Discount on Issue of ESOP Deductible from Business Income: ITAT grants Relief to Morgan Stanley [Read Order]

In a major relief to Morgan Stanley Advantage Services Pvt. Ltd, a division bench of the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) comprising Shri Kuldip Singh, Judicial Member and Shri Gagan Goyal, Accountant Member has held that the discount on issue of ESOP is allowable as deduction while computing Business Income under the provisions of the Income Tax Act, 1961.

The assessee-company is engaged in the business of rendering front office and back office support to the Morgan Stanley group of companies globally. The assessee-company has shown income under the heads “Business & Profession”, “Capital Gains” and “Income from Other Sources”. During the proceedings, the AO observed that the discount on issue of ESOP is not allowable as deduction.

Allowing the claim of the assessee, the Tribunal held that “the issue raised in this case by the assessee as to allowability of ESOP cost being in the nature of Revenue expenditure has already been decided by the Special Bench of Tribunal in case of Biocon Ltd. 144 ITD 21 (Bangalore). The Co-ordinate Bench of Tribunal also in case of Goldman Sachs (I) Securities Pvt. Ltd. (supra), decided the issue in favour of the assessee by holding that discount on issue of ESOP is allowable as deduction under the head “Profits & Gains of Business or Profession”. So the expenditure claimed by the assessee on account of ESOP under section 37(1) of the Act is allowable. So, the impugned order passed by ld. CIT(A) directing the AO to delete the disallowance.”

The assessee was represented by Sh. Sunil M. Lala.

To Read the full text of the Order CLICK HERE

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