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2021 (12) TMI 553 - AT - Income TaxDisallowance of ESOP expenses - CIT-A deleted addition holding the notional discount on shares issued under ESOP scheme as revenue expenditure allowable u/s 37(1) - Whether allowability of expenditure u/s 37(1) of the Act cannot be determined on the basis of SEBI guidelines? - HELD THAT:- The issue of allowability of ESOP discount being the difference between the market value of shares and the value at which employees had been given the shares is covered, not only by the decision of Hon’ble jurisdictional High Court in CIT Vs. Lemon Tree Hotels Ltd [2015 (11) TMI 404 - DELHI HIGH COURT], but also by the judgement of the Special Bench in the case of Biocon Ltd. [2014 (12) TMI 838 - ITAT BANGALORE] also approved by the Hon’ble Karnataka High Court [2020 (11) TMI 779 - KARNATAKA HIGH COURT] and held that employees’ discount represents consideration for services rendered by employees and hence it is a deductible business expenditure and it cannot be equated with share premium and it is to be intended towards profit by securing employees’ consistent services. As it is an ascertain liability since employees’ incurred obligation over the distinct period, notwithstanding the fact that exact amount as quantified at the time of exercising options - Decided against revenue.
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