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2015 (1) TMI 962 - AT - Income TaxReopening of assessment - Assessee filed the return as Resident but not ordinarily Resident - SOTP attributable to services rendered in India - value of perquisites as unexplained income - Indo-US DTAA - whether the provisions of the section 5(1)(c) and section 9(1)(ii) of the Act are not applicable to the appellant? - Held that - As can be seen from facts on record, prior to his joining Microsoft India (R & D) P. Ltd., on 01.01.2004, assessee was an employee of Microsoft Corporation, USA and was a non-resident. While, he was employed with Microsoft, USA assessee was granted stock awards as per stock awards scheme of Microsoft USA. As per the scheme, stock awards granted to assessee between August, 2002 and September, 2005, amounting to ₹ 1,49,80,713 vested with the assessee during previous year 2006-07 relevant to assessment year under dispute. It is the claim of the assessee that out of stock amount vested of ₹ 1,49,80,713, an amount of ₹ 1,05,62,088 was attributable to services rendered in India and ₹ 44,18,625 is relatable to services rendered in USA. To substantiate such claim assessee has also submitted before the A.O. a working showing the details of stock amount granted. A perusal of the working, a copy of assessee s paper book, reveals assessee has furnished all details relating to stock award granted, date of grant, date of vest of stock amount, total period between grant date and vest date, no. of days present in India between the grant date and vest date etc., Through this working assessee has also demonstrated the perquisite value of stock award which can be apportioned towards services rendered in India, depending upon the number of days stayed in India. As it appears, these facts and figures have not at all been examined by the Assessing Officer. Ld. CIT(A) has also not examined this issue with the attention it deserved. The order of the Ld. CIT(A) is non-speaking and bereft of any reasoning. When the residential status of the assessee is accepted as not ordinarily resident , income which accrues or arises to him outside India cannot and should not form part of the total income, unless the other conditions of proviso to section 5(1) are satisfied. Moreover, section 9(1)(ii) also makes it clear, income under the head Salaries shall be deemed to accrue or arise in India if it is earned in India towards services rendered in India. The information submitted by the employer under section 133(6) in letter dated 10.03.2009 also does not conclusively prove that amount received under SOTP is entirely relatable to services rendered in India. The employer has only stated that the stock awards proceeds were received by the assessee in India. Rather, in the aforesaid letter the employer has clarified that stocks were allotted to assessee when he was under employment of Microsoft Corporation, USA. Further, assessee sold the stocks to broker appointed by Microsoft, USA in the year 2003. Assessee only received the final installment of SOTP sales in financial year 2006-07. Therefore, without ascertaining how much of the SOTP is attributable to services rendered in India, the entire amount cannot be made taxable only because the money was received in India. Therefore, we are of the view that the assessee having residential status of not ordinarily resident , only that portion of the stock awards and SOTP attributable to services rendered in India can form part of total income for the impugned assessment year. As neither the A.O. nor Ld. CIT(A) have examined the facts properly, we are inclined to remit the matter back to the file of A.O. for taking a fresh decision on the issue of taxability of amount received from stock amounts/SOTP. - Decided in favour of assessee for statistical purposes. Addition of an amount of ₹ 89,87,658 being final installment of SOTP - Held that - The only additions made by A.O. are ₹ 1,49,80,713 towards stock awards and ₹ 30,46,287 towards post tax savings. Out of the additions of ₹ 1,49,80,713, assessee admits that an amount of ₹ 1,05,62,088 is taxable in India. Therefore, dispute remains with the amount of ₹ 44,18,625. The A.O. has not separately added the amount of ₹ 89,87,658. In these circumstances, we fail to understand how this ground arises. However, considering the fact that assessee has raised this issue in the petition filed under section 154 of the Act, which is still pending before the A.O., we remit the matter back to the file of the A.O. for deciding afresh after providing an opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Addition of an amount of ₹ 30,46,287 - Held that - Neither the A.O. nor the learned CIT(A) have decided the issue with reference to evidences brought on record by the assessee. Accordingly, we consider it appropriate to remit this issue back to the file of the A.O. for deciding afresh after affording reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
Issues Involved:
1. Validity of the CIT(A)'s order being a non-speaking order. 2. Taxability of Stock Option Transfer Proceeds (SOTP) amounting to Rs. 1,49,80,713. 3. Addition of Rs. 89,87,658 received as final installment of SOTP. 4. Addition of Rs. 30,46,287 as unexplained income. 5. Levy of interest under sections 234A and 234B of the Income Tax Act. Detailed Analysis: 1. Validity of the CIT(A)'s order being a non-speaking order: The assessee contended that the CIT(A) passed a non-speaking order without considering the factual and legal submissions. However, the assessee requested the Tribunal to dispose of the matter on merits rather than remitting it back to the CIT(A). 2. Taxability of Stock Option Transfer Proceeds (SOTP) amounting to Rs. 1,49,80,713: The assessee, employed with Microsoft India, filed a return declaring an income of Rs. 2,25,66,227 and claimed to be a 'Resident but not ordinarily Resident'. The AO reopened the assessment under section 147, noting discrepancies in the perquisites received and the amounts credited to the assessee's bank account. The assessee argued that the SOTP vested during FY 2006-07 pertained to services rendered in the USA and India, and only the portion related to Indian services should be taxable. The AO, however, included the entire SOTP amount in the taxable income, which was confirmed by CIT(A). The Tribunal observed that the assessee's residential status as 'not ordinarily resident' was accepted, and only income accruing or arising in India should be taxable. The Tribunal noted that the AO did not properly examine the details provided by the assessee regarding the apportionment of stock awards between services rendered in the USA and India. The Tribunal remitted the matter back to the AO for a fresh decision, directing the AO to verify the correctness of the assessee's claim and exclude the portion attributable to services rendered in the USA if substantiated. 3. Addition of Rs. 89,87,658 received as final installment of SOTP: The assessee claimed that out of Rs. 1,49,80,713, an amount of Rs. 44,18,625 was attributable to services rendered in the USA and not taxable in India. The AO did not separately add Rs. 89,87,658. The Tribunal noted that this issue was raised in a petition under section 154, pending before the AO. The Tribunal remitted the matter back to the AO for a fresh decision after providing an opportunity of being heard to the assessee. 4. Addition of Rs. 30,46,287 as unexplained income: The AO noticed a discrepancy between the total credits in the assessee's bank account and the amount shown in Form 16, leading to an addition of Rs. 30,46,287. The assessee explained that the amount was a remittance from post-tax savings in the USA. The Tribunal found that the AO and CIT(A) did not properly consider the evidence provided by the assessee and remitted the issue back to the AO for a fresh decision. 5. Levy of interest under sections 234A and 234B of the Income Tax Act: The assessee challenged the levy of interest under sections 234A and 234B. The Tribunal noted that the chargeability of interest is consequential and does not require adjudication at this stage. Conclusion: The Tribunal allowed the assessee's appeal for statistical purposes, remitting the matters back to the AO for fresh decisions on the issues of SOTP taxability, addition of Rs. 89,87,658, and addition of Rs. 30,46,287, after providing an opportunity of being heard to the assessee. The issue of interest under sections 234A and 234B was noted as consequential.
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