DCIT, CIRCLE-5(1), KOLKATA V. BANDHAN BANK LTD, KOLKATA

ITA 242/KOL/2024

AI Insights

The case involves Bandhan Bank Ltd., which claimed a deduction of Rs. 11,42,62,243/- for the cost of Employees Stock Options (ESOP) in the assessment year 2020-21. The initial claim was rejected by the Assessing Officer (AO), categorizing the expenses as capital expenditure. However, the first appellate authority (Ld. CIT(A)) reversed this decision, allowing the deduction as revenue expenditure. The Revenue appealed against this decision, which led to the current tribunal hearing. The tribunal's decision was influenced by previous rulings in similar cases, including those involving the assessee, which established a legal precedent for allowing such deductions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 32980 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Other Referred Cases: CIT v. PVP Ventures Ltd., CIT v. Lemon Tree Hotels Ltd., CIT LTU v. Biocon Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure; Fair market value; Capital expenditure
• Section: 250; 37(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER I.T.A. No. 242/Kol/2024 (Assessment Year 2020-21) DCIT, Circle-5(1), Kolkata, Aayakar Bhawan, 8th Floor, P-7, Chowringhee Square, Kolkata – 700069 ..............…...…………….... Appellant vs. Bandhan Bank Ltd., Kolkata, DN-32, Sector-V, Salt Lake, Kolkata – 700091 [PAN: AAGCB1323G] ..….............................. Respondent Appearances by: Assessee represented by : Biswanath Paul, FCA Department represented by : P.N. Barnwal, CIT-DR Date of concluding the hearing : 10.02.2025 Date of pronouncing the order : 03.03.2025 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER: 1. This appeal arises from order passed u/s 250 of the Income Tax Act, 1961 [hereafter ‘the Act] by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereafter “the Ld. CIT(A)], vide order dated 01.12.2023. 1.1 The brief facts are that the assessee had claimed deduction of Rs. 11,42,62,243/- towards cost of Employees Stock Option (hereafter “ESOP”). The assessee treated the difference in cost between the ESOP and the fair market value of shares as perquisite u/s 17(2)(vi) of the Act, this claim was rejected by the Ld.AO on the ground that the costs related to ESOPs were to be treated as capital expenditure and not allowable as 2 ITA No. 242/Kol/2024 Bandhan Bank Ltd., Kolkata revenue expenditure. The assessee is seen to have succeeded at the first appellate stage and the expenditure pertaining to ESOPs has been accepted as revenue expenditure. 2. Aggrieved with this action of the Ld. CIT(A), the Revenue is in appeal before us with the following grounds: “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), has erred in deleting the addition of Rs. 11,42,62,243/- made by the AO on account of disallowance of ESOP expenses without appreciating the fact that ESOP expense is notional and that too of capital nature. 2. That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or hearing of this appeal.” 2.1 Right at the outset, it was pointed out by the Ld. AR of the assessee that this matter was covered in favour of the assessee due to not only the ITAT’s order in assessee’s own case but also by the order of Hon’ble High Court of Calcutta, again in the assessee’s own case. The Ld. DR fairly accepted this point and handed over a copy of an order admitting SLP on this very same issue, in the case of Biocon Ltd. [reported in 131 taxmann.com 188 (SC)]. 3. We have considered the submissions by the Ld. DR/AR and also gone through the orders of ITAT and the Hon’ble Calcutta High Court in the assessee’s own case, placed before us. It would be relevant to extract a critical portion from the order of Hon’ble Calcutta High Court in assessee’s own case in ITA No. 286 of 2023, dated 07.02.2024. The relevant portion is as under: “We have elaborately heard the learned Advocates for the parties and carefully perused the materials on record. The legal issue involved in this appeal is squarely covered by the decision of three High Courts in favour of the assessee. The first of which is in the case of CIT v.PVP Ventures Ltd. [2012] 23 taxmann.com 286 and followed by the decision in CIT-v-Lemon Tree Hotels Ltd., [2019] ITA No. 107 of 2015 dated 18.08.2015, High Court of Delhi which was followed in CIT LTU-v-Biocon Ltd., [2020] 121 taxmann.com 351(Karnataka). In all the decisions it has been held that ESOPs was allowable as a deduction under Section 37(1) of the Act as primary object was not to waste capital but to earn profits by securing consistent service to the employees. The three decisions which were relied on by the assessee were taken note of by the learned Tribunal and the appeal filed by 3 ITA No. 242/Kol/2024 Bandhan Bank Ltd., Kolkata the revenue was dismissed. All the three decisions which were referred above have attained finality as it appears that the revenue has not preferred any appeal against those decisions. Thus, we find that Tribunal was well justified in dismissing the appeal filed by the revenue and we find no ground to interfere with the order passed by the learned Tribunal.” 3.1 Respectfully following the order of the Hon’ble jurisdictional High Court in assessee’s own case, we dismiss the appeal of the Revenue. 4. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the court on 03.03.2025 Sd/- Sd/- (Pradip Kumar Choubey) (Sanjay Awasthi) Judicial Member Accountant Member Dated: 03.03.2025 AK, P.S. Copy of the order forwarded to: 1. Bandhan Bank Ltd., Kolkata 2. DCIT, Circle-5(1), Kolkata 3. CIT(A)- 4. CIT- 5. CIT(DR) //True copy// By order Assistant Registrar, Kolkata Benches "