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2015 (11) TMI 867 - AT - Income TaxDisallowance of ESOP (Employee Stock Option) expenses claimed by the assessee company as revenue expenditure - Held that:- In the case of Biocon Limited (2014 (12) TMI 838 - ITAT BANGALORE) has held that discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t the market price of share at the time of grant of options to the employees. The Hon'ble Special Bench has held that the amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time , however, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference to the market price at the time of grant of option and the market price at the time of exercise of option. No contrary decision is brought to our notice by the Revenue. Respectfully following the decision of Hon'ble Special Bench, Bangalore Tribunal in Biocon Limited(supra), we decide this issue in favour of the assessee company and against the Revenue that discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t the market price of share at the time of grant of options to the employees. The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time, however, an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference to the market price at the time of grant of option and the market price at the time of exercise of option. Thus, we hold that discount on issue of Employees Stock option is allowable as deduction in computing the income under the head 'Profit and gains of Business or Profession' In the instant case we have noticed that the AO has refused to grant the deduction of the discount on ESOP at the very threshold and the CIT(A) has allowed the said claim based on the decision of Hon'ble Special Bench in the case of Biocon Limited(supra). Resultantly, the verification of correctness of calculation of discount stood ousted and have become now imperative in view of our directions in light of Hon'ble Special Bench, Bangalore Tribunal orders in Biocon Ltd (supra) which are binding on us and also followed by us. We , therefore, remit the matter to the file of AO for finding out the correct amount of deduction accordingly in light of our orders which are based on the binding orders of Hon'ble Special Bench, Banaglore Tribunal in the case of Biocon Limited(supra). - Decided in favour of assessee for statistical purposes.
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