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TMI Blog2014 (1) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... oreign assignment in India for which he is to be compensated by net of tax salary - the income arising in India is actual salary plus the incremental tax liability arising on account of Indian assignment - the claim of the revenue rejected – Decided against Revenue. - ITA no. 3452/Del/2011 - - - Dated:- 24-5-2013 - Shri R. P. Tolani, JM And Shri J. Sudhakar Reddy, AM,JJ. For the Appellant : Ms. Priscilla Singeit, Sr. D. R. For the Respondent : Sh. Nageshwar Rao, Adv. ORDER Per J. Sudhakar Reddy, AM. This is an appeal filed by the Revenue directed against the order of the CIT(A)-XXX, Delhi dated 29.04.2011 pertaining to the Assessment Year 2007-08. 2. Facts in brief:- The assessment has been done on M/s United Technologies International Operation, USA ('UTIO' for short) as a representative assessee of Mr.Robert Aruther Keltz. Mr.Robert Aruther Keltz was an employee of M/s UTIO, USA and was on deputation to the Indian liaison office (hereinafter referred to as ILO of UTIO) w.e.f. 1st April, 2006. He was a Resident and Not Ordinarily Resident during the subject Assessment Year. The employee filed its return of income on 31st July,2007 under Section 139(1) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion were allotted to Mr.Robert Aruther Keltz outside India and hence receipt of income, arising out of allotment of such shares was also outside India. It was contended that since the shares were allotted to the employee outside India, the benefit arising there from can not be deemed to be received in India. On the issue whether stock option benefit accrues or arises or is deemed to accrue or arise to the employee in India, it was argued that the option granted to the employee on 9.1.2006, represented a future right of the employee to receive shares of UTIO only, once the vesting requirement of continuing the employment with UTIO, over the vesting period of three years is satisfied. Thus it was argued that stock options accrued to the employee for services rendered by the employee during the grant period of 3 years. It was pointed out that in case the service of the employee is terminated, during the grant period, all such vested stock options automatically lapses. Thus it was argued that as the employee has been for only for a part of the time of the vesting period in India, only a proportionate stock option benefit, which is attributable to period spent in India accrues to the em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income for the subject Assessment Year, the appellant has excluded an amount of Rs.1,911,872/- on account of hypo tax from the employee's base salary. This is that part of the salary which never accrued to the employee. The Ld.AO has added back the amount of hypo tax to the base salary on the contention that as no specific exemption or deduction is granted for hypo tax under the Income Tax Act, 1961 and on the erroneous under standing that the income has already accrued to the employee, hence, hypo tax forms part of the employee's taxable salary." 7. The Commissioner of Income Tax (Appeals) applied the decision of the Hon'ble Delhi High Court in the case of CIT vs. Dr.Percy Batlivala (2010) 2010-TIOL- 175-HC-DEL-IT and allowed the case of the assessee. 8. Ground no.5 is stated as consequential to ground no.4. 9. We have heard Ms.Priscilla Singeit, Ld.Sr.D.R. on behalf of the Revenue and Sh. Nageshwar Rao, Ld.Counsel on behalf of the assessee. 10. On a careful consideration of the facts and circumstances of the case and on a perusal of the papers on record as well as the orders of the authorities below and case laws cited, we hold as follows. 11. On the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital gains arising from transfer of the equity shares as against taxability of perquisites of stock options in the appellant's case. 3.4. Considering the above judicial pronouncements and the submission made by the appellant, it is obvious that in the decisions as referred by Assessing Officer are clearly distinguishable on the facts of the assessee. The reference to circular no. 9/2007 dt. 20.12.2007, OECD guidance on treatment of stock based options and the decision of Delhi ITAT in the case of Mr.Eric Moroux and Ellis 'D' Rozario clearly laus down that only proportionate amount of stock option benefit relating to period of services rendered in India during the grant period is to be offered to tax in India. Accordingly, the ground is allowed." 13. In the case of DCIT vs. Eric Moroux and Ghorayeb Emile (ITA no. 1174 and 1175/Del/2005) the ITAT Delhi Bench at para 8 held as follows. "8. We have considered the rival submissions. As can be seen from the terms of the Contract the assesses were required to work in France and South Asia for a particular period of time. The contract of employment itself recognizes the division of work to be performed in India and that to be perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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