TaxTMI 
TaxTMI 
2023 (4) TMI 143
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....referred to as the "Act"), dated 29.12.2019. 2. Ground taken by the revenue is reproduced as under: "1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A), NFAC has erred in deleting the addition made on account of the disallowance of the expenses incurred in relation to ESOP cost." 3. Brief facts of the case are that assessee is a banking company and it furnished its return of income on 31.10.2017 reporting total income of Rs.1778,60,46,900/- which was revised on 29.03.2019 at a total income of Rs.1776,97,65,610/-. During the course of assessment, Ld. AO observed that a sum of Rs.5,55,24,417/- is claimed by the assessee as a deduction in the computation of income on account of "ESOP cost borne by the ....
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....ated the ESOP expenses of Rs.5,55,24,417/- as inadmissible and added it to the total income of the assessee. Aggrieved, assessee went in appeal before the Ld. CIT(A) who after dealing with the details of the ESOS schemes and the technicalities involved therein and by placing reliance on the decision of Hon'ble Special Bench of ITAT, Bangalore in the case of BIOCON Ltd. Vs. DCIT (2013) 35 taxmann.com 335, affirmed by the Hon'ble High Court of Karnataka in the case of CIT, LTU Vs. BIOCON Ltd. (2020) 121 taxmann.com 351 (Kar), held that expenditure on ESOP is in the nature of employees cost and is allowable u/s. 37(1) of the Act. Aggrieved, the revenue is in appeal before the Tribunal. 4. Before us, Smt. Ranu Bisawas, Addl. CIT, DR represente....
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....n'ble Special Bench of ITAT in the case of BIOCON Ltd. Vs. DCIT (Supra) and the judgment of Hon'ble High Court of Karnataka confirming the order of Hon'ble Special Bench in the case of BIOCON Ltd. wherein Hon'ble Court held that discount on issue of ESOP was allowable as a deduction u/s. 37(1) as primary object was not to waste capital but to earn profits by securing consistent service of employees. The head note of the said judgment is reproduced for reference: "Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Discount of issue of ESOP) - Assessment year 2004-05 - Assessee floated Employees Stock Option Plans (ESOP) - It provided employees discount - There was difference between grant price to employees....
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....claim of the assessee. Relevant extract from the said decision of ITAT, Delhi is reproduced as under: "6. After considering the rival submissions and going through the material placed on record, we find that it is now well settled proposition that the issue of allowability of ESOP discount being the difference between the market value of shares and the value at which employees had been given the shares is covered, not only by the decision of Hon'ble jurisdictional High Court in Lemon Tree Hotels Ltd. (supra), but also by the judgement of the Special Bench in the case of Biocon Ltd. (supra). This judgment of special bench has now been approved by the Hon'ble Karnataka High Court vide order dated 11.11.2020 and held that employees&#....