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

ITA 6547/MUM/2024

AI Insights

The case revolves around the classification of expenses incurred under the ESOP scheme by M/s. Avendus Capital Pvt. Ltd., questioning whether these should be treated as capital or revenue expenditures. The Revenue appealed against the decision of the CIT(A), which had allowed these expenses as revenue expenditures. The Tribunal examined previous rulings, including those from the Karnataka High Court and its own earlier decisions, which favored the respondent's position. The Tribunal concluded that the expenses are to be treated as revenue expenditures, aligning with established precedents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471294 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Other Referred Cases: Biocon case, Sandvik Asia case
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM KRISHN KEDIA
• Assessee Lawyers: UJJVAL GANGWAL
• Keywords: Set aside; Revenue expenditure; Capital expenditure
• Section: 37(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “A” Bench, Mumbai. Before Smt. Beena Pillai (JM) & Shri Omkareshwar Chidara (AM) ITA No. 6547/MUM/2024 (Assessment Year : 2015-16) DCIT, Circle 14(1)(1) Room No. 432, 4th Floor, Aayakar Bhavan M.K. Road, Mumbai 400 020. Vs. M/s. Avendus Capital Pvt. Ltd. 901 Platina, 9th Floor Plot No. C-59, Bandra Kurla Complex, Bandra East, Mumbai-400 051. PAN : AABCC2404Q Appellant Respondent Assessee by : Shri Ujjval Gangwal Revenue by : Shri Ram Krishn Kedia Date of Hearing : 29/01/2025 Date of pronouncement : 30/01/2025 O R D E R Per Omkareshwar Chidara (AM) :- 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. M/s. Avendus Capital Pvt. Ltd. 2 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 ITA No. 1738 & 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. Sd/- Sd/- (BEENA PILLAI) (OMKARESHWAR CHIDARA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/01/2025 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. M/s. Avendus Capital Pvt. Ltd. 3 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai PS "