JSW One Platforms Limited Vs PCIT (ITAT Mumbai)
ESOP Expense Gets Another Option: Ex Parte Revision u/s 263 Reset as Capital-v.-Revenue Issue Is Debatable
Return Accepting ₹39.51-Crore Loss
JSW One Platforms Limited filed its return of income for AY 2022-23 on 5 November 2022, declaring nil income after claiming a loss of ₹39,51,41,650.
The return was selected for scrutiny. The AO completed the assessment u/s 143(3) r.w.s. 144B on 27 March 2024, accepting the income returned by the assessee.
Subsequently, the PCIT examined the assessment records & noticed that the assessee had claimed expenditure relating to ESOPs. According to the PCIT, such expenditure was capital in nature & ought to have been disallowed while computing the assessee’s taxable income.
The alleged failure to disallow the expenditure had resulted in underassessment. The PCIT therefore formed a prima facie view that the assessment order was erroneous insofar as it was prejudicial to the interests of the Revenue.
PCIT Initiates Revision u/s 263
The PCIT issued a show-cause notice requiring the assessee to explain why the assessment order should not be revised u/s 263.
The assessee neither filed a reply nor participated in the revisionary proceedings. Consequently, the PCIT proceeded ex parte.
Relying upon certain judicial precedents, the PCIT expressed the view that ESOP expenditure was not allowable as revenue expenditure. He further observed that the AO had neither enquired into the issue nor applied his mind while completing the scrutiny assessment.
