DCIT-7(1)(1), MUMBAI vs. GOLDMAN SACHS (INDIA) SECURITIES PVT. LTD., MUMBAI
Income Tax Appellate Tribunal, MUMBAI BENCH “K” MUMBAI
Before: SHRI OM PRAKASH KANT () & SHRI RAJ KUMAR CHAUHAN () Assessment Year: 2013-14
PER OM PRAKASH KANT, AM
This appeal by the Revenue is directed against order dated
14.04.2025 passed by the Ld. Commissioner of Income-tax
(Appeals) – 56, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, raising following grounds:
1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in holding that the discount on issue of ESOP is allowable as deduction in compu busine
2. Whethe and in betwee option be trea
3. Whethe and in the sch will no period and re
4. Whethe and in penalty assess complia modific compa
2. Briefly stated, t
Private Limited Comp wholly owned subsid assessee is duly regis of India (SEBI) as a M
National Stock Excha consideration, the providing merchant transactions in India
2.1 The assessee fi under consideration
4,183,593,840/-. Th assessment, consequ
Goldman Sachs ting the income under the head profits an ess.
er on the facts and in the circumstance law, the Ld. CIT(A) was right in holding t en market price of the shares at the tim and offer price amounts to discount and ated as remuneration to Employees for the er on the facts and in the circumstance n law the Ld. CIT(A) committed error in n heme of ESOP from which it is clear that t ot get any right in the shares till comp prescribed and the expenditure claimed corded perverse finding.
er on the facts and in the circumstance n law, the Ld. CIT(A) was right in hol y was on account of irregularities com see's clients without appreciating the f ance to clearing house trades and cation are defaults attributable to t ny majorly and not to its clients.
the facts of the case are that pany incorporated under the law diary of Goldman Sachs (Maur stered with the Securities and E
Merchant Banker and is also reg ange as a Stock Broker. During assessee was engaged in th banking services and carryin
.
filed a revised return of incom on 31.03.2015, declaring a tota he said return was selected uent to which a notice under s s (India) Securities Pvt. Ltd
2
nd gains of the es of the case that difference me of grant of d same has to eir service.
es of the case not examining the employees mpletion of the d is contingent es of the case lding that the mitted by the fact that non- d client code the assessee the assessee, a ws of India, is a ritius) LLC. The Exchange Board gistered with the g the year under he business of ng on securities me for the year al income of Rs.
d for scrutiny ection 143(2) of the Income-tax Act, issued by the Learn
7(1)(1), Mumbai (he
Officer’).
Having r undertaken by the a the Ld. Assessing Of Pricing Officer (Ld. T of such transactions
92CA(3) of the Act price declared by t
Thereafter, the Ld.
under section 143(3
28.12.2016, assessin
While doing so, he m
Stock Option Plan (E same to be notional a 37,11,074/- paid to t nature and hence not 2.2 Aggrieved, the a Ld. CIT(A) deleted b
ITAT in the case of th order of the Ld. CIT(A by way of raising grou
Goldman Sachs
1961 (hereinafter referred to a ned Assistant Commissioner o ereinafter referred to as ‘the regard to the internationa assessee with its Associated En fficer made a reference to the L
TPO) for determination of the arm
. The Ld. TPO, vide order passe dated 28.10.2016, accepted th the assessee and proposed n
Assessing Officer completed t
3) read with section 144C(1) ng the total income at Rs. 5, made the following disallowance
ESOP) cost of Rs. 56,44,29,191
and contingent in nature; and (i the stock exchanges, treating th t allowable under section 37(1) o assessee filed appeal before the oth the additions following the he assessee in earlier years. Agg
A), the Revenue is in appeal befo unds as reproduced as above.
s (India) Securities Pvt. Ltd
3
as ‘the Act’) was of Income Tax–
Ld. Assessing al transactions nterprises (AEs),
Learned Transfer m’s length price ed under section he arm’s length no adjustment.
the assessment of the Act on 75,17,34,105/-.
es: (i) Employee
1/-, holding the ii) charges of Rs.
hem as penal in of the Act.
