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Brainbees Solutions, the parent company of FirstCry, has received show-cause notices regarding ESOP (employee stock ownership plan) expenses of close to Rs 80 crore incurred between AY 2018-19 and AY 2021-22.

The notices were issued under clause (b) of Section 148A of the Income Tax Act from the Income Tax Department.

“The company strongly believes that the claim of ESOP expenses by the company in its tax returns for above mentioned assessment years is in accordance with the provisions of the Income Tax Act, 1961 and are as per judicial precedents by various courts & advice from our external tax advisors,” said the company’s filing with BSE.

The SoftBank-backed company said that a similar ESOP expense claim was previously approved by the Commissioner of Income Tax (Appeals) for the assessment year 2015-16. Hence, the company believes “no income chargeable to tax has escaped the assessment”.

“At this stage, no order of any kind has been passed and as mentioned above, the company believes that it has a strong case on merit. The company will be filing an appropriate response to the show cause notices in due course,” said the filings. 

FirstCry, which provides a wide range of baby and children’s products, filed for a $500-million IPO earlier this year, which included a fresh issue of Rs 1,666 crore and an offer for sale of 543 lakh equity shares by existing shareholders.

The omnichannel retailer gained 44.8% on its first day of trading on the Indian stock markets, closing with a market capitalisation of $4.1 billion.