BOOKING.COM INDIA SUPPORT & MARKETING SERVICES PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 6(1)(2), MUMBAI
| आयकर अपीलीय अिधकरण ायपीठ, मुंबई |
IN THE INCOME TAX APPELLATE TRIBUNAL
“B” BENCH, MUMBAI
BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER
&
SHRI SANDEEP SINGH KARHAIL, HON’BLE JUDICIAL MEMBER
I.T.A. No. 3675/Mum/2025
Assessment Year: 2020-21
Booking.Com India Support
& Marketing Services
Private Limited
Unit No. 06, Level 7
Parinee Crescenzo
Plot No. 38/39, G Block Road
Bandra Kurla Complex
Bandra (East) S.O.
Mumbai - 400051
[PAN: AAECB5759L]
Vs
Principal Commissioner of Income Tax, Mumbai - 6
अपीलाथ/ (Appellant)
यथ/ (Respondent)
Assessee by :
Shri Ajit Jain, Shri Siddhesh Chaugule
&
Ms. Sachi Chugh, A/Rs
Revenue by :
Shri Satyaprakash R. Singh, CIT D/R
सुनवाई की तारीख/Date of Hearing : 11/09/2025
घोषणा की तारीख /Date of Pronouncement : 15/09/2025
आदेश/O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the ld.
Principal Commissioner of Income Tax, Mumbai - 6 {hereinafter “the ld.
PCIT”} dated 24/03/2025 pertaining to AY 2020-21. 2. The sum and substance of the grievance of the assessee is that the ld. PCIT erred in assuming jusri iction conferred upon him by the provisions of Section 263 of the Act and further erred in holding that the assessment order dated 05/09/2022 framed u/s 143(3) r.w.s. 144B of the Act is erroneous inasmuch as it is prejudicial to the interest of the revenue on the ground that the AO did not examine the claim of ESOP charges and allowed CSR expenditure u/s 80G of the Act.
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Representatives of both the sides were heard at length. Case records carefully perused and the relevant documentary evidence brought on record duly considered in the light of Rule 18(6) of the ITAT Rules, 1963. 4. Briefly stated the facts of the case are that the assessee filed its return of income on 21/03/2021 declaring total income at Rs. 13,69,51,720/-. The return was selected for scrutiny assessment through CASS and accordingly, statutory notices were issued and served upon the assessee. Queries were raised which were duly replied by the assessee with supporting evidence. The returned income was assessed as such at Rs. 13,69,51,720/-. Assuming power conferred upon him by the provisions of Section 263 of the Act, the ld. PCIT issued showcause notice to the assessee which reads as under:-
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1. The impugned notice revolves around two issues. Firstly, the claim of ESOP expenditure and secondly the claim of CSR expenditure as deduction u/s 80G of the Act. 5. Vide notice dated 18/11/2021, issued u/s 142(1) of the Act, the AO interalia raised the following queries:- “4. It is seen that you have debited an amount of Rs 1,19,98,626 towards ESOP expenses. Regarding the same, please answer the following: 4.1 Please explain the nature of these expenses and provide details thereof. 4.2 Please provide the ledger account 4.3 Bank statement extract to show that the amount has been debited during the year 4.4 Please explain why this expense is considered to be for the purpose of business/ profession?”
1. The assessee replied as under:- Question 4: It is seen that you have debited an amount of Rs 1,19,98,626 towards ESOP expenses. Regarding the same, please answer the following: 4.1 Please explain the nature of these expenses and provide details thereof. 4.2 Please provide the ledger account. 4.3 Bank statement extract to show that the amount has been debited during the year. 4.4 Please explain why this expense is considered to be for the purpose of business/ profession? In respect of the above question, the assessee humbly submits before your goodself that the ultimate holding entity of the Booking.com Group established an equity compensation plan, wherein it offered Employee Stock Option Plans (‘ESOPs’) to employees of its Group entities, who are eligible under the equity compensation plan,
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as incentives and rewards to encourage the employees to contribute to the long-term success of the Booking.com Group.
As per the arrangement, the ultimate holding company recharged/ recovered from the assessee, the proportionate ESOPs cost in respect of the ESOPs granted to the employees of the assessee company. The ESOPs of the ultimate holding company were offered to the employees of the assessee at a pre-determined exercise price. The proportionate cost (representing the difference between the prevailing market price and the exercise price) in relation to the ESOPs allotted to such employees were cross- charged from the assessee through intermediate group company incorporated in the Netherlands, as per the terms of the recharge agreement by raising debit notes/
invoices.
