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TMI Blog2014 (7) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... ied securities or sweat equity shares” – Relying upon Biocon Ltd. Vs. DCIT [2013 (8) TMI 629 - ITAT BANGALORE] - the discount on issue of Employee Stock Option is an allowable deduction in computing the income under the head ‘Profit and gains of business or profession’ - 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 - AO directed to allow the expenditure – Decided in favour of Assessee. - ITA No. 4588/Del/2013 - - - Dated:- 23-6-2014 - Shri G. D. Agarwal And Shri A. T. Varkey,JJ. For the Appellant : Ved Jain Rano Jain, CA For the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SSI Ltd. Vs. DCIT 85 TTJ 1049 wherein in identical circumstances the Hon ble ITAT has allowed the claim for ESOP expenses. (d) The Hon ble CIT(A) has confirmed the disallowance made towards ESOP expenses on the ground that even if the ESOP expenditure is to be allowed as deduction, then it shall be allowed as a deduction in the year the actual allotment of shares takes place. The hon ble CIT(A) has failed to appreciate the fact that as per SEBI regulations, the difference between the market price per share and the price at which such shares were allotted to be employees was to be claimed as a deduction in the year in which the option was given and exercised by the employees as the liability got ascertained at that time. 3. Apropos co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Employees Stock Option Cost (ESOP). Further it was submitted by the ld AR that as per the ESOP, shares were allotted to the employees by the assessee company; and the difference between the issue price of shares and market price of shares on the date of issue represented the benefit provided to the employees; and therefore that amount is an allowable expenditure as held by the Madras Tribunal in the case of SSI Ltd. Vs. DCIT 85 TTJ 1049, wherein, identical circumstances the ITAT has allowed the claim of the company incurred in respect to ESOP expenses. It was further submitted by the ld AR, that the said order of the Tribunal has been upheld by the Hon ble Madras High Court. It was also submitted by the ld AR that in Biocon Ltd. Vs. DC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was rightly held so by the Assessing Officer and thereafter the same was rightly upheld by the ld CIT(A), so, no interference in the impugned order is necessary. 8. We have heard both the parties and have perused the records and have gone through the case laws cited by both the sides. Admittedly there is no dispute with regard to the veracity of the claim of the appellant/ assessee in respect to the allotment or number of shares and about the value of the same earmarked to the employees as per the scheme under Employees Stock Option . The only issue is that whether the assessee/ appellant s claim for deduction under the head Employees Stock Option Cost (ESOP) is an allowable expenditure u/s 37 of the Income Tax Act, 1961 (herein after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Finance Bill, 2005 highlights the details of the Fringe Benefits tax. It provides that : Fringe benefit as outlined in section 115WB, mean any privilege, service, facility or amenity directly or indirectly provided by an employer to his employees (including former employees) by reason of their employment. Charging section 115WA of this Chapter provides that : In addition to the income-tax charged under this Act, there shall be charged for every assessment year . fringe benefit tax in respect of fringe benefits provided or deemed to have been provided by an employee to his employees during the previous year Section 115WB gives meaning to the expression fringe benefits. Sub-section (1) provides that for the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discount on shares under the ESOP is an allowable deduction. .. 10.8 Reverting to the questions of when and how much of deduction for discount on options is to be granted, we hold 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. We, therefore, agree with the conclusion drawn by the tribunal in SSI Ltd. s case allowing deduction of the discounted premium during the years of vesting on a straight line basis, which coincides with out above reasoning. 9. Moreover, it has been brought to our notice that in assessee s own c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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