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TMI Blog2012 (10) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... capital assets and the gains should be taxed as “Long Term Capital Gains” as the holding period is more than 3 years. - Decided in favor of assessee. - ITA No. 4107/Del/2011 - - - Dated:- 5-10-2012 - A. D. Jain (Judicial Member) And J. Sudhakar Reddy (Accountant Member) For the Petitioner : Pirthi Lal For the Respondent : Salil Kapoor and Vikas Jain ORDER J. Sudhakar Reddy (Accountant Member) This is an appeal filed by the Revenue directed against the order of CIT(A)-XXX, New Delhi, dt. 30th June, 2011 pertaining to asst. yr. 2006-07 on the following grounds : On the facts and circumstances of the case and in law, the learned CIT(A) has erred in holding that the case of the assessee falls under Expln. 1 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee by way of foreign reward remittance from the parent company but the assessee reckoned the time period from date of grant and not from date of exercise for calculating the capital gain purposes. Accordingly, the period from the date of grant exceeded 12 months, the assessee treated the same as long-term capital gain and claimed to be taxed the same @ 20 per cent. The assessee was asked to submit bifurcation/clarification in respect of the income under the head capital gains. In response to this, the Authorised Representative vide his letter dt. 8th Oct., 2010 has stated : The assessee has received total of ₹ 1,07,35,728 from the sale of employee stock option. These options were cashless. The assessee has paid t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment for the specified number of shares. Therefore, the dates of grant and resting are irrelevant because they do not result in any share acquisition. They have no value unlike the rights to subscribe for further shares under section 81 of the Companies Act, which is a transferable commodity. Requisition (sic-Relinquishment) of shares under ESOP happens only when the assessee has exercised option and is allotted the specified number of shares.' From the above it is clear that in cases of cashless sale of stock options and even in the other cases where the difference between the date of exercise of the option and the date of sale of the shares is less than the prescribed period of one year, the capital gain from such sale should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following case laws : (i) Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (ii) Apogee International Ltd. v. Union of India (1996) 220 ITR 248 (Delhi) (iii) HV Transmissions Ltd. v. ITO in ITA No. 2230/Mum/2010 (iv) Tribunal Delhi in case of Abhiram Seth v. Jt. CIT (2012) 150 TTJ (Delhi) 228 (v) Bomi S. Billimoria v. Asstt. CIT (2010) 35 SOT 18 (Mum.) (URO) (vi) Asstt. CIT v. Dr. Dhurjati Gupta (2010) 127 TTJ (Hyd.) 356 He distinguished the case laws relied upon by the learned Departmental Representative by submitting that, in those cases the employees stock options were first converted into shares and thereafter, these shares were sold after holding the same for some time. Mr. Salil Kapoor invoke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rued to the assessee at relevant time. The benefit of deferment of purchase price cannot lead to an inference that no right accrued to assessee. The sales of such valuable rights after three years are liable to be taxed under the head long-term capital gains and not short-term capital gains. CIT(A) out of conflicting Tribunal judgments has preferred to rely on only favourable to Revenue i.e. Jaswinder Singh Ahuja (supra), overlooking others and without commenting about the relevant facts. It has not been dealt on that acquisition of valuable rights in a property amounts to a capital asset. In case of Jaswinder Singh (supra), the shares were of the same company, whereas in this case there are group companies held through trustee and there we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be same as the sale consideration. In both situations there will be no taxability. 7.2 In our view, these propositions are of no avail insofar as we have held that, the assessee acquired a valuable and transferable right on these shares as on the respective dates in 1995-96 to 1999-2000, as mentioned above. The cases of Bomi S. Billimoria (supra) and Dr. Dhurjati Gupta (supra), are squarely applicable in favour of assessee. The right of shares constitute capital assets and the gains should be taxed as long-term capital gains as the holding period is more than 3 years. We reverse the orders of lower authorities on this issue, treating the gains as short-term capital gains. The ground is allowed. 10. Coming to the decision relied ..... X X X X Extracts X X X X X X X X Extracts X X X X
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