Top Stories ESOP Expenses are allowable expenditure u/s 37(1) of Income Tax Act: ITAT grants relief to HDFC Bank [Read Order] By Aparna. M – On March 28, 2024 3:18 pm – 2 mins read The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) held that Employee Stock Option Plan ( ESOP ) expenses are allowable expenditure under Section 37(1) of the Income Tax Act, 1961.

Therefore the bench granted relief to HDFC Bank. The Assessee, HDFC Bank Ltd filed the appeal against the order of the Commissioner of Income Tax (Appeal) CIT(A) by Disallowing the ESOP of expenses.  During the adjudication Yogesh Thar, the counsel for assessee argued that the assessee for the first time made the claim before the CIT(A) with regard to the ESOP Expense.

The CIT(A) did not allow the claim of assessee following the decision of the Supreme Court in the case of Goetz (India) Ltd. vs. CIT Further the assessee counsel argued that he issue is squarely covered by the decision of the Karnataka High Court in the case of Biocon Ltd. which has been followed by the Co-ordinate Bench in assessee’s own case for AY 2008-09. Biswanath Das, Department representatives argued that the assessee has made a fresh claim before the CIT(A) for the first time and therefore, the decision of the Supreme Court in the case of Goetz (India) Ltd.has been correctly applied by the CIT(A).

Although the revenue counsel argued that the Departmental is in appeal before the Supreme Court against the decision of the Karnataka High Court in the case of Biocon (supra) and therefore, the issue of allowability of ESOP expenses has not reached finality. After considering the issues Karnataka High Court in the case of Biocon Ltd the two member bench comprising Kuldip Singh (Judicial Member) & Padmavathy S (Accountant Member) held that ESOP expenses claimed by the assessee an allowable expenditure under section 37(1) of the  Income Tax Act. Therefore the bench allowed the ground raised by the assessee. To Read the full text of the Order CLICK HERE