The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has allowed the deduction holding that the Employees Stock Award Plan (ESOP) expenses could be claimed in the year of vesting.
The assessee company, Deutsche Asset Management (India) Pvt. Ltd. was an Asset management company of Deutsche Mutual Fund (DMF) and various other Deutsche Group Entities.
The employees of the assessee were entitled to subscribe to the shares of its parent company, Deutsche Bank AG, which was a listed company. When the employees get vesting right over the shares, the assessee booked the same as expenditure in the books of account and claimed it as deduction.
The Assessing Officer (AO) noticed that the employees had not exercised the option to subscribe the shares during the year under consideration. Accordingly, the AO took the view that the expense claimed by the assessee was a notional expenditure and disallowed the same.
Percy Pardiwala and Niraj D. Sheth appeared on behalf of the assessee and Riddhi Mishra appeared on behalf of the revenue.
The Bench observed that the assessee was actually incurring expenses in purchasing shares of Deutsche Bank AG. This was purchased as per the employee welfare scheme as per the agreement entered with the concerned employee. The deduction was claimed when the right was vested upon the employee.
The Two-member Bench of B.R. Baskaran (Accountant Member) and Pavan Kumar Gadale (Judicial Member) dismissed the appeal filed by the revenue and allowed the deduction in respect of Employee Stock Option Plan (ESOP) expenses referring to the decision in Biocon Ltd which held that the deduction could be claimed in the year of vesting.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
