Case Law Details
TE Connectivity Services India Private Limited Vs National Faceless Assessment Centre (ITAT Bangalore)
ITAT Bangalore held that the expenditure on account of ESOP is a revenue expenditure and had to be allowed as deduction while computing income.
Facts-
The assessee floated a share option plan scheme for its executives and senior employees. These options are given by the ultimate holding company i.e., TE Connectivity Limited, Switzerland (“TEL”), to the employees of assessee. The stock option plan granted to the employees during the current period is Restrictive Stock Options (“RSU”), which are assessed, managed and administered by the ultimate holding company. During the relevant FY 2016-17, assessee debited an amount of Rs.10,60,575 in the profit & loss account pertaining to costs relating to 236 shares vested during the year under consideration. The entire amount was cross charged to the assessee by the ultimate holding company, as the RSUs are allotted at free of cost to the employees of the assessee. In other words, the employees of the assessee were given option to invest in shares of the market value of the shares and the price at which the shares were issued to the employees was paid by the assessee to its holding company and such difference was claimed as employee cost of the assessee in the profit and loss account.
The AO rejected the claim of the Assessee on the ground that the Employee Stock Option Plan (ESOP) expenditure being a capital expenditure. The DRP also upheld the order of the AO on the ground that the similar issue on ESOP was pending before the Hon’ble Supreme Court and the addition was upheld just to keep the issue alive.
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