2021 (10) TMI 917 - HC - Income Tax

Disallowance of ESOP expenses u/s 37(1) - it is not a revenue expenditure actually incurred by the company, as per the provisions of the Act - ITAT allowed - HELD THAT - Commissioner followed the decision of the Bangalore Special Bench in the case of BIOCON LIMITED OTHERS .v. DCIT OTHERS 2013 (8) TMI 629 - ITAT BANGALORE and allowed the appeal of the assessee.

Summary

Issues:
1. Appeal filed by Revenue under Section 260A of the Income Tax Act, 1961 challenging the order of the ITAT regarding the allowance of ESOP expenses to the assessee.

Analysis:
1. The appeal was filed by the Revenue under Section 260A of the Income Tax Act, 1961, contesting the ITAT's order dated 02.08.2019 related to the assessment year 2013-14. The main question raised was whether the Tribunal was justified in allowing ESOP expenses to the assessee, despite it not being a revenue expenditure actually incurred by the company as per the provisions of the Act.

2. The assessee, engaged in the business of M Bio information, molecular biology, and bio-technology, had filed its income tax return for the relevant assessment year, declaring a total income of ?18,19,92,070. The Assessing Officer disallowed the claim made towards Employees Stock Option Plan (ESOP) expenditure under Section 37(1) of the Act.

3. The assessee appealed to the Commissioner of Income Tax (Appeals), who followed the decision of the Bangalore Special Bench in the case of BIOCON LIMITED & OTHERS and allowed the appeal. The Revenue then appealed to the Tribunal, which dismissed the appeal, citing precedents like BIOCON LIMITED, LEMONTREE HOTELS LIMITED, and PVP VENTURES LIMITED.

4. Dissatisfied with the Tribunal's decision, the Revenue filed the current appeal before the High Court.

5. Notably, a previous appeal by the Revenue challenging a decision related to ESOP expenses had been dismissed by the High Court, which ruled against the Revenue and in favor of the assessee. The current substantial question of law mirrored the one considered in the previous case, leading the Court to dispose of the appeal in line with the previous findings.

6. Given the similarity of the issues with the previous case, the Court deemed it unnecessary to issue notice to the respondent, as the matter was already conclusively settled.

7. The Court, based on the previous judgment, decided to dismiss the appeal, finding in favor of the assessee and against the Revenue.

8. The Court also condoned the delay of 8 days in filing the appeal, as it would not prejudice the assessee.

9. Ultimately, the substantial question of law was answered against the Revenue and in favor of the assessee, resulting in the dismissal of the appeal.