2015 (12) TMI 1026 - AT - Income Tax

Taxation of Employees Stock Option Plan under fringe benefit tax - Held that - When the CBDT clarified that with a view to bring stock options within the purview of fringe benefit tax, Finance Act, 2007 has inserted a new clause (d) in sub-section (1) of sec. 115WB of the Act, this Tribunal is of the considered opinion that the Employees Stock Option Plan cannot be brought under any other sub clauses before introduction of clause(d) to sec. 115WB(1) by Finance Act, 2007. Therefore, this Tribunal is of the considered opinion that in case the Employees Stock Option was allotted or transferred on or after 1.4.2007, the same is liable for fringe benefit tax. From the material available on record, it is not clear the date on which the Employees Stock Option was allotted or transferred. There is no reference about the date of such allotment in the assessment order also. The CIT(A), without referring to the date of the actual allotment, has proceeded on the footing that sec.115WB(1)(d) is applicable in respect of Employees Stock Option allotted or transferred on or after 1.4.2007. Therefore, this Tribunal is of the considered opinion that the date of actual allotment or transfer of Employees Stock Option is crucial for determination of the issue arises for consideration. In the absence of any material, this Tribunal is of the considered opinion that the actual date of allotment or transfer needs to be verified by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the entire issue raised by the assessee is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue afresh and bring on record the date of actual allotment or transfer of Employees Stock Option and thereafter decide the issue as indicated above by this Tribunal. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Taxation of Employees Stock Option Plan under fringe benefit tax for assessment year 2007-08.

Analysis:
The appeal was filed against the order of the Commissioner of Income-tax (Appeals) for assessment year 2007-08, with a delay of 35 days. The delay was condoned after finding sufficient cause. The main issue raised was the taxation of Employees Stock Option Plan under fringe benefit tax. The counsel for the assessee argued that the Employees Stock Option Plan should not be taxed for the year under consideration based on the provisions of sec. 115WB(1)(a) of the Act. The counsel contended that the Employees Stock Option Plan falls under sec. 115WB(1)(d) introduced by the Finance Act, 2007, and should be taxed for the assessment year 2008-09, not 2007-08.

The Departmental Representative argued that sec. 115WB(1)(d) was applicable for the assessment year 2008-09, but the Employees Stock Option Plan should be taxed under sec. 115WB(1)(a) for the assessment year 2007-08. The Tribunal considered the submissions and reviewed the provisions of sec. 115WB(1) introduced by the Finance Act, 2007. It was noted that Employees Stock Option falls under sec. 115WB(1)(d) as clarified by the Parliament. However, the Tribunal observed that the actual date of allotment or transfer of Employees Stock Option was crucial for determining the tax liability.

The Tribunal referred to Circular No.9/2007 issued by the CBDT, which clarified the applicability of sec. 115WB(1)(d) for allotments or transfers made after 1st April 2007. As the date of allotment was not clear from the record, the Tribunal set aside the lower authorities' orders and remitted the issue back to the Assessing Officer for verification of the actual allotment date. The Tribunal directed the Assessing Officer to re-examine the issue and determine the tax liability based on the date of allotment or transfer. The appeal of the assessee was allowed for statistical purposes.