Play Games 24X7 Pvt. Ltd. Vs PCIT-13 (ITAT Mumbai)
Summary: The Mumbai ITAT allowed the appeal of Play Games 24X7 Pvt. Ltd. and quashed the PCIT’s revisionary order under section 263 for Assessment Year 2013-14. The PCIT had treated the assessment as erroneous and prejudicial to the Revenue on two issues: deduction of Rs.1,53,88,418 as Employee Welfare Cost arising from the Employee Stock Option (ESOP) scheme, and advertisement payments of Rs.1,76,29,464 made to Facebook Ireland without deduction of tax at source. The Tribunal found that both issues had been examined during the assessment proceedings and that the Assessing Officer’s conclusions could not be revised merely because the PCIT proposed a different view.
On the ESOP issue, the assessee had furnished complete details of the ESOP cost and its computation before the Assessing Officer. The Tribunal followed Biocon Ltd. vs. DCIT, (2013) 35 taxmann.com 335 / (2014) 144 ITD 21 (Bangalore – Trib.) (SB) / (2013) 155 TTJ 649. The Special Bench had held that discount under an ESOP represents employee cost and is deductible over the vesting period, subject to appropriate adjustments for options that lapse or are exercised. Applying that principle, the Mumbai ITAT held that the ESOP deduction had been rightly allowed by the Assessing Officer after enquiry and verification. The assessment was therefore neither erroneous nor prejudicial to the Revenue on this issue.
