Case Law Details
Northern Operating Services Pvt. Ltd. Vs JCIT (ITAT Bangalore)
ITAT Bangalore held that expenditure towards ESOP is wholly and exclusively for the purpose of business and it satisfies all the conditions referred to in section 37(1). Accordingly, expenditure towards ESOP is eligible for deduction u/s 37 of the Income Tax Act.
Facts- The assessee had participated in the Northern Trust Corporation 2012 Stock Plan issued by its parent, The Northern Trust Company (“NT Corporation”) whereby awards based in shares of the NT Corporation were granted directly by ‘The Compensation and Benefit Committee’ of NT Corporation’s board of directors to the Assessee’s employees through the stock option (“ESOP”) scheme or the restricted stock unit (“RSU”) scheme.
Under the ESOP scheme, stock options on equity shares of the ultimate holding company i.e., NT Corporation were granted to the employees and Directors of the ultimate holding company, its subsidiaries and affiliates. The equity shares are granted directly by the ultimate holding company to the employee. Accordingly, employees are eligible to participate in the scheme and option is given to the employees to purchase defined number of shares at concessional price by way of exercising the options.
The assessee claimed the amount reimbursed to NT Corporation as an expenditure in the statement of profit and loss as ‘Employee Benefit Expense’. Further, RSU’s were also issued by NT Corporation to the employees of the assessee as a part of employee compensation scheme. The assessee claimed expenses of Rs.1,41,47,125/- towards Employee share-based payments while filing the return of income for the year under consideration.
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