2015 (1) TMI 364

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....confirming the action of Assessing Officer in making an addition of Rs. 8,27,17,775/- by disallowing the expenditure debited to P&L account on account of amount amortized under the Employees Stock Option Scheme (ESOP) without appreciating the facts of the case." 3. The other grounds are only arguments in support of above ground No.1. 4. The facts of the case are that the assessee is a limited company. For the year under consideration, the assessee filed the return declaring total income at Rs. 57,45,70,490/- which was subsequently revised to Rs. 52,42,84,150/-. In the return of income, the assessee had claimed the deduction amounting to Rs. 8,27,17,775/- under the head Employee Stock Option Scheme (ESOP). During the accounting year releva....

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....considered whether any adjustment is required to be made in the subsequent year if any option remained unexercised or lapsed at the end of the exercise period. The ITAT arrived at the conclusion that the deduction is allowable and the method provided by the ITAT for computing the deduction is similar to the deduction worked out by the assessee. He, therefore, submitted that the Assessing Officer may be directed to allow the deduction claimed at Rs. 8,27,17,775/- on account of issue of ESOP. 7. Learned DR, on the other hand, relied upon the orders of authorities below and she further stated that if the Bench intends to follow the decision of the Special Bench of ITAT, then, the matter needs to be set aside to the file of the Assessing Offic....

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....ch expenditure is on account of an ascertained (not contingent) liability; and iii) it cannot be treated as a short capital receipt. Therefore, discount on shares under the ESOP is an allowable deduction."     (emphasis by underlining provided by us) 10. Thus, the Special Bench of ITAT clearly held that discount on shares under the ESOP is an allowable deduction. In view of the above, we direct the Assessing Officer to allow the deduction for discount on shares under the ESOP. The ITAT also prescribed the method for computing the quantum of deduction which reads as under:-     "Quantum of deduction.     * An employee becomes entitled to the shares at a discounted premium over the vesting peri....