedings to the parties, but also in avoiding sending individual notices to the parties regarding the next dates fixed by the Tribunal. A dynamic display board is also available in the court rooms and other prominent places in the Tribunal.

The Anti Evasion Department, GST Commissonerate Nagpur-1 detected fake availment of Input Tax Credit (ITC) by M/s D Solanki Enterprise amounting to Rs 8,77,21,5338 and passing on of ineligible ITC amounting to Rs 9,05,06,060.

M/s D Solanki Enterprise engaged in the trading activities of goods classified under Central Goods and Services Tax (CGST) Act 2017 having GSTIN No. 27PESPS8037G1ZF has been suspended with immediate effect for availment and passing on fake ITC.

Dilipbhai Gabhabhai Solanki, Proprietor of M/s D Solanki Enterprise is engaged in trading activities of goods classified under HSN 39012000, 39021000, 47071000.
Based on Advait report, officers of Anti Evasion Nagpur–1 visited the taxpayer u/s 67(1) of CGST Act, 2017 on February 14, 2023.

Based upon intelligence, the preliminary inquiry of the tax-payer it was found that the electricity bill of the said consumer number was incorrectDuring the visit of the firm, it was found non-existent at it’s proper place of business (PPOB).

As per the information, the taxpayer had fraudulently availed input tax credit amounting to Rs 8,77,21,5338 and also passed on ineligible input tax credit amounting to Rs 9,05,06,060.

Registration of taxpayer was suspended with immediate effect. Further investigation is under process, according to the Anti Evasion Department Nagpur-1.

Net direct tax collection (after adjusting refunds) rose 15.3 per cent to ₹15.72 trillion till March 16 this fiscal year so far, buoyed by an upsurge in advance tax mop-up, people close to the development told Business Standard.

With this, tax collection is 95.2 per cent of the revised target of ₹16.5 trillion and 10 per cent above the Budget Estimate of ₹14.2 trillion.

As on March 16, on a net basis, corporate tax collection stood at ₹8.11 trillion and personal income tax ₹7.32 trillion.

These include the advance tax collection of ₹7.40 trillion.

Securities transaction tax collection is at ₹24,093 crore against the revised target of ₹25,000 crore.

“We are in the process of compiling the advance tax received in the fourth and last quarter of the fiscal year. The March 16 figures include 60 per cent of the advance tax due. The remaining 40 per cent will reflect by March 18-19,” an official said.

“Based on the March 16 compilation, we are short of just ₹78,821 crore (or 5 per cent) of the Revised Estimate of ₹16.5 trillion. Since the fourth instalment of advance tax is yet to arrive fully, there is a high probability of the numbers getting revised upward,” he added.

The deadline for the final instalment of advance tax collection was March 15.

The Central Board of Direct taxes (CBDT), an apex body for direct tax matters, on March 20 expected to conduct a pan-Indian review of tax collection in FY23 over video-conferencing, another official privy to the matter said.

Usually in March, tax collection increases remarkably owing to quarterly and yearly closures.

“Revenue is likely to go up because many companies pay the entire tax in the fourth instalment, making up for any shortfall in the first three instalments. Moreover, enforcement efforts to recover outstanding tax demand further optimise revenue collection,” the officer said.

Advance tax is paid in four instalments, instead of at the end of the fiscal year. It is considered an indication of economic sentiment. The first instalment, or 15 per cent of advance tax, is to be paid by June 15, the second by September 15 (30 per cent), the third by December 15 (30 per cent), and the rest by March 15.

For FY23, the projection of direct tax, which includes individual and corporate tax, has been revised upward and is expected to grow by over 17 per cent to ₹16.5 trillion from ₹14.08 trillion estimated earlier.

Notably, the Union Budget in February pegs tax revenue at ₹33.6 trillion, which is 10.4 per cent higher than the ₹30.4 trillion projected in the Revised Estimate for FY23.