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TMI Blog2023 (8) TMI 1626X X X X Extracts X X X X X X X X Extracts X X X X ..... ICAI. The assessee company during the course of assessment explained that ESOP issued to the employees was revenue expenditure for the company in the interest of the business of the company so that talents of the employees is retained in the company to perform and compete in the market place. As in assessee case itself for assessment year 2009-10 & 2011-12 [2015 (6) TMI 1200 - ITAT MUMBAI], 2010-11 [2017 (11) TMI 1860 - ITAT MUMBAI] as held that ESOP expenses is an allowable deduction u/s. 37(1). Disallowance u/s 14A r.w.Rule 8D - CIT(A) has dismissed the ground of appeal of the assessee by referring the amendment made by Finance Act 2022 to Sec.14A by inserting a non-obstante clause that the provision of this section shall apply and sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against the common order of ld. CIT(A)-48, Mumbai for assessment years 2016-17 & 2017-18 based on common issue on identical facts therefore, for the sake of convenience these appeals are adjudicated together by taking ITA No. 1738/Mum/2023 as a lead case and its finding will be applied mutatis mutandis to the other appeal. ITA No. 1738/Mum/2023 "1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals)-48, Mumbai ("Ld. CIT(A)") erred in confirming the action of the learned assessing officer ("td. AO") in making disallowance of INR 1,67.97,854/ on account of Employees Stock Option Plan ("ESOP") claimed by the Appellant under section 37(1) of the Income-tax Act, 1961 ("IT Act") 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be treated as capital expenses. The assessee explained that similar expenses it had claimed in assessment year 2009-10 and 2010-11 and the ITAT has decided the issue for both the years in its favour. The assessee further explained that in the scheme of ESOP's the company gives an option to its employees to purchase its securities at a price lower than the market price. This was a practise which was exercised in order to benefit the employees in order to retain the employees and reward them for their contribution in the growth of the company. It is also explained that its employees were the main assets, therefore, ESOP was issued to them purely from business perspective would qualify as business expenditure and the same was entitled to ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme of ESOP's to purchase its securities at a price lower than the market value price. The assessee had followed the intrinsic value-based method of accounting for stock options granted based on the Guidance Note on Accounting for Employees Share-based payments issued by ICAI. The assessee company during the course of assessment explained that ESOP issued to the employees was revenue expenditure for the company in the interest of the business of the company so that talents of the employees is retained in the company to perform and compete in the market place. During the course of appellate proceedings before us the ld. Counsel has submitted that identical issue on similar facts has been adjudicated by the ITAT Mumbai in the case of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - only. Therefore, the assessing officer has computed disallowance as per Sec. 14A r.w.Rule 8D to the amount of Rs. 95,20,878/- and after reducing the suo-moto disallowance of Rs. 557,184/- further disallowance of Rs. 89,63,694/- was made u/s 14A of the Act. 6. Aggrieved, the assessee filed the appeal before the ld. CIT(A). However, the ld. CIT(A) has dismissed the ground of appeal of the assessee by referring the amendment made by Finance Act 2022 to Sec. 14A by inserting a non-obstante clause that the provision of this section shall apply and shall be deemed to have always applied in a case where exempt income has not accrued or arisen or has not been received during the previous year relevant to assessment year and the expenditure has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17) 82 taxmann.com 415 (Delhi Tribunal) (SB) held that disallowance made u/s 14A cannot be added for computing book profit u/s 115JB of the Act. Therefore, we find that decision of ld. CIT(A) in sustaining the addition is not justified. Accordingly, this ground of appeal of the assessee is allowed. 11. In the result, the appeal of the assessee is allowed. ITA No. 1739/Mum/2023 Ground No. 1 12. Since the facts and issue involved in this ground of appeal is similar to the ITA No. 1738/Mum/2023 as adjudicated supra in ground no. 1 therefore applying the finding of ITA No.1738/Mum/2023 as mutatis mutandis this ground of appeal of the assessee is also allowed. Ground No. 2 13. Since the facts and issue involved in this ground of appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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