ESOP expenses allowed as deductible business expenditure under section 37(1) despite being cross-charged by parent company

ITAT Delhi upheld CIT(A)'s decision allowing ESOP expenses under section 37(1) as deductible business expenditure. The AO had disallowed these expenses considering them notional and contingent. The assessee, a private limited company providing real estate consultancy services, had incurred ESOP expenses cross-charged by its parent company. ITAT followed established precedents from Karnataka HC and Delhi HC in similar cases, confirming that actually incurred ESOP expenses are allowable deductions. The Revenue's appeal was dismissed.

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Issues involved: Appeal against order of NFAC, Delhi regarding deletion of expenses on Employee Stock Option (ESOP) scheme u/s 37(1) for A.Y. 2018-19.

Facts: The assessee, a private limited company in real estate consultancy, filed return declaring income. AO disallowed ESOP expenses as notional and contingent. CIT(A) allowed the claim based on High Court decisions.

Arguments: Assessee claimed actual cost incurred for ESOP, supported by invoices. Revenue contended expenses were notional and contingent. Assessee argued expenses were determined and paid during the year.

Decision: Tribunal found ESOP expenses allowable u/s 37(1) based on High Court decisions. Revenue failed to provide contrary evidence. Expenses were considered incurred and allowable. Appeal dismissed in favor of assessee.

Judicial Precedents: High Courts in Delhi and Madras held ESOP expenses debitable to profit and loss account. Karnataka High Court stated expenses incurred for consistent employee services are deductible u/s 37(1).

Conclusion: Allowability of ESOP expenses upheld based on various court decisions. Appeal of Revenue dismissed.

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