TaxTMI 
TaxTMI 
2021 (9) TMI 104
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.... appeal as per which, only issue urged by the assessee relates to disallowance of "ESOP expenses" claimed by the assessee. 3. The assessee is engaged in the business of providing transaction-based business process outsourcing services to the Group companies. 4. The facts relating to the above said issue are stated in brief. The assessee has floated "Employees Stock Option Scheme" (ESOP). During the year under consideration, the assessee has vested ESOP rights to certain employees. Normally, the shares are issued under ESOP scheme at price below the market price. Accordingly, the assessee claimed a sum of Rs. 1,36,10,974/-, being the difference between the market price of shares and the issue price as ESOP expenses u/s 37(1) of the Act....
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....Panel has examined the submissions of the assessee. There are four stages in the grant of the ESOP. * Granting of option * Vesting of option * Exercise of option * Selling of shares Normally, the ESOP is designed in such a way that there is a gap of one or more years between each of the first three stages. 77. The Biocon decision also holds that the expenditure is allowable at the time of vesting. Since this is. position as per the Biocon decision, then the same becomes taxable in the hands of the employee. What has not been brought before and therefore not considered by the Hon. Special Bench in Biocon is that when the same amount becomes taxable in the hands of the employee. Therefore,....
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....ies The following income shall be chargeable to income- tax under the head" Salaries" (a)any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not; (b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him; (c) any arrears of salary paid or allowed to hint in the previous year by or on behalf of an employer or a former employer, if not charged to incometax for any earlier previous year. Further, u/s 17 of the Act the salary and perquisites are inclusive definitions and ESOP is covered within these provisions. 82. To summarize, the.13locon ....
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....sed by the special bench and submitted that the special bench has visualized the situation that the stage of taxability of perquisite in the hands of the employee may differ from the stage of the deductibility of expense in the hands of the company, depending upon the method of accounting followed by the company. Only condition mentioned by the special bench is that the amount of such discount or the perquisite amount taxed in the hands of employees cannot be different. Accordingly, the Ld. A.R. submitted that it is not correct to say that the ESOP discount claimed by the assessee should be assessed as perquisite in the current year itself. He further submitted that the decision rendered by special bench in the case of Biocon Ltd. (supra) h....