THE COMMISSIONER OF INCOME - TAX vs. M/S BIOCON LTD.,

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ITA/654/2013HC KarnatakaKAHC01049049201325 November 2022Bench: ALOK ARADHE,ASHOK S.KINAGI3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the discount on the issue of ESOPs is an allowable deduction in computing business income. It also ruled that the difference between market price and offer price is remuneration for employee service.

What were the facts?

The Revenue appealed a High Court decision regarding the tax treatment of discount on Employee Stock Option Plans (ESOPs). The core issue was whether this discount constitutes an allowable business deduction.

What were the issues?

Whether discount on ESOPs is an allowable business deduction and if it constitutes remuneration to employees.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 25TH DAY OF NOVEMBER 2022

PRESENT

THE HON'BLE MR. JUSTICE ALOK ARADHE

AND

THE HON'BLE MR. JUSTICE ASHOK S. KINAGI

I. T. A. NO.654 OF 2013

BETWEEN:

1 . THE COMMISSIONER OF INCOME - TAX LTU, JSS TOWERS, BSK III STAGE BANGALORE.

2 . THE DY. COMMISSIONER OF INCOME TAX LTU, JSS TOWERS, BSK III STAGE BANGALORE. ...APPELLANTS (BY SRI. K V ARAVIND, ADVOCATE)

AND:

M/S BIOCON LTD., 20TH KM, HOSUR ROAD ELECTRONIC CITY, HEBBAGODI BANGALORE-560100 …..RESPONDENT (BY SRI. T. SURYANARAYAN, SR. COUNSEL FOR SMT. MANASA ANANTHAN, ADVOCATE)

THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 16/07/2013 PASSED IN ITA NO.370/BANG/2010, FOR THE ASSESSMENT YEAR 2005- 2006, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO.370/BANG/2010 DATED 16/07/2013 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, BANGALORE.

THIS ITA COMING ON FOR ORDERS THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal under Section 260A of the Income Tax Act, 1961, has been preferred by the Revenue. The subject matter of the appeal pertains to the assessment year 2005- 06. This appeal was admitted by this Court vide order dated 04.02.2014 to examine the substantial question of law. (i) Whether on the facts and in the circumstances of the case and in law the Tribunal was right in holding that the discount on issue of ESOP is allowable deduction in computing the income under the head profits and gains of the business?

(ii) Whether on the facts and in the circumstances of the case and in law the Tribunal was right in holding that difference between market price of the shares at the time of grant of option and offer price amounts to discount and the same has to be

treated as remuneration to the employees for their continuity of service?

(iii) Whether on the facts and in the circumstance of the case and in law the Tribunal committed an error in not examining the scheme of ESOP from which it is clear that the employees will not get any right in the shares till completion of the period prescribed and the expenditure claimed is contingent and recorded perverse finding?

2.

The substantial questions of law framed in the appeal are answered against the Revenue and in favour of the assessee for the reasons assigned in the judgment dated 11.11.2020, passed in ITA No.653/2013.

3.

Accordingly, the appeal is dismissed.

SD/- JUDGE

SD/- JUDGE

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