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of <h1>ESOP expenses qualify as deductible business expenditure under section 37(1) of Income Tax Act</h1> The Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, 2014 defines employee unit option scheme as a scheme where the manager grants unit options to employees through an employee benefit trust, including all directors except independent directors. Court decisions establish that Employee Stock Option Plan (ESOP) expenditure constitutes allowable revenue expenditure under tax law. The expenditure represents employee compensation and welfare measures that stimulate performance, increase output and profits, making it commercially expedient. Courts have consistently held that ESOP discount amounts to deductible business expenditure under section 37(1) of the Income Tax Act, as it facilitates business promotion without creating enduring benefits or assets for the company.
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