Ld. CIT(A). The e finding of the grieved with the ore the Tribunal
The ground Nos ESOP , which has be computing the incom business’. 4.1 Briefly stated, t that Goldman Sachs a global stock award the employees of its the assessee–compa granted ESOPs of G employees, upon fu shares of GSGI. Upo of GSGI would be del was required to mak the assessee to GSG value of the shares of 4.2 As per the cons group, the grant pr amortized in the book award. At the close were marked to ma stock price vis-à-vis t duly adjusted to th accounting was in Goldman Sachs s. 1 to 3 of the appeal relate to d en allowed by the Ld. CIT(A) as me under the head ‘profit and the facts relevant to the issue Group Inc. (hereinafter ‘GSGI’) d plan, the benefits whereof w subsidiaries and associated en any. Under the said scheme SGI to its employees. The ESO ulfillment of stipulated conditi on completion of the vesting per livered to the employees, for whi ke payment to GSGI. The quan I was determined with referenc f GSGI on the date of such deliv istently followed global account rice of ESOPs, as on the date ks of the assessee over the vesti of each financial year, the outs arket with reference to the flu the grant price, and the differen he Profit and Loss Account. T consonance with the applica s (India) Securities Pvt. Ltd 4 discount cost on deduction while d grains of the e in dispute are had formulated ere extended to ntities, including , the assessee OPs entitled the ions, to receive riod, the shares ich the assessee tum payable by ce to the market very. ting policy of the e of grant, was ing period of the standing shares uctuation in the ntial, if any, was This method of able accounting standards in India. T account of ESOPs g assessee as part of accordingly claimed laid out for the purpo 4.3 During the fin debited an amount market fluctuation o and Loss Account an its taxable income represented bonus p inadvertently been claimed by the assess assessee requested t ESOP disallowance, allowable under sect Officer, in his assess plea and proceeded to 4.2 Before us, the L issue is no longer re assessee by the orde assessment years, n 2010–11 (ITA No.927/Mum/2016), Goldman Sachs
The payment so required to be m granted to employees was con
‘salary cost’ in the year of i as revenue expenditure wholly ose of its business.
nancial year ended 31.03.2013
of Rs.564,429,191/– (inclusiv of Rs.135,125,414/–) as ESOP c nd claimed deduction thereof in e. Out of this amount, Rs paid to employees during the y clubbed under the head ‘ES see that vide submission dated that such bonus amount be exc if any, since the same was ion 43B of the Act, however, th sment order, did not separately o disallow the entire ESOP cost.
Ld. Counsel for the assessee sub s integra, as it stands covered ers of the Tribunal in its own c amely AYs 2009–10 (ITA No.22
No.1546/Mum/2015),
20
, 2012–13 (ITA No.1428/Mum/
s (India) Securities Pvt. Ltd
5
made to GSGI on nsidered by the incurrence, and and exclusively
3, the assessee ve of mark–to–
cost in its Profit computation of s.153,747,734/–
year, which had SOP cost’. It is 21.12.2016, the cluded from the s independently he Ld. Assessing y adjudicate this .
bmitted that the in favour of the cases for several
22/Mum/2014),
011–12
(ITA
2017), 2014–15
(ITA No.6475/Mum/
and more recently fo dated 09.12.2024) as order dated 03.06.20
5. We have heard record. The Ld. CIT(A and relying upon assessee’s own case observing as under:—
“6.4. Decision
Mumbai in 09.12.2024 re
The relevant e reproduced as “....
12.3. Before u decision of th of Blocon Ltd discount on is 12.4. The Ld favour of the Special Benc employees st the income u profession. Gr
5.1 Before us, the L decision of the Co–o
2018–19 (ITA No.243
of earlier years incl
Goldman Sachs
/2018), 2015–16 (ITA No.720
or AY 2017–18 (ITA No.763/Mu s well as AY 2018–19 (ITA No.24
025).
rival submissions and perused
A), having examined the assesse the binding precedent of th for AY 2017–18, deleted the d
—
n: The issue has been decided by the H the assessee's own case for A.Y elying on the earlier assessment year ie.
extract of the Hon'ble ITAT's order for A.
s under:
us, the Ld. Senior Counsel drew our att e Special Bench of the Bangalore Tribuna d 144 ITD 21 (Bang) wherein on simil ssue of ESOP was allowed as deduction.
d. DR could not bring any distinguishing
Revenue. Respectfully following the de ch (supra), we hold that discount o tock options is allowable as deduction i under the head profits and gains of round No. 5 & 6 are accordingly allowed
Ld. Counsel has also placed re ordinate Bench in assessee’s o
36/Mum/2020), wherein follow uding AY 2010–11, the Tribu s (India) Securities Pvt. Ltd
6
07/Mum/2019), um/2022, order
436/Mum/2022, the material on ee’s submissions he Tribunal in disallowance by Hon'ble ITAT,
2017-18 on AΥ 2009-10. Y.2009-10 is tention to the al in the case lar facts the g decision in ecision of the on issue of in computing business of d"
liance upon the wn case for AY ing the findings nal deleted the disallowance. Having considered view that duly supported by bi assessee has brough disallowance of R
Rs.153,747,734/– to inadvertently include requires verification appropriate to restor verification. Subject allowed as deduction by the Tribunal in a the appeal are accord
6. Ground No. 4
disallowance of Rs.37
to the Stock Exchang as penal in nature.
