TaxTMI 
TaxTMI 
2015 (1) TMI 364
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....circumstances of law, the ld.CIT(A) erred in 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....
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....ial Bench of ITAT has considered the identical issue and has examined every aspect, i.e., whether the deduction is allowable on issue of employee's stock options and how to compute the deduction and has also 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, relie....
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....fit or 'any consideration for employment', it is not open to argue contrary. Once it is held as a consideration for employment, the natural corollary which follows is that such discount i) is an expenditure; ii) such 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 ....
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....9;how much' of deduction for discount on options is to be granted, it is held that the liability to pay the discounted premium is incurred during the vesting period and the amount of such deduction is to be found out as per the terms of the ESOP scheme by considering the period and percentage of vesting during such period. Therefore, deduction of the discounted premium is to be allowed during the years of vesting on a straight line basis." 11. The learned counsel for the assessee has claimed that the discount worked out by the assessee, though named as amortization, is similar to the method prescribed by the Special Bench for computing deduction. Learned DR had suggested that the matter may be sent back to the file of the Assessing O....