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The Tax Publishers Shriram Insight Share Brokers Ltd. v. Dy. CIT [ITA Nos. 733, 734 & 735/Mds/2015, dt. 5-5-2016] : 2016 TaxPub(DT) 2540 (Chen-Trib) ESOP buy back reimbursed to Trust whether allowable expenditure *Facts:* Assessee in share broking business had to reimburse to its employee ESOP trust for buy back of its own shares to the ESOP trust at 340 per share for 32,700 tendered in the buy back mode. This was claimed as an allowable business expenditure. It was pleaded that the ESOP trust was established only to reward its employees and such ESOP shares could have been freshly allotted or bought back from the market. 350,000 shares were purchased from promoters at Rs. 15 per share and 32,700 from the employees on a buy back offer at Rs. 340 per share. This did not find favour with the lower authorities, thus went up in appeal: Held against the assessee that the ESOP trust payment is not a claimable expenditure. It was also factual that the assessee could not produce proof of ESOPs being allotted to employees during the year. The ITAT could not comprehend the reasoning of acquiring promoter shares at Rs. 15 while from the buy back at Rs. 340/ thus upheld the disallowance. Decision of Bangalore ITAT in Novo Nordisk India Pvt. Ltd. v. DCIT (2014) 63 SOT 242 was distinguished that the same shares were purchased from promoters at 15 while from employees at 340 and it was not the difference between the market price and the purchase price which is claimed as an expenditure.

The Tax Publishers

Shriram Insight Share Brokers Ltd. v. Dy. CIT [ITA Nos. 733, 734 & 735/Mds/2015, dt. 5-5-2016] : 2016 TaxPub(DT) 2540 (Chen-Trib)

ESOP buy back reimbursed to Trust whether allowable expenditure

Facts:

Assessee in share broking business had to reimburse to its employee ESOP trust for buy back of its own shares to the ESOP trust at 340 per share for 32,700 tendered in the buy back mode. This was claimed as an allowable business expenditure. It was pleaded that the ESOP trust was established only to reward its employees and such ESOP shares could have been freshly allotted or bought back from the market. 350,000 shares were purchased from promoters at Rs. 15 per share and 32,700 from the employees on a buy back offer at Rs. 340 per share. This did not find favour with the lower authorities, thus went up in appeal:

Held against the assessee that the ESOP trust payment is not a claimable expenditure.

It was also factual that the assessee could not produce proof of ESOPs being allotted to employees during the year.

The ITAT could not comprehend the reasoning of acquiring promoter shares at Rs. 15 while from the buy back at Rs. 340/ thus upheld the disallowance. Decision of Bangalore ITAT in Novo Nordisk India Pvt. Ltd. v. DCIT (2014) 63 SOT 242 was distinguished that the same shares were purchased from promoters at 15 while from employees at 340 and it was not the difference between the market price and the purchase price which is claimed as an expenditure.