Accordingly, during the captioned AY, the Company had recognized ESOP costs of INR 1,19,98,626 as part of its total personnel expenses in Note 17 of audited financial statements of the financial year relevant to the captioned AY (enclosed as Annexure-
5). Out of this ESOP cost, INR 58,31,179 was suo moto identified as notional in nature and hence, disallowed while computing the taxable income for AY 2020- 21. The balance portion of INR 30,76,299, being an actual expense on account of vested
ESOPs, did not require any adjustment. In this regard, a copy of the ledger account of ESOP recharge for the captioned AY is enclosed as Annexure-12. The assessee further encloses herewith, the recharge agreement and debit note evidencing the cross-charge which resulted in the incurrence of the actual expense which has been claimed by the assessee as Annexure-13 and Annexure-14 respectively. Further, extract of the bank
Statement evidencing that an amount of INR 92,43,746 has been debited during the year is enclosed as Annexure-15. ESOP cost should be considered for business purposes
In ESOP, the company undertakes to issue its shares to its employees or employees of its affiliates at a future date at a price lower than the current market price. This is achieved by granting ESOPs to its employees at a discount. The amount of discount represents the difference between market price of the shares at the time of the grant of option and the offer price. In order to be eligible for acquiring the shares under the ESOP, the concerned employees are obliged to render services to the company during the vesting period as given in the scheme. On the completion of the vesting period in the service of the company, such options vest with the employees. The options are then exercised by the employees by making application to the employer for the issue of shares against the options vested in them.
Considering the high attrition rate prevalent in the services sector, the ESOP tool usually helps in attracting and retaining the best human talent and are an important tool of human resource policy in an organization, where human resources constitute an important asset.
Under the Act, there is no specific section or provision which permits an assessee to claim ESOP expenditure as an allowable expense. The provision where a company can claim such an expenditure is section 37 of the Act. Hence, it is pertinent to test the conditions mentioned in section 37 in order to conclude whether the ESOP expenditure is allowable as business expenditure.
Section 37 of the Act allows an assessee to claim expenditure if it fulfills the following conditions:
•
It should be an expenditure;
•
It should not be dealt in section 30 to 36;
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•
It should not be a capital expenditure or personal expense of the assessee, and •
It should be incurred or laid out wholly and exclusively for the purpose of business or profession.
In view of the rationale and modus operandi of the ESOP, it becomes out and out clear that the primary object of ESOP is to earn profit by securing the consistent and concentrated efforts of its dedicated employees during the vesting period. Therefore.
ESOP cost should be construed as nothing but a part of package of remuneration and granting ESOPs is a substitute to giving direct incentive in cash for availing the services of the employees. Hence. the sole object of granting ESOPs to employees is to ensure continuity of their services to the company and the same cannot be overlooked.
It is nothing but the employee remuneration cost incurred by a company.
As submitted earlier, the stock options of the ultimate holding company granted to the employees of the assessee were offered to employees at a pre-determined exercise price.
Further, pursuant to the ES scheme, debit notes/ invoices were raised by intermediate group company on the assessee for rec g the proportionate amount of ESOP costs pertaining to options granted to the assessee s employees.
As per the ESOP agreement, the proportionate cost re-charged to assessee
(representing the proportionate cost of ESOPs granted to assessee’s employees) involves actual reimbursement in the form of monetary payout by the assessee to the intermediate group company. Accordingly, such ESOP cost borne by the assessee cannot be treated as a notional or fictitious expenditure by any stretch of imagination.
It is further submitted that such ESOP cost should be construed as nothing but a part of package of remuneration of the employees and granting ESOPs is a substitute to giving direct incentive in cash for availing the services of the employees. It is evident that the sole object of granting ESOPs by the ultimate holding company to the employees of the assessee is to ensure continuity of their services to the company, which is nothing, but employees cost incurred by the Company. Therefore, such cost does not result in creation of any asset of enduring nature for the assessee, i.e., not of capital nature and qualifies as "an expenditure incurred wholly and exclusively for the purposes of business’, which is tax deductible under section 37 of the Act.
