ESOP expenditure allowed as business deduction where prior binding precedent had already settled the issue.

ESOP expenditure was held allowable as business expenditure under section 37(1) because the same issue had already been decided in the assessee's own case for earlier years and that view had been affirmed by the jurisdictional HC. The Tribunal held that the disallowance could not be sustained merely because the Revenue had carried a similar issue to the Supreme Court in another matter. The deduction therefore succeeded.

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Issues: Allowability of ESOP expenditure as deductible business expenditure under section 37(1) of the Income-tax Act, 1961.

Analysis: The issue was already decided in the assessee's own case for earlier assessment years and that view had been affirmed by the jurisdictional High Court. In view of the binding decision covering the same question, the disallowance of ESOP expenditure could not be sustained merely because the Revenue had carried the matter further before the Supreme Court in another case.

Conclusion: ESOP expenditure was allowable, and the Revenue's objection to its deduction failed.

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