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TMI Blog2011 (3) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed by Ld. AO in view of above mentioned judgment of Supreme Court and in view of settled law is unlawful and unfounded. 3. That the assessment order and appeal effect order were contrary to law and facts and therefore, Ld. CIT(A) has erred in not bringing the same in accordance with law and facts and the action of Ld. CIT(A) in not doing so is contrary to law and facts. 4. That the value of perquisite of ESOP as assessed by Ld. AO was contrary to law and facts inasmuch as per law as contained in section 17(2)(iiia) read with memorandum explaining Finance Bill of 1999 and therefore, Ld. CIT(A) ought to have modified the impugned order so as to bring it in accordance with law. 5. That having regard to the facts and circumstances of the case, ld. CIT(A) while deleting interest u/s 234B, has otherwise erred in law and on facts in not holding that the impugned amount of perquisites value of ESOPs assessable as income in the hands of the assessee being liable for tax deduction by the employer was also in any case outside the scope of levy of interest u/s 234B. 6. That the appellant craves the leave to add, modify, amend or delete any of the grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne-thirds of the shares was freely transferrable. 4.1. For the previous year relevant to assessment year 1999-2000, the assessee filed return of income declaring "perquisite" under Section 17(2)(iii) of the Income-tax Act, 1961 ("the Act") to the tune of Rs.7.72 crores, being the difference between the market value of the equity shares as on 01.02.1999 (Rs.598 per share) and the rate at which the option to purchase the equity shares was offered to the assessee (Rs.212 per share). Perquisite was therefore declared at Rs.386 per share. The return of income for the said assessment year, declaring perquisite value of Rs.7,72,00,000/-, was accepted vide intimation dated 03.07.2001 issued under Section 143(1)(a) of the Act. 4.2. Subsequently, vide letter dated 15.04.1999, relevant to the assessment year under 2000-01, the assessee exercised the option to convert the entire 2,00,000 warrants into equity shares. The board of directors of Zee Telefilms on 30.04.1999 approved allotment of equity shares as per terms of offer. 4.3. In the return of income for assessment year 2000-2001, the assessee declared total income of Rs.14,41,77,150/-. including short term capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of section 17(2)(iiia). Since the correct assessment year to be taxed was 2000-01, it might be a ground to reduce the income from assessment of the assessment year 1999-2000, but reverse was not true in view of specific provision of section 17(2)(iiia) applicable to the year under appeal. Sine the assessee exercised option in respect of allotment of shares by letter dated 15-4-1999, though without payment of requisite sum but which was accepted by the employer on 30-4-1999 waiving the amount payable for allotment of shares, the perquisite arose in terms of section 17(2)(iiia) on 30-4-1999. Since there was no dispute as regards fair market value of shares as on 30-4-1999, the Assessing Officer was justified in bringing to tax the sum in the financial year 1999-2000 relevant to the assessment year 2000-01. Therefore, the order of the Commissioner (Appeals) was to be reversed and that of the Assessing Officer was to be restored." 4.7. The assessee has now preferred an appeal under Section 260A of the Act to the Hon'ble High Court of Delhi against this ITAT order dated 29.08.2008, which appeal has been admitted vide order dated 23.09.2009 by the Hon'ble High Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echnologies Limited reported at 297 ITR 147. 7. That the learned Assessing Officer has erred in law and on facts in levying interest u/s 220 of the Income Tax Act. 8. The appellant craves leave to add to, alter or amend the above grounds of appeal." 4.10. Against the said order dated 26.05.2009, the Revenue has preferred appeal to the Tribunal. 4.11. Consequent to ITAT order, the AO proceeded to give effect of the Tribunal's order dated 29-08-2008. Vide order dated 5-5-2009 u/s 254 read with sec. 143(3)/154, he recomputed the income by way of ITNS 150 and not in regular proforma. 4.12. CIT(A) held ground nos. 1 and 8 to be general in nature. Ground nos. 2 and 3 pertained to giving adjustment of taxes paid by the assessee in A.Y. 1999-2000, 2000-01 and 2002-03. These grounds arose because of the fact that the ITAT held the ESOP to be taxable in the year 2000-01 whereas the assessee was under impression that ESOP were partly taxable in each of the years i.e. 2000-01, 2001-02 and 2002-03 and under this belief the taxes were paid in these three years. AO did not give credit for the taxes which were already paid by the assessee towards ESOPS in A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the said income declared by the assessee in AY 1999-2000 on account of perquisite has to be excluded therefrom and the taxes paid towards the said income should be adjusted towards the tax due for the year under consideration. Suitable directions in this regard should be issued to the assessing officer to exclude the said income from AY 99-2000 and to adjust the taxes paid in that year against demand due for AY 2000-01." (b) Adjustments in respect of AY 2001-02 and 2002-03" "The third ground of appeal is to challenge the non-adjustment of excess taxes paid in the AY 2001-02 and 2002-03. The assessee declared capital gain on the said shares in AY 2001-02 and 2002-03 at sale price minus the cost of share i.e. 598/- being the value on which perquisite was calculated by him. If the assessing officer considered the value of Rs. 1128.25 for calculation of perquisite then while computing capital gain, the said value should be considered as cost of the said shares. However, in the subsequent two assessment years the revenue