Assessee-company issued Employee’s Stock Option Plan (ESOP) and claimed difference between market price and exercise price as deduction under section 37(1), spread equally over vesting period of four years, on basis of SEBI Guidelines and accounting principles . Assessing Officer disallowed same, holding it as a contingent liability or a short receipt of share premium . On appeal the Tribunal held that  where liability in respect of ESOP is incurred at end of each year, which is quantified at end of vesting period when employees become entitled to exercise options, discount on ESOP is an ascertained liability and not a contingent liability  accordingly the  discount on ESOP being a general expense, is an allowable deduction under section 37(1) during years of vesting on basis of percentage of vesting during such period, subject to upward or downward adjustment at time of exercise of option . On appeal by the revenue  dismissing the appeal of the revenue the Court held that discount on  issue  of ESOP is an allowable deduction in computing the income under the head profits and gains of the business. ( ITA No. 653 of 2013 dt 11 -11-2020 ) (AY.  2003 -04  to 2007 -08)    )

Editorial :  Bicon Ltd v. Dy CIT  (2013)  35 taxmann.com 335 / 144 ITD 21 / 155 TTJ 649/  90 DTR 289 / 25 ITR 602  (SB)(Bang)  Trib.)