Paper Book at pages allocation/non–confir modifications. The A Form No. 3CD whe fine/penalty for non and client code mod
Goldman Sachs g considered the totality of fact t the Ld. CIT(A) has passed a inding precedent. However, it is ht to our notice, for the first
Rs.564,429,191/–
includes a owards bonus paid to employe ed in the ESOP cost. Since this at the end of the Assessing Offi re this limited issue to his fil to such verification, the ESO n, in terms of the consistent view ssessee’s own case. The ground dingly allowed for statistical pur
4 of the Revenue’s appeal p
7,11,074/–, being charges paid ge, which were treated by the A The details of such charges, a s 390 to 433, reveal that these rmation of CP/OTR trades and ssessing Officer, taking note of rein the said amount had be n–compliance in confirmation o ification, held the same to be i s (India) Securities Pvt. Ltd
7
s, we are of the reasoned order, s noted that the time, that the an amount of ees, which was s factual aspect ficer, we deem it le for necessary
P cost is to be w already taken d Nos. 1 to 3 of rposes.
pertains to the by the assessee
Assessing Officer as placed in the pertain to non–
d to client code f Clause 17(e) of een reflected as of house trades in the nature of penalty and consequ to the total income of 6.1 We have heard record. The Learned C the decision of the C own case for A.Y.
following finding:—
“7.4. Decision favour of the Following the amount paid clearing hou
Appellant, is Appeal is all 6.2 Before us, Learn attention to the jud
Income Tax Appeal N to the Stock Exchan character of penalty followed its earlier ru
The relevant observa
12 of its order make compensatory in nat operations, and not section 37(1) of the Court is reproduced a Goldman Sachs uently disallowed the claim by m f the assessee.
d rival submissions and carefu
CIT(A), upon appreciation of fac
Co–ordinate Bench of the Tribun
2009–10, deleted the disallow n: This issue has been decided by the Ho appellant in appellant's own case for A e aforesaid decision, the disallowance i d to the stock exchanges for non-con se trades, client code modification, directed to be deleted. Accordingly, thi lowed.”
ned Counsel for the assessee ha gment of the Hon’ble Bombay
No. 30 of 2017, wherein identic nge were categorically held not y. The Hon’ble High Court, wh uling in CIT v. Angel Capital & De ations of the High Court in para e it abundantly clear that such ture, arising out of the exigenc t penal so as to attract disa
Act. The relevant finding of th as under:
s (India) Securities Pvt. Ltd
8
making addition ully perused the cts and following nal in assessee’s wance with the on'ble ITAT in A.Y 2009-10. in respect of nfirmation of etc. by the is Ground of as further drawn y High Court in cal charges paid t to partake the hile so holding, ebit Market Ltd..
agraphs 11 and h payments are cies of business allowance under he Hon’ble High
The questi revenue argues was considere Mumbai City-4 No.475 of 2011 examined:- "Wheth law the the Ass deducti Stock E under E clearly 12. The quest observations:- "3. As r by the irregula were no busines would n be ente In that view of 6.3 In view of the p and respectfully foll order of the Learned being squarely covere to interfere. The gro accordingly dismissed Order pronoun (RAJ KUMAR C JUDICIAL M Mumbai; Dated: 09/09/2025 Goldman Sachs ion No.vii pertains to disallowing an expend s was in the nature of penalty. We notice th ed by this Court in case of The Income Ta Vs. Angel Capital & Debit Market Ltd. (Incom 1) in the order dated 28th July, 2011, followi er on the facts and in the circumstances of e Tribunal was justified in deleting the disallo sessing Officer of claim of the Assessing ion of payment of Rs.6,51,240/- towards Exchange even though the penalty payme Explanation to Section 37(1) of the Income tion raised by the revenue was rejected m regards question (C) is concerned the finding ITAT is that the amount paid as penalty wa arities committed by the assessee's clients. ot on account of any infraction of law and he ss expenditure. In such a case the explanati not apply. Accordingly question (C) raised by rtained." the the matter, this question is also not entertain pronouncement of the juri ictio owing the same, we find no i CIT(A) in deleting the disallow ed in favour of the assessee, w ound No. 4 of the appeal of d. ced in the open Court on 09/0 d/- S CHAUHAN) (OM PRAK MEMBER ACCOUNTA s (India) Securities Pvt. Ltd 9 diture which the hat similar issue ax Commissioner me Tax Appeal (L) ing question was f the case and in owance made by Company for a penalty paid to ent disallowable e Tax Act? was making following g of fact recorded as on account of Such payments ence allowable as ion to section 37 y Revenue cannot ned.” onal High Court infirmity in the wance. The issue we see no reason the Revenue is 09/2025. KASH KANT) ANT MEMBER
Rahul Sharma, Sr. P.S.
Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.
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Goldman Sachs ded to :
BY ORDER
(Assistant Re
ITAT, Mu s (India) Securities Pvt. Ltd
10
R, gistrar) umbai