collected tax on capital gain computed on the sale of the said shares by taking their cost at Rs. 598/- per share as declared by the appellant in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration (1913) 6 Tax Cases 211 (HL), to conclude that taxing twice for the same purpose cannot be permitted. If the same transaction and the resultant income cannot be taxed twice, it naturally follows that the payment of tax on the said transaction/income cannot be made twice. Same has been the position taken by the Apex Court in Jain Bros. and others v. Union of India and others (1970) 77 ITR 107 (SC). Once this principle is settled, we may naturally conclude that to the extent tax was paid by the assessee for AY 1999-2000, the learned Assessing Officer would have to adjust the same, in accordance with the decision of the Apex Court in ITO vs. Bachu Lal Kapoor (1966) 60 ITR 74 (SC). The Revenue cannot blow hot and cold at the same time. As such, the assessee succeeds in ground of appeal No. 2. 6. There is another angle, why the assessee deserves to succeed in ground of appeal no. 2. When the issue, was originally being considered a the level of CIT(A), a remand report was filed by the learned Assessing Officer, who in his reply to point 1.1 (page 179 of the paper book) has stated that t he assessee had returned the income as taxable in the Assessment year 1999-2000, volun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of taxes in respect of A.Y. 2001-02: "9. To reiterate, the sum and substance of the point in controversy is that the assessee had declared capital gain on the ale of shares in Assessment year 2001-02 and 2002-03 @ Rs. 598 per share. This was in accordance with his voluntary declaration of income in AY 1999-2000. The learned Assessing Officer has taken the value at Rs. 916.25 pr share, holding the marked value as Rs. 1128.25 per share as on 30.4.1999. The stand of the learned Assessing Officer ahs been upheld by the Hon'ble ITAT. However, while giving appeal effect, the learned Assessing Officer has not adjusted the taxes paid in Assessment year 2001-02 and 2002-03, even while taking the cost price at Rs. 598 per share, as declared by the appellant. This was the cost of the share as on 1.2.1999 and declared by the assessee. One the learned Assessing Officer (and also upheld by the Hon'ble ITAT) has taken the market value at 1128.25 per share as on 30.4.1999, the same price would have to be calculated even for the Assessment year 2001-02 and 2002-03, while computing the capital gain. I would like to clarify here that while deciding this ground of appeal, I am holding that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said plea of the appellant and deleted the said levy. Photocopies of the said two appellate orders are enclosed. ii. What AO had done is only to shift the year of assessment of the perquisite value to succeeding year for immediately preceding year levy of similar interest was deleted, therefore, shifting of taxability will not automatically lead to imposition of interest u/s 234 as a holistic view was to be taken as all these years were under challenge. iii. The appellant also submits that interest u/s 234B could not be charged on the additions made in the assessment proceedings, as he had no liability to pay advance tax in view of the fact that his entire income was subject to tax of tax at source. iv. The use of words 'such assessee' in the second limb indicates that the liability to pay 90% of the advance tax applies only to an assessee who is liable to pay advance tax under section 208. Therefore, the charge of interest u/s 234B of the Act presupposes a liability to pay advance tax u/s 208, and an assessee who is not so liable cannot be called upon to pay interest u/s 234B of the Act. v. The applicability of section 208 on current income as comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew that ss. 234A, 234B and 234C are of the same genre. On going through these provisions, it is clear that interest is sought to be charged because the Government is denied of its revenues at the due dates. Under s. 234A interest is charged where tax which is payable upon self assessment at the time of filing of a return is not paid at that point of time. Sec. 234B provides for charging of interest for default in payment of advance tax and under s. 234C interest is charged for deferment in the payment of advance tax from the appointed dates of payment. Under the Act, income-tax is payable at different stages and through different modes. Where specific dates by which parts of the tax are to be paid are clearly stipulated, if such a schedule is not adhered to it can be said that the Government is deprived of its revenue as on those dates. To compensate for such deprivation, interest is chargeable under provisions of the Act such as ss. 234A, 234B and 234C. The scheme of the Act and the nature of these provisions reveal that they are compensatory and not penal. Under these provisions interest is chargeable by way of compensation and not by way of penalty. This is also clear from the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und which should have accrued (as no refund has been issued), the interest under section 234B would have to be computed. While computing the interest, the date of payment of tax by the assessee would be the crucial factor. 13. The assessee succeeds in ground of appeal no. 4. Decision in ground of appeal no. 5 would go against the assessee in view of the jurisdictional High Court decision, extracted above." 