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2023 (3) TMI 1035 - ITAT BANGALOREAddition on account of valuation of marketing intangibles of assessee - CIT(A) deleted the addition by relying on assessee’s own case for AY 2015-16 [2018 (5) TMI 337 - ITAT BANGALORE] where the Tribunal has held that the profit margin forgone by the assessee cannot be held to be expenditure in creating intangible or goodwill - HELD THAT:- As decided in assessee own case [supra] action of the AO in disregarding the books results cannot be sustained and the further conclusion that the action of the AO in presuming that the Assessee had incurred expenditure for creating intangible assets/brand or goodwill is without any basis, we do not think it necessary to deal with the arguments that even assuming that expenditure was incurred by the Assessee the expenditure for building brand or creating intangible or goodwill is revenue expenditure and allowable as deduction. It is also not necessary for us to go into the question of estimation of quantum of expenditure on creating intangibles, in view of the above conclusions. We hold that the loss as declared by the Assessee in the return of income should be accepted by the AO and his action in disallowing expenses and arriving at a positive total income by assuming that there was an expenditure of a capital nature incurred by the Assessee in arriving at a loss as declared in the return of income and further disallowing such expenditure and consequently arriving at a positive total income chargeable to tax is without any basis and not in accordance with law. Disallowance u/s. 37 towards ESOP expenses - HELD THAT:- We notice that the issue of whether ESOP cross charge expenses are allowable u/s. 37 of the Act has already been decided by this Tribunal in favour of the assessee in the case of Biocon Ltd [2013 (8) TMI 629 - ITAT BANGALORE] which has also been affirmed by the Hon’ble Karnataka High Court [2020 (11) TMI 779 - KARNATAKA HIGH COURT] by categorically holding that “the expression ‘expenditure’ will also include a loss and therefore, issuance of shares at a discount where the assessee absorbs the difference between the price at which it is issued and the market value of the shares would also be expenditure incurred for the purposes of Section 37(1) of the Act.” Thus we hold that the expenditure towards ESOP is eligible for deduction u/s 37. Assessee appeal allowed.
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