ESOP cross-charge is allowable expenditure u/s 37(1) of the Income Tax Act

Hewlett Packard (India) Software Operation Pvt. Ltd. Vs DCIT (ITAT Bangalore)

ITAT Bangalore held that expenditure of ESOP cross-charge is wholly and exclusively for the purpose of business, said amount remitted by the assessee to ultimate holding company, and hence allowable expenditure u/s 37(1) of the Income Tax Act.

Facts-

The appellant company is engaged in providing Application Maintenance and Development, Enterprise Resource Planning and specialized services like Data Warehousing and Business Intelligence, Testing Services and Infrastructure Management Services.

It was submitted that the ESOP cross-charges represents the actual expenditure incurred by the Company in respect of its employees, who form part of the Company’s business and are involved in carrying out day-to-day business operations/management. The said expenses are incurred wholly and exclusively for the business of the Company and therefore, eligible for deduction under section 37 of the Act.

Please become a Premium member. If you are already a Premium member, login here to access the full content.