Taxpayer Can Raise Additional Claims Before Appellate Authorities: ITAT Allows ₹4.90 Cr ESOP claim [Read Order]
The Tribunal allowed an additional deduction of Rs. 1.77 crore for ESOP and ruled that taxpayers can raise valid claims before appellate authorities even if not originally claimed in the return of income.
![Taxpayer Can Raise Additional Claims Before Appellate Authorities: ITAT Allows ₹4.90 Cr ESOP claim [Read Order]](https://images.taxscan.in/h-upload/2025/07/11/2062785-esop-itat-taxscan.webp "Taxpayer Can Raise Additional Claims Before Appellate Authorities: ITAT Allows ₹4.90 Cr ESOP claim [Read Order]")
The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) allowed a deduction of Rs. 4,90,35,650 for Employee Stock Option Plans (ESOPs) expenses, including an additional claim of Rs. 1,77,40,250 not originally made in the return of income, held that taxpayers can raise additional claims before appellate authorities. Arvind Limited (assessee), a company engaged in...
The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) allowed a deduction of Rs. 4,90,35,650 for Employee Stock Option Plans (ESOPs) expenses, including an additional claim of Rs. 1,77,40,250 not originally made in the return of income, held that taxpayers can raise additional claims before appellate authorities.
Arvind Limited (assessee), a company engaged in textiles, retail, and other sectors, filed its income tax return, claiming a deduction of Rs. 3,12,95,400 for ESOP expenses under the head "any other amount allowable as deduction."
During assessment proceedings, the assessee realized an arithmetical error and sought an additional deduction of Rs. 1,77,40,250, bringing the total to Rs. 4,90,35,650. The Assessing Officer (AO) rejected the additional claim.
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The AO cited the Supreme Court’s decision in Goetze (India) Ltd. vs. CIT, which held that claims for deductions must be made through a revised return and cannot be entertained otherwise by the AO. The AO also disallowed the original ESOP claim, treating it as a notional or capital expense.
Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) allowed the original deduction of Rs. 3,12,95,400, relying on SEBI guidelines and judicial precedents that ESOP costs are revenue expenses deductible as perquisites taxable in employee’s hands.
However, the CIT(A) rejected the additional claim, following the Goetze ruling. Aggrieved by the CIT(A)’s partial relief, both the assessee and the Revenue appealed to the ITAT.
The assessee contended that the full ESOP expense of Rs. 4,90,35,650 was supported by detailed computations and that denying the additional claim on procedural grounds would lead to incorrect taxation, violating Article 265 of the Constitution.
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The two-member bench comprising Dr. B.R.R.Kumar (Vice-President) and Suchitra Kamble (Judicial Member) observed that while Goetze restricts the AO from allowing claims outside revised returns, it does not limit appellate authorities powers.
The Tribunal cited precedents like Jute Corporation of India Ltd. vs. CIT and Pruthvi Brokers & Shareholders Pvt. Ltd., which affirmed that appellate bodies can entertain new claims if facts are on record and the claim is legally valid.
The bench verified the ESOP computation based on perquisite values for key employees. It upheld the full deduction by relying on decisions like CIT vs. Lemon Tree Hotels Ltd. and CIT vs. Biocon Ltd., which treated ESOP costs as allowable revenue expenditure.
The Tribunal granted the full Rs. 4,90,35,650 deduction. The appeal of the assessee was partly allowed for statistical purposes and the appeal of the revenue was dismissed.
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