Assessee Company issued ESOP and RSU plans to its employees in India. The ESOP expenses resulted from the difference between the fair market value of the shares of the associate parent entity (AE) on the date of the grant and the exercise price. Since the AE first incurred these expenses, it charged them back to the assessee by issuing a debit note. The Assessee booked this cost as employee benefit expenses in its books of accounts. AO denied these expenses under the grounds that these were notional expenses and hence not allowable u/s 37. AO further held that the transaction was a colourable device to shift profits out of India. The Tribunal held that the scheme was for the employees of the assessee; hence, the assessee was the one who had to bear the difference in the cost of shares. By relying upon the coordinate bench, it also held that since the expenditure was for retaining and rewarding the employees, these were revenue expenses.(AY. 2015-16)