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TMI Blog2023 (2) TMI 1063X X X X Extracts X X X X X X X X Extracts X X X X ..... determined at Rs.27,87,17,461/-. 4. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 08.11.2019 in Appeal No.10162/2019-20 granted substantial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal and has raised the following effective ground: "1. Whether on facts and circumstances of the case and in law, the Learned CIT(A) is legally justified in holding that the employees Stock Expenses (ESOP) is an allowable expense u/s 37(1) of the Act. 5. During the course of assessment proceedings, AO noticed that assessee had claimed Employee Stock Option (ESOPs) expense of Rs.4,45,31,251/-. The assessee was asked to justify the claim of the expenditure. Assessee in response furnished detailed submissions but the same was not found acceptable to AO. AO noted that assessee did not furnish the break-up of expenses on shares exercise i.e. allotted during the year. He, therefore, held that the claim of the assessee cannot be allowed u/s 37(1) of the Act and accordingly disallowed Rs.4,45,31,251/- and made its addition. 6. Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(A) after considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as disallowed the expenditure u/s 37(1) of the Income Tax Act on two counts viz, expenditure had not crystallized and expenditure was not capital in nature. In regard to the former the appellant contended that the expenditure had been actually incurred by the appellant company and cross charges in this regard had been paid to the parent company. The appellant also filed a copy of Form 15CBS to authenticate payment so affected along with copy of bank statements of the appellant company. The AR also drew my attention to Note 32 of Audited financial Statements which reflects the details of cross charge. The ARs also placed reliance on the judgement of the Bangalore Tribunal in the case of Novo Nordisk India (P) Ltd, Mumbai Tribunal in the case of DCIT Vs Accenture Services (P) Ltd and ITAT Delhi in the case of Lemon Tree Hotels Ltd to strengthen his argument that such an expenditure is allowable under the aegis of Section 37(1) of the Income Tax Act. Regarding the latter the AR submitted that the expenditure was incurred to incentivize employees to continue working with the appellant company and is not in the nature of capital expenditure. The ARS of the appellant also produced a copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 37(1), the meaning of the term 'expenditure' turns out to be the same as is there in the aforequoted part of the definition under section 2(h) of the Expenditure Act, 1957, viz., not only 'paying out' but also 'incurring'. Coming back to our context, it is seen that by undertaking to issue shares at discounted premium, the company does not pay anything to its employees but incurs obligation of issuing shares at a discounted price on a future date in lieu of their services, which is nothing but an expenditure u/s 37(1) of the Act. The Hon'ble Delhi ITAT in the case of Lemon Tree Hotels Ltd vs ACIT (ITA No. 6070/Del/2014) has also held that ESOP expenses are allowable under section 37(1) of the Act. The order reads as under: Now, turning to Ground No.2, the AO made an addition of Rs.91,89,791/- in respect of ESOP alleging the outgoing expenses are only notional and the pg. 3 ITA No. 6070/Del/2014 expenditure is allowable only when the shares are purchased by the employer. However, in view of the fact that this issue was covered in assessee's own case in respect of the AYS 2008-09 & 2009-10 in ITA No.4588/Del/2013 in Lemon Tree Hotels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y package. According to the court decisions, the expenses are incurred when the right of option is vested in the employee. 6.3 The AO has raised many issues viz. the stocks are from the parent company Cvent Inc. USA and not from the appellant company Cvent India P. Ltd., these are notional expenses not allowable as business expenses. He has also relied on the decision of ITAT, Delhi in the case of Ranbaxy laboratories Ltd versus additional CIT (2010) 39 SOT 17. However, the AO has allowed Rs. 30,56,762/- out of Rs. 1,58,93,019/- as actually incurred expenses on account of allotted stocks. 6.4 The appellant has relied on Novo Nordisk India Vs DCIT, ITA 1275/Bang/2011 and DCIT Vs Accenture Services ITA 4540/Mum/2008 to support its claim that stocks of parent company can be allotted in ESOP and they are claimable. 6.5 Further, Delhi High Court has decided the issue in the case of CIT VS Lemon Tree Hotels Ltd ITA 107/2015 order dt. 18.08.2015 in favour of assessee and allowing the expenditure as claimable expenditure in P&L a/c. The relevant portion is quoted below:- "The Court has been shown a copy of the decision dated 19th June 2012 passed by the Division Bench of Madras Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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