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TMI Blog2015 (11) TMI 1367X X X X Extracts X X X X X X X X Extracts X X X X ..... vests on the exercise of the option/s by the assessee, and not at any time earlier, who, at best, could be considered as having held the shares for a single day. In fact, it states this in the alternative, observing that the assessee did not become the owner of the shares at any point of time. This is also precisely what the A.O. states in the alternative (as did the assessing authority in that case). The shares were not intended to be held in-as-much as the payment of cost, a precondition for their acquisition, could not be made. The assessee’s account was accordingly settled, for all intents and purposes, otherwise than through delivery, yielding speculative gain, assessable u/s. 43(5), and which could itself fall under any head of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eat equity offer to the assessee by his employer, M/s. Parke Davis, of shares in it s parent, a foreign company, on 20.2.1998, which was accepted by him forthwith. This, it is claimed, gives him a right in the said shares, i.e., 1100 in number, at an acquisition cost of US $ 1, which the assessee could acquire within a period of ten years. It is this right that translates into equity shares on the exercise of the option by the assessee on 19.10.2001, on which date the shares were, both, allotted and sold, resulting in the impugned gain. The details of the acquisition of shares, including the manner in which the same stood increased in numbers over time, along with the cost incurred toward their acquisition, is as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceptance , as it is stated to be, is of little consequence. The so called acceptance is in fact a promise to accept (in future). A promise to offer or, as the case may be, to accept, is not offer or acceptance per se, and no binding contract or even contractual relationship comes into existence at this stage. The said endorsement thus does not signify anything and no right crystallizes in favour of the assessee thereat. It is only when the assessee exercises the option thereto, much later, which the Offer entailed, complying with the terms and conditions thereof, including the payment of cost of US $ 1 (Rs.42/-), that a right in terms of shares or rights therein accrued to the assessee. In fact, in-as-much as the assessee, under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only fructify on the exercise of the option by the employee, resulting in a debt, non-interest bearing, permissible by law, crystallizing in favour of the employer- company. Clearly, therefore, it is only upon allotment and transfer of shares, which per force the circumstances had to be simultaneous, that a benefit in terms of excess of sale price over cost, or net gain, arises to the assessee. The allotment/acquisition and sale of shares being (almost) simultaneous, the capital gain arising would only be a short term capital gain (STCG). What, then, we wonder, is the controversy about? The right, which is by definition a capital asset, arose to the assessee only upon exercise of the option under a Scheme, with we in fact further obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 1998-999/copy on record). Each of the difference aspects of the transaction, representing a part of the sophisticated plan of compensation to its employees, stands discussed in detailed. In essence and substance though, as afore-stated, the co-ordinate Bench express the same opinion, i.e., that the rights to the assessee, undoubtedly a capital asset, vests on the exercise of the option/s by the assessee, and not at any time earlier, who, at best, could be considered as having held the shares for a single day (para 14). In fact, it states this in the alternative, observing that the assessee did not become the owner of the shares at any point of time. This is also precisely what the A.O. states in the alternative (as did the assessing auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in appeal as raised by the Revenue, it is not really necessary for us to deal with other aspects of the matter. In so holding, reliance was placed on the decision in the case of Summit Bhattacharya vs. Asst. CIT [2008] 112 ITD 1 (Mum) (SB) and Shripad S. Nadkarni (in ITA No. 4698/Mum/2004 dated 20.01.2009). The assessee s reliance on the decision in Bomi S. Billimoria vs. Asst. CIT (in ITA No. 2120/Mum/1998 dated 30.06.2009), a subsequent decision, was also met by it (refer paras 15-19 of its order). The assessee has also before us relied on several decisions by the tribunal. So, however, he himself admits to the same being without reference to the decision by the tribunal in the case of Shripad S. Nadkarni (supra) and himself (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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