Case Number: ITA 1036/DEL/2021
Appellant: Delhivery Pvt. Ltd., New Delhi
Respondent: Pr. CIT-3, New Delhi
Assessment Year: 2015-16
Result: 2015-16
Case Filed on: 2021-08-31
Order Type: Final Tribunal Order
Date of Order: 2023-03-16
Pronounced on: 2023-03-16
The case of Delhivery Pvt. Ltd., New Delhi versus Pr. CIT-3, New Delhi revolves around the disallowances of Employee Stock Option Plan (ESOP) expenses, prior period expenses, and interest on late payment of TDS for the assessment year 2015-16. The appellant, Delhivery Pvt. Ltd., challenged the revisionary order passed by the Pr. CIT-3 under section 263 of the Income Tax Act, 1961.
Delhivery Pvt. Ltd., engaged in the business of providing warehousing and logistics services, filed its revised return of income on 5th February 2016, declaring a loss of Rs.68,69,71,022/-. The Assessment Order under Section 143(3) was passed by making an addition of Rs.68,41,731/-, resulting in an assessed loss of Rs.68,01,29,291/-. Subsequently, the Pr. CIT-3, Delhi, exercised revisionary powers under section 263, leading to the present appeal.
The grounds raised by the appellant were as follows:
1. The Ld. Pr. CIT erred in passing the impugned order under Section 263 without giving due consideration to the submissions of the appellant, rendering it bad in law and void-ab-initio.
2. The Ld. Pr. CIT erred in invoking jurisdiction under section 263 while concluding that the assessment order passed by the Deputy Commissioner of Income Tax, Circle 7(1), New Delhi was erroneous and prejudicial to the interest of revenue.
3. Disallowance of ESOP expenses of INR 3,76,75,732.
4. Disallowance of Prior Period expenses of INR 79,10,087.
5. Disallowance of interest on late payment of TDS/TCS of INR 6,96,533.
The Tribunal reviewed the issue of disallowance of ESOP expenses. The Pr. CIT-3 held that the ESOP expenses did not amount to business expenditure under section 37(1). However, the Tribunal referred to the Special Bench decision in the case of Biocon Limited, which allowed ESOP expenses as deductible. The Tribunal found that the AO had failed to consider this precedent while completing the assessment under section 143(3) and thus overturned the Pr. CIT’s order on this issue.
The Tribunal examined the issue of prior period expenses amounting to Rs. 79,10,087/-. The Pr. CIT held that the AO had not thoroughly examined these expenses. However, the Tribunal found that the AO had made specific inquiries during the assessment, and the appellant had provided detailed justifications for the expenses. The Tribunal ruled that the AO had conducted adequate inquiries, and thus, the Pr. CIT’s order on this issue was not valid.
The Tribunal addressed the issue of interest on late payment of TDS amounting to Rs. 6,96,533/-. The Pr. CIT held that such interest was not allowable as business expenditure. The Tribunal upheld the Pr. CIT’s decision, stating that interest on late payment of TDS/TCS is not deductible under section 37(1) of the Act.
The Tribunal partially allowed the appeal filed by Delhivery Pvt. Ltd. The disallowance of ESOP expenses and prior period expenses was overturned, while the disallowance of interest on late payment of TDS was upheld.
In conclusion, the ITAT, Delhi Bench, provided a balanced judgment by allowing the appeal concerning ESOP expenses and prior period expenses while upholding the disallowance of interest on late payment of TDS for the assessment year 2015-16.
Pronounced in the open court on 16th March 2023.
Signed:
(C. N. Prasad)
Judicial Member
Signed:
(Dr. B. R. R. Kumar)
Accountant Member
Dated: 16th March 2023
Copy forwarded to:
Asstt. Registrar, ITAT, New Delhi
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform