TMI Blog2014 (12) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... Decided in favour of assessee. ESOPs to the employees – Held that:- M/s. Biocon Limited and others Versus The Dy. Commissioner of Income-tax (LTU) and others [2013 (8) TMI 629 - ITAT BANGALORE] - the discount under ESOP is in the nature of employees cost and is hence deductible during the vesting period w.r.t. the market price of shares at the time of grant of options to the employees - The amount of discount claimed as deduction during the vesting period is required to be reversed in relation to the unvesting/lapsing options at the appropriate time - an adjustment to the income is called for at the time of exercise of option by the amount of difference in the amount of discount calculated with reference the market price at the time of grant of option and the market price at the time of exercise of option - No accounting principle can be determinative in the matter of computation of total income under the Act - discount on issue of Employee Stock Options is allowable as deduction in computing the income under the head 'Profits and gains of business or profession' – thus, the matter is to be remitted back to the AO – Decided in favour of assessee. - ITA No.1760/Hyd/12 - - - Dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jective comparative analysis and inter alia selecting the following companies as comparable to the services of the Appellant; (a) Accentia Technologies Ltd.; (b) Acropetal Technologies Ltd.(Seg); (c) Cosmic Global Ltd.; (d) Eclerx Services Ltd.; (e) Genesys International Corporation Ltd.; (f) HCL Comnet Systems Services Ltd. (Seg.); (g) Wipro Ltd. (Seg); Rejection of comparables 7. Not undertaking an objective comparative analysis and inter alia rejecting the following comparable companies. (a) Accurate Data Converters Pvt. Ltd. (b) Allsec Technologies Ltd. (c) Informed Technologies ltd. (d) NIIT Smart Serve Ltd.; (e) Jindal Intellicom Ltd.; (f) ASE Structure Design Pvt. Ltd.; (g) Cepha Imaging Pvt. Ltd.; (h) CG-VAK Software Exports Ltd.(Seg.) (i) Chakilam Infotech Ltd.(Seg); (j) Microland Ltd.; and (k) Igate Global Solutions Ltd.(Seg.) Adjustment of risk differences 8. Not adjusting the net margins of the comparable companies selected taking into account the functional and risk differences betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee does not wish to press grounds No. 1, 2, 3 4,5,7,8 and 9. In view of the same, these grounds are rejected as not pressed. 6. The learned counsel further submitted that the additional grounds of appeal raised by the assessee are legal grounds and therefore, should be admitted and considered on merits. 7. The first additional ground of appeal raised by the assessee by letter dated 7th March, 2013 relates to non-compliance of the directions of the DRP by the Assessing Officer and making TP adjustments in excess of the global profits of the assessee. The brief facts of the case are that the assessee is a global healthcare services company that offers BPO and IT services to various organizations/clients. It has a wholly owned subsidiary in USA to market the services of the assessee in USA. During the relevant financial year, there were international transactions between the assessee and its subsidiary and the Assessing Officer made a reference to the TPO under S.92CA of the Income-tax Act for determination of the Arms Length Price of the international transaction. The TPO made TP adjustment to the price charged by the assessee to its AE. Consequently, the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 266 ITR 548 (Guj.). 8. The Learned Departmental Representative however, opposed the admission of the additional ground of appeal of the assessee. 9. Having heard both the parties and having considered the rival contentions, we find that the assessee had in fact raised an objection on this issue before the DRP, and the DRP had given a direction to the Assessing Officer that the TP adjustments should not exceed the global profits of the assessee company. We find that the Assessing Officer has not given effect to this finding of the DRP while passing the assessment order and therefore, this ground is very much admissible and has to be considered on merits. Therefore, we admit the additional ground of appeal. 10. As regards the merits of the additional ground of appeal, we find that under sub-section (3) of S. 144C the Assessing Officer shall complete the assessment on the basis of the draft assessment order, if no objections are received, within the period specified in sub-section (2) of S.144C, and under sub-section (5) of S.144C, the DRP shall, in a case where any objection has been received under sub-section(2), issue such directions, as it deems fit, for the guidance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and accordingly disallowed the same. The DRP confirmed the disallowance holding that the liability of the company to allot shares is though real, it may crystallize upon the exercise of the options by the employees, and for the relevant assessment year, it is notional and cannot be treated as ascertained liability. Further, the DRP has observed that the issue remains unsettled since it is under litigation by the department. It accordingly confirmed the disallowance. Hence, the assessee is in appeal before us. 14. The learned counsel for the assessee submitted that this issue is now settled by the decision of the Special Bench of the Tribunal(Bangalore Bench) dated 16.7.2013 in the case of Bicon Limited, Bangalore V/s. DCIT (ITA No.368/Hyd/2010 for the assessment year 2003-04 and others. 15. The Learned Departmental Representative, on the other hand, supported the orders of the Revenue authorities. 16. Having heard both the parties, and having considered the material on record, we find that the issue of allowability of discount on the issue of ESOPs is covered by the decision of the Special Bench of the Tribunal in the case of Biocon Ltd. (supra), wherein the Special Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X
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