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2017 (12) TMI 995 - AT - Income TaxRevision u/s 263 - AO has mechanically allowed ESOP expenditure claimed by the assessee without establishing whether the same has actually accrued or not - Held that:- Special Bench of the ITAT in the case of Bicon Ltd. vs. DCIT [2013 (8) TMI 629 - ITAT BANGALORE] held that the ESOP expenditure is not a contingent liability and, that it is an expenditure, that such expenditure is on account of ascertained (not contingent liability) and that it cannot be treated as a short capital receipt. Therefore, discount on shares in the ESOP is an allowable deduction. From the above, it is evident that the premise adopted by the ld. Commissioner of Income Tax in the show cause notice u/s. 263 that the ESOP expenditure were not allowable, as they were contingent liability and has reliance upon the Tribunal’s decision in this regard, stand overruled by the Special Bench of the ITAT. Hence, the final direction of the Commissioner of Income Tax that the Assessing Officer should examine the issue afresh after conducting necessary enquiry and investigation as the same had not actually accrued, is not at all sustainable. It is not the case that there is any Hon’ble High Court decision on the issue which the ld. Commissioner of Income Tax has followed, which overruled the Special Bench decision as above. Thus in the background of the afore-said discussion and precedent, we do not find the order of the ld. Commissioner of Income Tax passed u/s. 263 holding the ESOP expenditure to be contingent and directing further examination by the Assessing Officer sustainable. Accordingly, we set aside the order passed by the ld. Commissioner of Income Tax u/s. 263 and decide the issue in favour of the assessee.
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