JSW Jaigarh Port Limited Vs PCIT (ITAT Mumbai)
ESOP Cost Cannot Be Called “Notional” Merely Because No Cash Was Paid: ITAT Quashes Section 263 Revision
Can the Principal Commissioner revise an assessment simply because the Assessing Officer allowed ESOP expenditure without discussing it at length? The Mumbai Bench of the Income Tax Appellate Tribunal answered no in the case of JSW Jaigarh Port Ltd. The company had claimed ₹4,83,26,000 as employee stock option plan (ESOP) expenditure. The Principal Commissioner of Income Tax (PCIT) considered it a notional expense and directed a fresh assessment. The Tribunal quashed that direction, holding that the allowance of the claim was supported by the prevailing judicial position.
How the Dispute Arose
JSW Jaigarh Port filed its return for assessment year 2020–21 declaring a loss of ₹59.55 crore. After scrutiny, the Assessing Officer passed an order on 28 September 2023 determining the loss at ₹46.87 crore. The company’s audited financial statements and accompanying notes disclosed ₹4,83,26,000 of expenditure arising from equity-settled, share-based payment transactions.
The PCIT issued a show-cause notice on 24 December 2025. In his view, the ESOP claim arose from issuing shares at a discount, involved no actual payment to employees and was therefore not deductible under section 37(1). He also considered the Assessing Officer’s enquiry into the claim inadequate. Invoking Explanation 2 to section 263, he set aside the assessment on this issue and directed the Assessing Officer to examine it afresh.
