Case Law Details
Fortune Park Hotels Limited Vs ACIT (ITAT Delhi)
Summary: In the case of Fortune Park Hotels Limited Vs ACIT before the ITAT Delhi, the issue revolved around the deduction of Employees Stock Option Plan (ESOP) expenses amounting to Rs. 4,27,27,652/-. The Assessing Officer (AO) disallowed the claim, but the ITAT overturned this decision. The ITAT ruled that the claim for ESOP expenditure made by the assessee within the time limit specified under section 139(5) of the Income Tax Act was justified. Additionally, the ITAT noted that the requisite documents and explanations were furnished by the assessee, and the expenses were incurred in accordance with the ESOP scheme. Several judicial precedents were cited to support the allowance of ESOP expenditure as a deductible expense.
Facts of the Case: The assessee initially filed its return of income declaring total income, but later revised the return under section 139(5) of the Act, claiming a deduction for ESOP expenses. These expenses arose from the reimbursement of the value of stock options granted to employees by ITC Ltd., the parent company. The assessee incurred the ESOP expenses in the financial year 2015-16 but received the invoice in the immediately succeeding year.
Proceedings and Arguments: The AO disallowed the deduction of ESOP expenses, citing various reasons such as incomplete information provided by the assessee and the timing of the vesting of stock options. However, the assessee furnished all relevant documents and explanations before the authorities. The claim for deduction was made within the prescribed time limit under section 139(5) of the Act.
ITAT’s Decision: The ITAT overturned the decision of the AO and CIT(A), allowing the deduction for ESOP expenses. The ITAT emphasized that the claim was made within the statutory time limit and supported by necessary documentation. Additionally, the expenses were incurred as per the ESOP scheme and duly taxed in the hands of the employees.
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