9911796707
TMI Blog2008 (5) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... w York (hereinafter called Amexco ). The assessee showed total income in the revised return at Rs. 66,65,177. The reason for revising the return was that he had not shown the capital gain of Rs. 2,35,310 in the original return, which resulted from sale of 385 shares of Amexco. The Assessing Officer observed that the assessee had not offered Rs. 32,75,716 for taxation, which represented sale of stock option received from Amexco. On being show caused, the assessee stated that Amexco was the parent company of his employer. He further contended that the stock option was given by Amexco and not his employer AEBL. It was therefore, contended that the employer-employee relationship was missing insofar as the acquisition of shares is concerned. The Assessing Officer did not agree with the submission advanced on behalf of the assessee on the ground that he was in the employment of the AEBL, which was wholly owned subsidiary of Amexco which had granted the stock option in recognition of assessee s continuing contribution to long-term success and development of Amexco. He further held that though the assessee was not directly in employment of Amexco but AEBL did not have any employee stock o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Amexco, which had allotted shares to him and secondly, the amount received on sale of such shares could not be put to tax under any section of the Act. 5. Per contra , the learned D.R. strenuously argued that the case of the assessee was covered within the ambit of the proviso to section 17(2)( iii ). He further contended that the assessee was entitled to receive stock option of Amexco only due to his employment with AEBL and hence the employer-employee relationship cannot be lost sight of. He, therefore, relied on the impugned order. 6. We have heard the rival submissions and perused the relevant material on record. The primary question to be decided is as to whether or not the employer-employee relationship is existing in the present case. The assessee is employee of AEBL, USA, branch in India, which is wholly owned subsidiary of American Express International Banking Company. Such holding company is wholly owned subsidiary company of Amexco, which had allotted shares under the employees option scheme to the assessee. On 24-2-1997, the assessee was granted Non-qualified Stock Option by Amexco to purchase 1000 shares at an exercise price of $ 66.43 per share. One-thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. These facts recorded by the Assessing Officer have remained uncontroverted on behalf of the assessee. Under these circumstances, we find that the allotment of shares to the assessee by Amexco is only directly due to and by virtue of his employment with AEBL. It is an indirect allotment by AEBL through Amexco, and thus by allotting the shares the holding company has stepped into shoes of its sub-sidiary company. It would be noted infra that proviso to section 17(2)( iii ) applies to the facts of the case and it covers not only direct but "indirect" allotment of shares, debentures or warrants under any Employees Stock Option Plan. Under these circumstances, we cannot hold that the employer-employee relationship is missing insofar as stock option by Amexco to the assessee is concerned as it is an indirect allotment by AEBL. 7. Turning to the taxability of the perquisite value, we find that the assessee was given option for purchasing shares in earlier years and the event of exercising the option and selling such shares occurred in the previous year relevant to the assessment year under consideration. This entire exercise may be viewed in three stages. First, when the employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with the guidelines issued in this behalf by the Central Government.] [Explanation. For the removal of doubts, it is hereby declared that the use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work, or from such office or place to his residence, shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate for the purposes of this sub-clause;] ( iiia )the value of any specified security allotted or transferred, directly or indirectly, by any person free of cost or at concessional rate to an individual who is or has been in employment of that person......." Section 17(2)( iiia ) was inserted by the Finance Act, 1999 with effect from 1-4-2000 and omitted by the Finance Act, 2000 with effect from 1-4-2001. By the same Finance Act, simultaneously, a proviso was inserted to section 17(2)( iii ). 9. Adverting to the facts of the case we find that insofar as clause ( iiia ) is concerned, that cannot be applied to the facts of the instant case for the obvious reason that it was omitted with effect from 1-4-2001, i.e., assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch specific provision is omitted, that by necessary implication, should not be construed as having been included in the general provision. Coming back to the point, we note that clause ( iiia ) contained a specific provision for treating the value of any security allotted or transferred to employees free of cost or at a concessional rate as perquisite. It impliedly meant that such benefit was the subject-matter of coverage under this clause only and should be deemed to be not part of any other clause of section 17(2). When this clause was removed from the statute, ordinarily, it should have been presumed that the Legislature has intended not to tax this benefit under any other provisions of section 17(2). However, we find that this general rule of interpretation is exceptionable in the present case. Whereas clause ( iii ), a general provision for treating the value of any benefit or amenity granted or provided free of cost or at concessional rate by the employer to the employees ought to have excluded the perquisite value in respect of shares allotted free of cost or at a concessional rate, which was hitherto subject-matter of clause ( iiia ), but by the insertion of the proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
