TMI Blog2021 (9) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... of ESOP benefits as perquisite may also differ - we are of the view that the tax authorities are not justified in holding that the assessee should have deducted tax at source from the discount amount by assessing the same as perquisite in the hands of the assessee in the year in which ESOP was vested in them. We hold that the assessee is entitled for deduction of ESOP expenses when the rights are vested in the hands of the assessee as held in the case of Biocon Ltd [ 2013 (8) TMI 629 - ITAT BANGALORE] - we direct the AO to allow the claim - AO is entitled to satisfy himself that the assessee has either deducted tax at source when the option is exercised by the employee or has reversed the expenditure when the concerned employee did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Biocon Ltd. Vs. DCIT (2013) 35 Taxmann.com 335 in support of its claim. In the above said case, the special bench has held that the difference between the market price of shares at the time of grant of ESOP options to the employees and the price at which shares are offered to the employees is allowable as deduction u/s 37(1) of the Act. The A.O. observed that the revenue has not accepted the decision rendered by Tribunal in the case of Biocon Ltd (supra) and has filed further appeal before Hon ble Karnataka High Court. The A.O. further observed that the loss claimed by the assessee should be real as in the case of income, which should be real in order to get it taxed. Accordingly, he held that the loss claimed by the assessee i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned liability. However, it is contended that the taxability arises in the hands of the employee on the date of Exercise. The TDS on perquisite amount arising out of the vesting transaction must have been deducted by the assessee. However, from the records it is not clear when the TDS is made. 79. Thus, the gap between the date of Vesting and the date of Exercise is the period for which there is a tax loss to the revenue. Each transaction has two sides. One is 'Expenditure side' and the other is 'Income side'. In the hands of the company it is an expense and in the hands of the employee it is income The second question arises is whether the income is taxable. 80. In the hands of the employee the taxability cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf. Therefore, two situations arise. a. First, the assessee. has not considered the 'perquisite amount at the time of vesting' as salary income of the employee and has not deducted tax on the same. In such a situation the expenditure is to be disallowed by the AO u/s 40(a)(ia). b. Second, the assessee has considered 'perquisite amount at the time of vesting' as salary income of the employee and has deducted tax on the same. In such a situation, the expenditure is to be allowed by the AO. 83. Accordingly, the objection is decided as above. 6. Accordingly, while passing final assessment order, the A.O. called for the details of ESOP given to the employees. From the details furnished, the A.O. noticed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the order passed by Ld. DRP and A.O. 9. We heard the rival contentions and perused the record. We notice that the A.O. has made the impugned disallowance of ₹ 136,10,974/-, only for the reason that the assessee has not deducted tax at source from the above said amount in the current year itself, i.e. it is the case of the A.O that the ESOP discount amount should have been assessed as perquisite in the hands of the concerned employees in the current year itself and TDS should have been deducted there from. Thus, there is no dispute now that the ESOP expenses claim is allowable u/s 37 of the Act. The dispute is whether the TDS is to be deducted during the current year itself or not. 10. We have noticed that the Tribunal has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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