In support of the above contentions, reliance is placed on the judgment of Hon’ble
Mumbai Income Tax Appellate Tribunal (‘ITAT’) in the case of DCIT vs Accenture
Services Pvt Ltd [I.T. Appeal No. 4540 (Mum.) of 2008, dated 23-3-2010], wherein on identical set of facts as prevalent in the assessee’s case, the Hon’ble Mumbai ITAT has held the ESOP costs to be allowable revenue expenditure. In this case, the assessee allotted shares of its parent company to its employees as part of Employee Stock
Purchase Plan (ESPP’) and the difference in the market price of the shares of parent company and the exercise price of such shares paid by its employees was claimed by the taxpayer as its expense. The assessing officer disallowed the expenditure on the ground that the same was not the expenditure of the assessee but of its parent company.
While determining the allowability of ESOP costs claimed by the assessee, Hon’ble
Mumbai HAT held that since the shares were allotted to employees of the assessee to motivate and award its employees for their hard work, the expenditure on the same amounts to assessee’s personnel cost and was incurred for the purposes of assessee’s business. Accordingly, the expenditure incurred towards grant of shares of the parent
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company to employees was held to be allowable expenditure as per the provisions of section 37 of the Act.”
2. The AO was satisfied with the reply of the assessee. 6. The ld. PCIT is of the firm view that the AO has not made any further enquiry thereby making the assessment order erroneous insofar as it is prejudicial to the interest of the revenue. We do not find any merit in such observation of the ld. PCIT. Firstly, the ld. PCIT has not invoked provisions of Section 263 of the Act suo moto but was compelled by the audit objections as mentioned in the body of the order of the ld. PCIT which means that without applying his own mind, the ld. PCIT was simply carried away with the audit objections raised by the audit party. 7. As mentioned hereinabove, the AO raised a specific query on the issue of the claim of ESOP expenditure to which the assessee not only furnished a detailed reply but also supported its claim by quoting various judicial decisions in favour of the assessee. The judicial decisions are discussed hererinbelow:- 8. The Hon’ble High Court of Bombay in the case of PCIT vs. Cartier Leafin (P) Ltd. 112 taxmann.com 63, had the occasion to consider a similar grievance and held as under:- “7. We find that the finding of fact order of the Tribunal that the proceedings under section 263 of the Act, on the face of it, have been initiated without examination of records before the Assessing Officer is not shown to be perverse. It is clear that the show cause notice proceeds on the basis that the books of accounts, transaction accounts of share trading carried out by the assessee vis-a-vis D-mat accounts have not been examined by the Assessing Officer during the course of assessment proceedings. However, we note that in the assessment order dated 28 March 2014 itself in paragraph-5.2, the Assessing Officer has recorded that he examined D-mat account in order to verify the share trading activities claimed by the assessee. Moreover the before passing the assessment order, sale, purchase and closing stocks were also examined by the Assessing Officer. Thus, the basis to invoke section 263 of the Act factually did not exist as there was due enquiry by the Assessing Officer during the assessment proceedings leading to the assessment order dated 28 March 2014. Thus, it is amply clear that the Assessing Officer has applied his mind while accepting the claim of the Respondent of operating loss of Rs.8.79 crore making the proceedings
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under section 263 of the Act bad in law. In any event, the view taken on fact by the Assessing Officer is a possible view and the same is not shown to be bad.”
Similar view was taken by the Hon’ble High Court of Bombay in the case of CIT vs. Nirav Modi 390 ITR 292. The relevant findings read as under:- “12. In the present facts, the Assessing Officer was satisfied, consequent to making an enquiry and examining the evidence produced by the Assessing Officer, establishing the identity and creditworthiness of the donor as also the genuineness of the gift. The CIT in his order of Revision, does not indicate any doubts in respect of the genuineness of the evidence produced by the Assessee. The satisfaction of the Assessing Officer on the basis of the documents produced is not shown to be erroneous in the absence of making a further enquiry. It is made clear that our above observations should not be inferred to mean that it is open to the Assessing Officer to enquire into the source of source for the purpose of the present facts. This is a case where a view has been taken by the Assessing Officer on enquiry. Even if this view, in the opinion of the CIT is not correct, it would not permit him to exercise power under Section 263 of the Act. In fact, the Apex Court in Amitabh Bachchan (supra) has observed that there can be no doubt that where the view taken by the Assessing Officer is a possible view, interference under Section 263 of the Act, is not permissible.”
