APTECH SOFTWARE LTD,MUMBAI vs. DCIT 8(1), MUMBAI

The present appeal filed by assessee against the order of CIT(A)-16, Mumbai, dated 18.09.2013 for AY-2009-10 raising only one substantial Ground against the disallowance of Employees Stock Option Expenses (ESOP) of Rs. 5,61,750/-.

The brief facts of the case are the in the return of income for the relevant assessment year, the assessee claimed ESOP charges of Rs. 5,61,700/-. During the course of assessment preceding the AO asked the assessee, as to why these expenses should not be disallowed being capital expenses. The assessee submitted its reply and contended that ESOP was issued to the employee based on SEBI Guidelines and following accounting procedure and Guidelines of SEBI. The ESOP was issued to provide incentive to the employees with the motive to retain the precious human resources of the M/s Aptech Software Ltd. company in a competitive market. The contention of the assessee was not accepted by AO. Thus AO disallowed Rs. 5,61,700/- holding it as capital expenditure. Aggrieved by the order of AO assessee filed appeal before CIT(A). During the First Appellate Proceeding, assessee claimed that no capital expenditure involved because it is not expenditure in the nature of share issue expenses. The expenditure in the nature of incentive to the employees and therefore, it is an expenditure incurred wholly and exclusively for the purpose of business of the company and is allowable as revenue expenses u/s 37(1) of the Act. The contention of assessee was not accepted by the CIT(A) and confirmed the action of AO. Aggrieved, the assessee filed the present appeal before this Tribunal raising the aforementioned ground.

We have heard the Authorized Representative (AR) of assessee and Departmental Representative (DR) for Revenue and perused the material available on record. AR of the assessee argued that this case is squarely covered by the decision of Special Bench in case of Biocon Ltd. vs. DCIT (LTU) vide dated 16.07.2013. DR for Revenue has fairly conceded the contention of the AR of the assessee.

We have considered the rival contentions of the partiers and the order of authorities below as well as the order cited by Special Bench in case of Biocon Ltd. (supra). Perusal of the order revealed that similar issue was adjudicated by the Tribunal. Considering the same, we restore the matter to the file of AO to follow the said decision of the Special Bench and grant the relief to the assessee in accordance with law. We may further clarify that in case of an issue of shares to the public also, the discount on the ESOP shall be reckoned with regard to the issue price of the shares to the public. 5. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on this 22nd June, 2016. (SANJAY ARORA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated 22/06/2016 S.K.PS आदेशक"""त"ल"पअ"े"षत/Copy of the Order forwarded to :