2007 (2) TMI 353 - AT - Income Tax

Summary

Issues Involved:
1. Determination of taxable interest on stock options.
2. Treatment of income from sale of shares as long-term capital gain or income from other sources.
3. Deduction claims u/s 54F and u/s 54EA.
4. Admissibility of fresh evidence without opportunity to Assessing Officer.

Summary:

1. Determination of Taxable Interest on Stock Options:
The CIT (Appeals) erred in determining the taxable interest of Rs. 2,41,000 based on the initial option price of Rs. 15,05,990 for two years. The CIT (Appeals) computed the interest of Rs. 2,41,000 by applying 8% interest for two years on the option price, treating it as perquisite income. The Tribunal found no merit in this computation and set aside the order, directing the Assessing Officer to re-examine the issue.

2. Treatment of Income from Sale of Shares:
The revenue contested the CIT (Appeals)'s decision to treat Rs. 32,32,410 as long-term capital gains instead of income from other sources. The Assessing Officer had argued that the stock option agreement was a device to remunerate the assessee, thus treating the income as remuneration in lieu of salary. The Tribunal noted the lack of documentary evidence to support the CIT (Appeals)'s conclusion and remanded the matter back to the Assessing Officer for fresh examination, emphasizing the need for detailed particulars of the shares acquired under the stock option scheme.

3. Deduction Claims u/s 54F and u/s 54EA:
The CIT (Appeals) rejected the assessee's claim for deduction u/s 54F for expenditure on addition/alteration of a house property, stating it was not eligible as it was on the cost of improvement. The Tribunal upheld this view but directed the Assessing Officer to allow deduction for investment made in prescribed securities u/s 54EA if found proper. The matter was remanded back for fresh examination.

4. Admissibility of Fresh Evidence:
The revenue argued that the CIT (Appeals) admitted fresh evidence without allowing the Assessing Officer an opportunity to examine it, violating rule 46A of the IT Rules. The Tribunal acknowledged this procedural lapse and directed the Assessing Officer to re-examine the evidence with due opportunity for both parties to be heard.

Conclusion:
The Tribunal set aside the orders of both the CIT (Appeals) and the Assessing Officer, remanding the matter back to the Assessing Officer for fresh examination on all issues, ensuring compliance with legal provisions and procedural fairness. Both appeals were allowed for statistical purposes.