ESOPS
ARE TAX-FREE, RULES ITAT
Companies can deduct
the difference between stock option prices and the market
prices from their taxable income. This exemption follows a
judgement by the Chennai Income Tax Apellate Tribunal (ITAT).
The judgement sas tax is not payable on Esops expenditure.
The order also
ensures that Esops will not be taxable either in the hands
of the employers or in the hands of the employees.
Incidentally, in the US, Esops are taxable in the hands of
employees but companies can claim tax deduction on such expenditure.
But chartered accountants
are still not very sure about the ITAT judgement. T P Ostwal,
CA, told ET, "The issue of allowing Esop expenditure
is not very clear at present. The tax authorities need to
clarify on this matter"
The Chennai ITAT
ruled last week in favour of SSI Ltd, which had appealed against
the order of a commissioner (appeal) giving directions to
disallow the Esop expenditure.
Though the Income
Tax Act is not clear about the allowability of expenditure
on Esop, Sebi rules say the difference between the market
price and the price at which the option is exercised by the
employees is to be debited to the profit & loss account
as an expenditure.
