ITAT Deletes Income Tax Addition Towards ESOP

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has deleted the income tax addition towards ESOP.

The bench of Amit Shukla (Judicial Member) and Padmavathy S. (Accountant Member) has observed that ESOP expenses are capital in nature.

The appellant/assessee company is engaged in the manufacturing of branded FMCG products, namely foods and beverages and home and personal care (HPC) products.

The assessing officer, during the course of the assessment, noticed that the assessee had debited a sum of Rs. 147.50 lakh towards the benefit provided to employees of the company in respect of the "Employees Share Option Scheme (ESOP)." The assessee made a detailed submission before the assessing officer explaining the nature of the ESOP and the reasons why the same is allowable under Section 37(1).

However, the assessing officer did not accept the contentions of the assessee by stating that the ESOP expenses have not crystallized and that the same is capital in nature. The AO disallowed the ESOP expenditure. The DRP upheld the disallowance.

The tribunal held that the addition made by the AO towards ESOP expenses be deleted.

Case Title: Unilever India Exports Limited Versus ACIT

Case No.: I.T.A. No.2107/Mum/2022

Date: 11-05-2023

Counsel For Appellant: Karishma Phatarphekar

Counsel For Respondent: Samuel Pitta

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