2021 (12) TMI 553

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.... case, the Ld. CIT(A) has erred in deleting the addition Rs. 3,01,60,201/- on account of disallowance of ESOP expenses by holding the notional discount on shares issued under ESOP scheme as revenue expenditure allowable u/s 37(1) of the I.T. Act, 1961. 2. On the facts and circumstances of the case, the Ld CIT(A) erred in deleting the addition of Rs. 3,01,60,201/- on account of disallowance of ESOP expenses ignoring the fact that allowability of expenditure u/s 37(1) of the Act cannot be determined on the basis of SEBI guidelines. " 3. The facts in brief qua the issue raised are that, the assessee has debited an amount of Rs. 3,01,60,201/- on account of amortization of deferred option of a stock option scheme to employees. The ld....

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.... deductible during the vesting period on the difference between the market price of shares on the date of grant of options to the employees and the exercise price. However, an upward or downward adjustment to the aforesaid amount is called for depending on the market price at the time of exercise of options. Further, the amount of discount claimed is required to be reversed in relation to the unvested or lapsed options." 4. The ld. Assessing Officer held that the employees' compensation as per SEBI guidelines does not include ESOP and held that amortization of deferred employees' compensation is not expenditure in terms of Section 37 because issue in shares at discount the company had paid out nothing. He further held that the discount r....

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.... ESOP is in the nature of employee cost and hence is allowable as deduction in computing the income under the head profits and gains of business and profession during the vesting period and Ld. AO is directed to compute the amount of discount allowable as deduction on account of ESOP as per the method given by Hon'ble Special Bench of ITAT in the case of Biocon Ltd. This direction is given as the AO did not examine the calculation of quantum of allowability of deduction claimed. Further, since the appellant company is not a listed entity as in the case of Biocon Ltd., therefore, assessing officer is directed to consider the relevant factors as discussed by Hon'ble Special Bench ITAT Bangalore in the case of Biocon Ltd. in para Nos. 12.1 to ....