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2015 (7) TMI 1412 - AT - Income TaxDisallowance on account of Employee Stock Option Plan (ESOP) expenses - HELD THAT:- We find that similar issue came up for consideration before the Special Bench of the Tribunal in Biocon Ltd. [2013 (8) TMI 629 - ITAT BANGALORE]. In this case, the Tribunal has held that discount on issue of ESOP is allowable as deduction in computing income under the head ‘Profits and gains of business or profession.’ Since it is on account of an ascertained and not contingent liability, it cannot be treated as a short capital receipt. Thereafter, the Special Bench has laid down the mechanism for determining as to when and how much deduction should be allowed. It has been held that 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 ESOP by considering the period and percentage of vesting during such period. Deduction of the discounted premium during the years of vesting should be allowed on straight line basis. Then, dealing with the subsequent adjustment to discount, the Special Bench laid down that any adjustment to 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 market price at the time of exercise of option. Thus we set aside the impugned order and send the matter to the file of AO for deciding the issue in conformity with the decision taken by the Special Bench in the aforenoted case. Assessee appeal is allowed for statistical purposes.
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