4.16. Against the above order of the CIT(A), both the Revenue and the assessee have filed the present appeals: 5. Learned DR at the out set contends that the assessee's appeal is not maintainable inasmuch as CIT(A) ought not have admitted the assessee's appeal in the first place. ITAT vide its order dated 29-8-2008, allowing revenue's appeal, has clearly held that ESOPs were taxable perquisites for A.Y. 2000-01. The AO while giving effect to the order of ITAT has passed impugned order in proforma ITNS 150, which is a non-appealable order and passed to give effect to the direction of the Tribunal. Sine there was no direction in the ITAT order about levy of interest u/s 234B, 234C and giving credit of taxes of earlier year and subsequent year, CIT(A) ought n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation, reduction or enhancement, the original order of assessment stands modified to the extent of the directions given by the appellate authority. In the case of annulment the order becomes non est. In case an order is set aside, the authority has to start the entire process afresh and make a fresh order of assessment complying with the direction given by the appellate authority. It is thus clear that what remains as a final order after giving effect to the orders of the appellate authorities is an order of assessment under section 143 or 144. It cannot be anything else." 6.1. It is pleaded that there is no merit in the argument of learned DR that the appeal was neither maintainable nor before ITAT. Besides, in this order AO has levied fresh interest on the assessee who has a right of appeal inasmuch as legality of levy of interest itself is challenged. 7. We have heard rival contentions and have gone through the entire material available on record. Though revenue has not raised this ground in memo of appeal, however, this being legal ground the same is admitted. 7.1. We see no reason to deviate from the view taken by the Hon'ble Bombay High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest u/s 234B, order of CIT(A) is not correct on following counts: (i) It has been admitted that the ESOPs are perquisites of salary and taxable u/s 17(2) of the I.T. Act as salary income. Employer is under an obligation u/s 192 to deduct TDS thereon. Section 209 mandates that while computing the advance tax i.e. current income, the same shall be reduced by the amount of income tax which is deductible or collectable at source. (ii) Learned counsel further contends that : Interest under section 234B of the Income-tax Act, 1961 is chargeable only in cases where there is either failure or shortfall in the payment of advance tax by an assessee. The relevant portion of the said section, at the relevant time, read as under: "234B. Interest for defaults in payment of advance tax (1) Subject to the other provisions of this section, where, in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one and one-half ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timated income of the assessee under this head for that financial year. ..." For the year under consideration i.e. AY 2000-01, benefit arising to any employee in the form of any security allotted to such employee, either free of cost or at a concessional price, under an employee stock options scheme (ESOP Scheme") of the employer constituted "perquisite" u/s 17(2)(iiia) of the Act, and chargeable to tax under the head "Salaries" in terms of section 17(1)(iv) read with Section 15 of the Act. The relevant portion of the said section is as under: "17. For the purposes of section 15 and 16 and of this section,- (1) "Salary" includes- .... (iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; (2) "Perquisite" includes- (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: On a conjoint reading of Section 192 and Section 17 of the Act, it is submitted that the employer is under an obligation to deduct incometax at sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is an Indian resident. 13. In reply, the learned counsel for the assessee contends that applicability of sections 209 and 192 is same in respect of resident and nonresident assessees and therefore the ratio of decision of Hon'ble Delhi High Court applies with full force to assessee's case. 14. We have heard rival contentions and have gone through the relevant material on record. Apropos assessee's ground nos. 1 to 4, about taxation of perquisites on 2/3rd lock in shares, we have no choice but to follow the ITAT judgment dated 29-8-2008 reproduced above as in the end there is a direction to tax entire shares at same market rate. Following this order, ground nos. 1 to 4 of assessee's appeal are dismissed. 14.1. Apropos ground no. 5, it has not been disputed that the perquisite value constitutes salary u/s 17(2) which is liable for TDS u/ss 192 and 209, postulates payment of advance tax on the amount of tax payable by the assessee minus income-tax which is deductible or collectable. Hon'ble Delhi High Court in the case of Jacabs Civil Incorporated (supra) has clearly held: "The liability to deduct or collect the tax at source is that of the payer. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational Taxation) vs. NGC Network Asia LLC (2009) 222 CTR (Bom) 86: (2009) 18 DTR (Bom) 203 relied on." 14.2. We find merit in the argument of the learned counsel for the assessee that there is no difference between a resident and non-resident assessee about levy of interest u/s 234B, therefore, we are unable to accept the revenue's argument that ratio of decision in the case of Jacabs Civil Incorporated (supra) is not applicable to assessee's case. In our view the aforesaid decision of Hon'ble Delhi High Court squarely covers the issue in question. Respectfully following the same, we hold that the interest u/s 234B was not chargeable on assessee in these facts and circumstances and the same should be deleted. Consequently, ground no. 5 of the assessee is allowed. In the result, assessee's appeal is partly allowed. 15. Coming to Revenue's appeal, learned DR Ms. Sangeeta Gupta contends that while deciding the appeal CIT(A) has directed the AO that the tax paid by the assessee in respect of perquisites in A.Y. 1999-2000 may be treated as advance tax for A.Y. 2000-01 and to adjust the excess taxes paid by the assessee on sale of ESOPs in AY 2001-02 and 2002-03 agai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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