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2023 (9) TMI 1221 - ITAT MUMBAITP Adjustment - ALP of the ESOP Expenses Determined at "NIL" - reimbursement towards ESOP expenses - HELD THAT:- AO and the TPO had failed to appreciate that the expenses for which deduction has been claimed by the Appellant pertain to RSUs granted in 2015 and exercised in the FY 2017-18. The ESOP expenses related to the RSUs granted and exercised were claimed as deduction by the Appellant over the vesting period. During the relevant previous year, the ESOP expenses were also remitted outside India on the basis of invoices raised upon the Appellant by its AE. Therefore, deduction for the ESOP expenses was claimed by the Appellant during the relevant previous year. Benefit accruing on account of ESOP plans - We find merit in the contention advanced on behalf of the Appellant that for the purpose of granting the RSUs to the employee of the Appellant was to retain and motivate him for continuing his employment with the Appellant. The cost incurred by AE on exercise of the RSUs by the employee of the Appellant is the cost reimbursed by the Appellant which was initially picked up by the AE. We hold that given the facts and circumstances of the present case discussed hereinabove, the ALP of the ESOP Expenses cannot be taken as ‘Nil’. The transfer pricing addition therefore, set aside and TPO/AO is directed to re-compute ALP and the transfer pricing adjustment, if any, by following the method adopted by the Appellant for determination of ALP of the international transaction of reimbursement of ESOP Expenses.
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