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2022 (11) TMI 1050 - AT - Income TaxDisallowance with respect to expenditure on ESOP u/s 37 - outflow of money resulting in an expense - shares pertaining to Ultimate Holding Company are granted to eligible employees of HPISO under the above ESOP schemes - Applicability of section 195/192 - AR submitted differential price/full price of the shares granted under these schemes are considered as a part of 'perquisite' taxable in the hands of employees under section 17(2) - HELD THAT:- As decided in NOVO NORDISK INDIA PVT LTD VERSUS DEPUTY COMMISSIONER OF INCOME TAX [2013 (11) TMI 218 - ITAT BANGALORE] The law by now is well settled by the decision of the Special Bench of the ITAT Bangalore in the case of Biocon Ltd. in [2013 (8) TMI 629 - ITAT BANGALORE], wherein it was held that expenditure on account of ESOP is a revenue expenditure and had to be allowed as deduction while computing income - Expenditure in question is wholly and exclusively for the purpose of the business of the assessee and the fact that the parent company is also benefited by reason of a motivated work force would be no ground to deny the claim of the assessee for deduction, which otherwise satisfies all the conditions referred to in section 37(1) of the Act - Expenditure in question was wholly and exclusively for the purpose of the business of the assessee and had to be allowed as deduction as a revenue expenditure. No basis for the observation that the obligation to issue shares at a discounted price to the employees of the Assessee was that of the foreign parent company and not that of the Assessee. Admittedly, the shares were issued to employees of the Assessee and it is the Assessee who has to bear the difference in cost of the shares. The expenditure is necessary for the Assessee to retain a health work force. Business expediency required that the Assessee incur such costs. The parent company will be benefitted indirectly by such a motivated work force. With regard to the observations of the CIT(Appeals) that the ESOP actually benefits only the parent company, we are of the view that the expenditure in question is wholly and exclusively for the purpose of the business of the assessee and the fact that the parent company is also benefited by reason of a motivated work force would be no ground to deny the claim of the assessee for deduction, which otherwise satisfies all the conditions referred to in section 37(1) - disallowance of ESOP expenses has made under the provisions of section 37 of the I.T.Act (though there was some discussion in the draft assessment order with reference to disallowance u/s 40(a)(i) of the I.T.Act). - Decided in favor of Assessee. Payment of leave encashment - allowability of certain payments on actual basis u/s 43B - HELD THAT:-This issue came up for consideration before this Tribunal in [2021 (8) TMI 1349 - ITAT BANGALORE] in the case of M/s. Global e-Business Operations (P) Ltd. held in the light of the decision of the in the case of Exide Industries [2020 (4) TMI 792 - SUPREME COURT ] the assessee will not be entitled to claim deduction on leave encashment on the basis of the provision. Taking into consideration the circumstances under which the assessee did not claim a sum being leave encashment actually being paid during the previous year relevant to Assessment Year we are of the view that the assessee should be allowed leave encashment actually paid as per provisions of section 43B(f) - We remit the issue to the AO to verify the claim of the assessee and allow deduction to the assessee as per law after affording assessee opportunity of being heard. Not allowing the tax credits (TDS, Advance Tax & Self-assessment tax) pertaining to erstwhile Aruba India (Merged Entity) - HELD THAT:- The assessee is entitled for tax credit, which has been paid by Aruba India. Accordingly, the issue is remitted to AO to consider it afresh. Credit for TCS - non-following the direction of the Ld. DRP to grant consequent depreciation on software - HELD THAT:- These issues remitted to the file of AO to grant appropriate depreciation as per the direction of Ld. DRP.
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