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2015 (1) TMI 364 - AT - Income TaxESOP expenses disallowed Facts properly appreciated or not - Whether the CIT(A) erred in confirming the action of AO in making an addition by disallowing the expenditure debited to P&L account on account of amount amortized under the Employees Stock Option Scheme (ESOP) without appreciating the facts of the case Held that:- Following the decision in M/s. Biocon Limited and others Versus The Dy. Commissioner of Income-tax (LTU) and others [2013 (8) TMI 629 - ITAT BANGALORE] discount on shares under the ESOP is an allowable deduction the AO is directed to allow the deduction for discount on shares under the ESOP. Computation of quantum of deduction Held that:- An employee becomes entitled to the shares at a discounted premium over the vesting period depending upon the length of service provided by him to the company - In all such schemes, it is at the end of the vesting period that option is exercisable albeit the proportionate right to option is acquired by rendering service at the end of each year - the company incurs liability to issue shares at the discounted premium only during the vesting period - The liability is neither incurred at the stage of the grant of options nor when such options are exercised - the liability to pay the discounted premium is incurred during the vesting period and the amount of such deduction is to be found out as per the terms of the ESOP scheme by considering the period and percentage of vesting during such period - deduction of the discounted premium is to be allowed during the years of vesting on a straight line basis Decided in favour of assessee.
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