9911796707
TMI Blog2014 (4) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') was issued to the assessee on 19-08-2010. During the course of assessment, the Assessing Officer observed that the assessee has obtained secured loan of Rs. 5.50 Crores from HDFC Bank. The assessee has paid interest to the tune of Rs. 79.95 Lakhs thereon and has claimed the same as expenditure under the provisions of Section 37(1) of the Act. The assessee-company has formed Murugappa Employees Foundation Trust to implement, execute and administer Employee's Welfare-cum-Share Purchase Option Scheme. In pursuance thereof, the Trust holds the shares of the group companies to be allotted under Employees Stock Option Scheme (ESOP) for the benefit of the employees, the shares are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure u/s. 37(1) of the Act. The CIT(Appeals) allowed the appeal of the assessee for statistical purposes with the following directions: "The Madras High Court in the case of Commissioner of Income Tax-III, Chennai Vs. M/s. PVP Ventures Limited (supra), has held that expenditure on ESOP is an allowable expenditure. Therefore the expenditure incurred by the company by way of interest payable on loans borrowed for acquiring shares to be given to their employees as part of the ESOP scheme is an allowable expenditure. However, the AO may verify that the expenditure claimed by the Appellant Company is only in respect of ESOP scheme of their employees. If the benefit had accrued to employees of any other company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of rendering management services to the group companies as well as holding of shares. The group companies float ESOP Schemes for the employees. Some of the employees do not opt for the allotment of shares under the scheme. The shares to be allotted under ESOP Scheme are vested in Murugappa Employees Foundation. As and when the employees opt for the allotment of shares under the scheme, shares are allotted to the employees by the Trust. The funds borrowed by the assessee are utilized by the Trust in acquiring the shares of the group companies. The Trust is allotting shares under ESOP Scheme to the employees of the assessee as well as to the employees of the group companies. The ld. Counsel further submitted that the ESOP is a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the employees as and when the employees excise their option to acquire shares under ESOP Scheme. One of the objections raised by the Revenue is that the Trust is not exclusively handing the shares of the assessee-company and is not only dealing with the employees of the assessee-company, the Trust is holding shares of group companies as well. The ld. Counsel for the assessee has categorically stated that the assessee-company has been incorporated with the purpose of providing management services to the group companies as well as holding of shares. The Trust has been floated by the assessee-company to achieve its objectives. The benefits accruing to employees by allotment of shares under the scheme is in the form of perquisite. The diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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