Expenses / Discount on ESOP exercised by the employees are allowable

Pr. CIT Vs New Delhi Television Ltd. (Delhi High Court)

Legislature itself contemplates the discount on premium under ESOP as a benefit provided by the employer to its employees during the course of sendee. If the Legis­lature considers such discounted premium to the employees as a fringe benefit or ‘any consideration for employment’, it is not open to argue contrary. Once it is held as a consideration for employment, the natural corollary which follows is that such discount (i) is an expen­diture ; (ii) such expenditure is on account of an ascertained (not con­tingent) liability ; and (iii) it cannot be treated as a short capital receipt. In view of the foregoing discussion, we are of the considered opinion that discount on shares under the ESOP is an allowable deduction.

FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT

The Revenue’s appeal contends that the expenditure reported by the assessee for which it claims benefit under section 37 was taxable for the assessment year 2007-08. The assessee succeeded before the Income Tax Appellate Tribunal (ITAT) which followed its Special Bench ruling in Bio-con Limited v. Dy. CIT (LIU) (2013) 25 ITR (Trib) 602 (Bang) (SB) : (2013) 144 ITD 21 (Bang) (SB). The assessee’s like expenditure for the pre­vious assessment year 2006-07 was the subject matter of an appeal by the Revenue. This court, by its order dated 12-7-2016 (in I.T.A. No. 366 of 2016 and connected matter), refused to entertain the appeal. Learned counsel for the Revenue contends that a substantial question of law arises because the reliance placed upon CIT v. Lemon Tree Hotels Ltd. (I.T.A. No. 107 of 2015) by the previous order of this court is not strictly justified. It was submitted that more importantly, the appeal was rejected on the ground of delay and the observations made by the court cannot be treated as conclusive.

2. Learned counsel for the assessee appearing on advance notice, on the other hand, urges that there is no infirmity with the approach of the Income Tax Appellate Tribunal and that this court had on 12-7-2016 given reasons for not entertaining the appeal which was not dismissed merely on the ground of delay. The previous order of the court records inter alia as follows :–

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