Appeal Details
Counselvise Citation
[2017] 126 COUNSELVISE.COM (IT) 8263 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-11-2017
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
Not Allotted
Assessment Year
2010-2011
Appeal Filed On
18-12-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5679/MUM/2015 ASSESSMENT YEAR: 2010 - 11 DCIT - 14(1)(1) ROOM NO. 460, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. VS. M/S AVENDUS CAPITAL PVT. LTD. 2 ND FLOOR, IL & FS FINANCIAL CENTRE, WEST QUADARANT, BKC, BANDRA (E) , MUMBAI - 400051. PAN NO. AAACT1426A (APPELLANT) (RESPONDENT) REVENUE BY : MR. RAJESH KUMAR YADAV, DR ASSESSEE BY : MR. RAGHAV BAJAJ , AR DATE OF HEARING : 27 /09/2017 DATE OF PRONOUNCEMENT : 24/11/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 22 , MUMBAI AND ARISES OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE SOLE GROUND RAISED BY THE REVENUE IN THIS APPEAL IS THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE EXPENSES OF RS.2,09,72,732/ - M/S AVENDUS CAPITAL PVT. LTD. ITA NO. 5679/MUM/2015 2 INCURRED TOWARDS THE EMPLOYEE STOCK OPTION PLAN (ESOP) IS ALLOWABLE U/S 37(1). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) OBSERVED THAT IN THE SCHEME OF ESOP, THE COMPANY GIVES AN OPTION TO ITS EMPLOYEES TO PURCHASE ITS SECURITIES AT A PRICE LOWER THAN THE MARKET PRICE. AS PER THE SCHEME, THE DIFFERENCE BETWEEN THE EXERCISE VALUE AND THE MARKET VALUE IS PAID BY THE COMPANY. THIS IS A PRACTICE WHICH IS EXERCISED IN ORDER TO BENEFIT THE EMPLOYEES TO RETAIN THEM. AS IT LEADS TO THE CHANGE IN NUMBER OF SHARES OR THE SHARE CAPITAL, THE AO OBSERVED THAT IT AFFECTS THE CAPITAL OF THE COMPANY. THEREFORE, THE AO MADE A DISALLOWANCE OF RS.2,09,72,732/ - HOLDING IT AS CAPITA L EXPENDITURE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) . WE FIND THAT THE LD. CIT(A) FOLLOWED THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR THE AY 2009 - 10 AND ALLOWED THE APPEAL. 5. BEFORE US, THE LD. D R RELIES ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE ORDER OF THE LD.CIT(A) AND THAT OF ITAT A BENCH IN THE CASE OF THE ASSESSEE FOR THE AY 2009 - 10. 6. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEV ANT MATERIALS ON RECORD. WE FIND THAT THE ISSUE IN THE INSTANT CASE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE CO - ORDINATE BENCH IN THE CASE OF THE ASSESSEE FOR THE AY 2009 - 10 (ITA NO. 4542/MUM/2013) , WHICH READS AD UNDER: M/S AVENDUS CAPITAL PVT. LTD. ITA NO. 5679/MUM/2015 3 WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISION OF THE TRIBUNAL BROUGHT TO OUR NOTICE. THE GRIEVANCES 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 TOWARD S EMPLOYEES STOCK OPTION PLAN (ESOP) EXPENSES AS CAPITAL EXPENDITURE. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL SPECIAL BENCH BANG A LORE IN THE CASE OF BIOCON VS. DCIT 25 ITR (T) 602 AND IT HAS HELD THAT ESOP EXPENSES IS AN ALLOWABLE DEDUCTION U/S 3 7(1) OF THE ACT. THE SAME VIEW WAS FOLLOWED BY ITAT PUNE BENCH IN THE CASE OF SANDVIK ASIA PVT. LTD. VS. ACIT IN ITA NO. 1841,1842,2053 & 2054/PN/2012 . 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 E XPENSES AS REVENUE EXPENDITURE. 7. FACTS BEING SIMILAR, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH AND UPHOLD THE ORDER OF THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/11/2017. SD/ - SD/ - (MAHAVIR SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 24/11/2014 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI
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