Expenses debited as cost of ESOP in profit and loss account allowable

Expenses debited as cost of ESOP in profit and loss account allowable

Case Law Citations- CIT vs. Lemon Tree Hotels Ltd (Delhi High Court), ITA 107/2015, Date-18.08.2015
In case of CIT vs. Lemon Tree Hotels Ltd Following the Madras High Court in CIT-III Chennai v. PVP Ventures Ltd. (TC(A) No. 1023 of 2005) it was held by Delhi High Court that ESOP could be debited to the profit and loss account of the Assessee. Delhi High Court Court has also in its decision dated 4th August 2015 in ITA No.2 of 2002 (CIT v. Oswal Agro Mills Ltd.) held that the expenditure incurred in connection with issue of debentures or obtaining loan should be considered as revenue expenditure.
Full Text of the High Court Judgment is as follows :-
HIGH COURT OF DELHI AT NEW DELHI
ITA 107/2015
COMMISSIONER OF INCOME TAX
versus
LEMON TREE HOTELS LTD
CORAM:
HON’BLE DR. JUSTICE S.MURALIDHAR
HON’BLE MR. JUSTICE VIBHU BAKHRU
ORDER
18.08.2015
1. This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (‘Act’) is directed against the order dated 23rd June 2014 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 4588/Del/2013 for the Assessment Year (‘AY’) 2008-09.
2. The question sought to be projected by the Revenue is whether the ITAT erred in deleting the addition of Rs. 1,28,19,169/- made by the Assesssing Officer (‘AO’) by way of disallowance of the expenses debited as cost of Employees Stock Option (‘ESOP’ ) in profit and loss account?
3.The Court has been shown a copy of the decision dated 19th June 2012 passed by the Division Bench of Madras High Court in CIT-III Chennai v. PVP Ventures Ltd. (TC(A) No. 1023 of 2005) where a similar question was answered in favour of the Assessee by holding that the cost of ESOP could be debited to the profit and loss account of the Assessee. This Court has also in its decision dated 4th August 2015 in ITA No.2 of 2002 (CIT v. Oswal Agro Mills Ltd.) held that the expenditure incurred in connection with issue of debentures or obtaining loan should be considered as revenue expenditure.
4. In the circumstances, the impugned order of the ITAT answering the question in favour of the Assessee is affirmed.
5. No substantial question of law arises in the facts and circumstances of the present case.
6. The appeal is dismissed.

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