The Hon’ble High Court of Delhi in the case of PCIT vs. Clix Finance India (P) Ltd. [2025] 473 ITR 650 (Delhi) interalia held as under:- 27. Considering the aforesaid judicial pronouncements, it can be safely concluded that inadequacy of enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Act. The Revenue in the instant case has not been able to make out a sufficient case that the CIT has exercised the power in accordance with law. Rather, in our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit. 28. Notably, the ITAT, while making a categorical finding that the CIT had failed to point out any definite or specific error in the assessment order, has satisfactorily explained both the claims in question in Paragraph 8.2 of its order, which reads as under:- "8.2 In the Impugned Order, the Ld. Commissioner of Income Tax-IV, Delhi held that the AO had not examined the aforesaid two issues properly and, therefore, set aside the issues for further inquiries to be conducted by the AO. As regards the first issue is concerned, we note that out of total provision of Rs. 1114.68 lacs, a sum of Rs. 7,60,76,105/- was suo moto added back in the computation of income and a further sum of Rs. 73,46,160- was disallowed by the AO in the original assessment order dated 30.3.2005. Therefore, out of Rs. 1114.68 lacs, Rs. 834.22 lacs already stood disallowed in the original assessment order. The balance amount represented actual write off which was palpably clear from page 2 of the impugned order itself. No deduction on account of any such provision was, therefore, allowed to the assessee. Hence, there is no error or prejudice to the interest of revenue. As regards
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second issue it was noted that interest rate swap was an actual loss and only the net loss of Rs. 114.05 lacs after setting of gain of interest rate swap was claimed as deduction. However, we find that both these issues were duly examined by the AO vide Questionnaire dated 2.11.2004 (Page 1-2 of the Paper Book) to which replies dated 9.12.2004, 20.12.2004 and 6.1.2005 (Page No. 3-39 of Paper Book-1) were furnished and, therefore, the finding of the Ld. CIT that the issues were not examined properly was not correct. Even the Ld. CIT has not pointed out the definite and specific error in the original assessment order and observed that the inquiry made by the AO was inadequate or improper without first pointing out the error in the original assessment order passed by the AO, particularly because both the aforesaid issues were duly examined at the stage of the original assessment proceedings, hence, the impugned order is beyond juri iction, bad in law and void-ab-initio."
29. It is discernible from the aforenoted findings of the ITAT that both the claims were duly examined during the original assessment proceedings itself and neither there was any error nor the same was prejudicial to the interests of the Revenue.
Thus, the findings of fact arrived at by the ITAT do not warrant any interference of this Court.
30. So far as the reliance placed by the CIT on Umashankar Rice Mill is concerned, the same is misplaced, particularly in light of the insertion of Explanation 2 to Section 263 of the Act, brought in place by the Finance Act, 2015. The said amendment markedly specifies various conditions to exercise the authority vested in the Commissioner under Section 263 of the Act, leaving no ambiguity in the interpretation of the said provision.
31. In view of the aforesaid, the appeal preferred by the Revenue is dismissed alongwith the pending application(s), if any.”
The ld. D/R has relied upon the decision of the Hon’ble High Court of Delhi in the case of Goetze (India) Ltd. 361 ITR 505, but in our considered opinion, the said decision of the Hon’ble Delhi High Court is misplaced inasmuch as in that case, the Hon’ble Delhi High Court interalia held as under:- “In such cases the order of the Assessing Officer is erroneous provided the Commissioner holds and is able to demonstrate that the view taken by the Assessing Officer was not plausible, being legally unsustainable and incorrect. But the finding must be recorded. This would satisfy the statutory requirement that the order passed and made the subject-matter of revision was erroneous, subject to the second condition that the order under review should also be prejudicial to the interests of the Revenue.”
If the aforementioned findings of the Hon’ble High Court is considered in the light of the facts and circumstacnes of the case in hand, we find that in the present case, due to plethora of decision on the issue
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of ESOP expenditure, the AO has taken the most plausible view and it cannot be said that the view taken by the AO is erroneous. Merely because the decision of the Hon’ble Karnataka High Court in the case of CIT vs. Biocon Ltd. [121 taxmann.com 351] is sub-judice before the Hon’ble
Supreme Court would not make the assessment order erroneous simply because the AO has followed the decision of the Hon’ble Karnataka High
Court.
