DACIT-14(1)(1), MUMBAI vs. AVENDUS CAPITAL PVT. LTD., MUMBAI

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ITA 6547/MUM/2024Status: DisposedITAT Mumbai31 January 2025AY 2015-16Bench: Smt. Beena Pillai (Judicial Member), Shri Omkareshwar Chidara ( (Accountant Member)4 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal followed its own orders and decisions of Coordinate Benches, which held that ESOP expenses are allowable as revenue expenditure under Section 37(1) of the Act. The Tribunal noted that similar issues had been settled in favour of the assessee in earlier years.

What were the facts?

The Revenue appealed the decision of the CIT(A) allowing the respondent company's claim for ESOP expenses as revenue expenditure. The Revenue contended that these expenses were capital in nature and not deductible under Section 37(1) of the Income Tax Act.

What were the issues?

Whether ESOP expenses are capital or revenue expenditure and consequently allowable as a deduction under Section 37(1) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Mumbai “A” Bench, Mumbai.

Before: Smt. Beena Pillai (JM) & Shri Omkareshwar Chidara (AM)

For Appellant: Shri Ram Krishn Kedia
Pronounced: 30/01/2025
1.

The only dispute to be resolved in the above captioned appeal is whether respondent company’s claim under “ESOP Scheme” is of capital or revenue expenditure. Following ground of appeal was taken by the Revenue in this case :-

Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) right in allowing the expenses incurred on “ESOP Scheme” as revenue expenditure, ignoring the fact that expenses incurred on the said scheme are capital in nature and hence not allowed u/s. 37(1) of the I.T. Act.

2.

During the hearing before the bench, Ld.AR has mentioned that in the similar circumstances the issue was settled in favour of the respondent by the Hon'ble Tribunal in earlier years. Ld. AR of the respondent company has filed a copy of the ITAT decision of the Coordinate Bench for A.Y. 2016-17 & 2017-18 and submitted as the issue was already covered in favour of respondent company, even by the Hon'ble Karnataka High Court and hence, the appeal of the Revenue may be dismissed.

2 M/s. Avendus Capital Pvt. Ltd.

3.

Per contra, Ld. DR has stated that the Revenue has taken up the case of Biocon to Hon'ble Supreme Court and as of today the same is pending.

4. After perusing the ITAT orders of the Coordinate Bench in appellant’s own case, it observed that the appellant company is entitled to claim ESOP expenses are allowable expenses under section 37(1) of the Income Tax Act. As the facts and circumstances are similar, the decision of the Coordinate Bench in appellant’s own case is followed. In & 1739/Mum/2023 for A.Y. 2016-17 & 2017-18, the ITAT “A” Bench decided the issue in favour of the respondent and relevant portion is reproduced as under :- "5. We have carefully perused the orders of the authorities below and the decision of the Tribunal brought to our notice. The grievance of the assessee is that the Ld. CIT(A) erred in confirming the disallowance of Rs. 1,20,47,684/-claimed u/s. 37(1) of the Act towards Employee Stock Option Plan (ESOP) expenses as capital expenditure. An identical issue was considered by the Tribunal Special Bench Bangalore in the case of Biocon (supra) has held that ESOP expenses is an allowable deduction u/s. 37(1) of the Act. The same view was followed by ITAT Pune Bench in the case of Sandvik Asia (supra). Respectfully following the decision of the Co-ordinate Benches, we set aside the order of the Ld. CIT(A) and direct the AO to allow the ESOP expenses as revenue expenditure."

4.

In view of the above, following the decision of ITAT, the Revenue appeal is dismissed.

Order pronounced in the open Court on 30/01/2025.

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