The Income Tax Appellate Tribunal dismissed the Revenue's appeal seeking to formulate substantial questions of law regarding ESOP valuation and allowance. The High Court, agreeing with the Tribunal, dismissed the appeal.
Substantial questions of law answered against Revenue; appeal dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 25TH DAY OF NOVEMBER 2022
PRESENT
THE HON'BLE MR. JUSTICE ALOK ARADHE
AND
THE HON'BLE MR. JUSTICE ASHOK S. KINAGI
I. T. A. NO.652 OF 2013
BETWEEN:
...APPELLANTS
(BY SRI. K V ARAVIND, ADVOCATE)
AND:
M/S BIOCON LTD., 20TH KM, HOSUR ROAD ELECTRONIC CITY, HEBBAGODI BANGALORE-560100
…..RESPONDENT
(BY SRI. T. SURYANARAYAN, SR. COUNSEL FOR SMT. MANASA ANANTHAN, ADVOCATE)
2
THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 16/07/2013 PASSED IN ITA NO.369/BANG/2010, FOR THE ASSESSMENT YEAR 20042005, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; AND ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO.369/BANG/2010 DATED 16/07/2013 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, BANGALORE.
THIS ITA COMING ON FOR ORDERS THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:
JUDGMENT
This appeal under Section 260A of the Income Tax Act,
1961, has been preferred by the Revenue. The subject matter of the appeal pertains to the assessment year 200405. This appeal was admitted by this Court vide order dated 04.02.2014 to examine the substantial question of law.
(i) Whether on the facts and in the circumstances of the case and in law the Tribunal was right in holding that the discount on issue of ESOP is allowable deduction in computing the income under the head profits and gains of the business?
(ii) Whether on the facts and in the circumstances of the case and in law the tribunal was right in holding that difference between market price of the shares at the time of grant of option and offer price amounts to discount and the same has to be
3
treated as remuneration to the employees for their continuity of service?
(iii) Whether on the facts and in the circumstance of the case and in law the Tribunal committed an error in not examining the scheme of ESOP from which it is clear that the employees will not get any right in the shares till completion of the period prescribed and the expenditure claimed is contingent and recorded perverse finding?
appeal are answered against the Revenue and in favour of the assessee for the reasons assigned in the judgment dated
11.11.2020, passed in ITA No.653/2013.
SD/JUDGE
SD/JUDGE
RD
3 issues framed by the court
Whether the discount on issue of ESOP is allowable as deduction in computing income under head profits and gains of business?
Whether the difference between market price and offer price of shares amounts to remuneration?
Whether the Tribunal erred in not examining the ESOP scheme showing contingent expenditure?
2 provisions across 1 enactments
THE COMMISSIONER OF INCOME - TAX LTU, JSS TOWERS BSK III STAGE BANGALORE
THE DY. COMMISSIONER OF INCOME TAX LTU, JSS TOWERS, BSK III STAGE BANGALORE
M/S BIOCON LTD., 20 KM, HOSUR ROAD ELECTRONIC CITY, HEBBAGODI BANGALORE-560100
ALOK ARADHE
ASHOK S. KINAGI
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