13. Considering the facts of the case in totality in light of the judicial decision discussed hereinabove, we do not find any merit in the findings of the ld. PCIT in the impugned order insofar as ESOP expenditure is concerned and we do not find the impugned assessment order as erroneous inasmuch as it is prejudicial to the interest of the revenue.
14. Insofar as the second issue is concerned, relating to the claim of CSR expenditure as deduction u/s 80G of the Act, it is true that no specific enquiry was made by the AO during the course of the scrutiny assessment proceedings but it is equally true that deduction u/s 80G of the Act has been allowed by the Co-ordinate Benches consistently in favour of the assessee in the case of Motilal Oswal Securities Ltd. (ITA No.
1795/Mum/2023, order dated 18.08.2023), Allegis Services India Pvt. Ltd. (ITA
No. 1693/Bang/2019), IMS Mining Put. Ltd. [130 taxmann.com 118 (Kolkata
Trib.)] and Elan Pharma (India) Pot. Ltd. vs. PCIT in ITA No.
2419/Mum/2025. 15. In our considered opinion, being a highly debatable issue, it is outside the purview of revisionary juri iction u/s 263 of the Act. At this stage, it is relevant to note the following observations of the Hon'ble
10 taxmann.com 418 (Bom):-
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"9. The Revenue may be correct in contending that, the Assessing Officer had not carried out detailed enquiries with respect to this claim of assessee. However, this by itself would not be sufficient to enable the Commissioner to exercise revisional power.
In a given case, as in the present one, if the answer to the legal issue can be had on the basis of the material already on record, there would be no useful purpose in asking the Assessing Officer to carry out the same exercise and come to the same conclusion as the Tribunal in the present case has. In this context, we do not accept the contention of the Counsel for the Revenue that, answer in law had to come from the Assessing
Officer and not the Tribunal. He had argued that even if the Tribunal was right in law, since the Assessing Officer had not come to the said conclusion, the order of the Commissioner should not be disturbed. In our opinion, if the Tribunal has come to the correct conclusions in law and said conclusions are based on materials already on record, it would be futile to reinstate the order of the Commissioner, which in turn, would require the Assessing Officer to carry out the same exercise and axiomatically come to the same conclusion. This line, we are adopting, is within the fold of the requirement of the order of Assessing Officer being erroneous. In other words, if it can be demonstrated that the order was not erroneous, the order of revision would, in any case, require an interference. The matter can be looked from slightly different angle. If while examining the order of the A.O. Commissioner notices that, though the A.O.
was not examined for claim of the assessee, but the claim itself is legally tenable, would be judicial in exercising and set aside the assessment? The answer may be in the negative"
The above mentioned binding observations of the Hon’ble Juri ictional High Court are sufficient for not sending the matter back to the file of the AO for verification as it would be a futile exercise as the issue has already been decided in several judicial decisions by the Co- ordiante Benches in favour of the assessee and against the revenue. 17. However, we find that the claim of deduction of Rs. 7 Lakhs pertains to the year ended 31/03/2019 relevant to AY 2019-20 which is evident from the invoices of Azad Foundation exhibited at page 242 of the paper book. Since this deduction do not pertain to the assessment year under consideration, the same needs to be disallowed. Modifying the findings of the ld. PCIT, we direct the AO to disallow the claim of deduction u/s 80G of the Act to the extent of Rs. 7 lakhs. 18. Considering the facts of the case in totality, we set aside the order of the ld. PCIT dated 24/03/2025 and restore that of the AO dated
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05/09/2022 framed u/s 143(3) r.w.s. 144B of the Act subject to the limited extent of disallowance of Rs. 7 Lakhs.
19. In the result, appeal of the assessee is partly allowed.
Order pronounced in the Court on 15th September, 2025 at Mumbai. (SANDEEP SINGH KARHAIL)
ACCOUNTANT MEMBER
Mumbai, Dated 15/09/2025
*SC SrPs
*SC SrPs
*SC SrPs
*SC SrPs
आदेश की ितिलिप अेिषत/Copy of the Order forwarded to :
अपीलाथ / The Appellant 2. थ / The Respondent 3. संबंिधत आयकर आयु" / Concerned Pr. CIT 4. आयकर आयु" ) अपील ( / The CIT(A)- 5. िवभागीय ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file.
आदेशानुसार/ BY ORDER