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TMI Blog2018 (11) TMI 1112X X X X Extracts X X X X X X X X Extracts X X X X ..... - however in the return of income, the assessee has declared income from salary as ₹ 2,74,92,222/-, short term capital gain ₹ 8,14,232/-, and income from other source ₹ 9,705/-, thus the total income returned by the assessee was for ₹ 2,83,16,159/-. Since there is discrepancy with respect to facts observed by the Ld.AO and the return of income filed by the assessee, in the interest of justice, we hereby remit the entire matter back to the file of Ld.AO to verify the facts from the records and thereafter decide the matter in accordance with merit and law and as per our observations made herein above. Assessee allowed for statistical purposes - I.T.A. No. 553/CHNY/2018 - - - Dated:- 24-10-2018 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER For The Appellant : Shri M. Sivathanu, Advocate For The Respondent : Ms. S. Vijayaprabha, JCIT ORDER Per A. Mohan Alankamony, AM:- This appeal by the assessee is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-5, Chennai dated 12.12.2017 in ITA No.50/CIT(A)-50/2016-17 for the assessment year 2011-12 passed U/s.250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee by employer, Google Inc Employee's Stock Option Plan during the previous year relevant to the A.Y. 2011-12. With effect from 01.04.2010, the value of any specified security or sweat shares allotted or transferred directly or indirectly shall constitute a perquisite in the hands of the employees. At this juncture it is apt to reproduce the provisions of section 17(2) (vi) of the Income-tax Act, 1061. Thereafter relying on the provisions of Section 17(2)(vi) of the Act, the Ld.AO assessed the total income of the assessee at ₹ 4,20,21,097/-, disregarding the assessee s claim of assessable capital gain of ₹ 8,14,232/- and salary income of ₹ 2,74,92,222/- by observing as follows:- 5. These shares were sold in various lots during the financial year relevant to the assessment year 2011-12. 6 In this case, neither the capital gain calculation nor the return filed with claims long term capital gain by the assessee, is acceptable, as the perquisite is the part of salary and it cannot be treated as capital gain. Hence, the assessee claim is not correct. 7. In the light of such situation the assessee claims of capital gain is not acceptabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it to the employees of the Indian Company and at the same time, to enhance their interest in the company. The parent company has made such an offer to the employees of the subsidiary company only because it regards its subsidiary and itself as the same concern. It wants to reward and encourage the employees of the subsidiary company. Even if the subsidiary is treated as a separate juristic entity, the stock option offered by the American company must be treated to have been made for and on behalf for the Indian company. Otherwise, there is no reason why an independent and altogether separate American company will try to give encouragement to the employee of an Indian company. It is the employer s job to look after its employees by paying salary and giving other benefits. If some other company pays additional benefits to the employees, then it must be held to have been done for and on behalf of the employer. Moreover, in a case like this the corporate veil will have to be lifted to see the real nature of the transaction. The only possible explanation for the offer of stock option by the American company to the employees of the Indian company can be that it regards its business and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at accrued during the period prior to Nov. 2008 i.e. when the assessee was a non-resident working in USA for Google Inc. 6.9 It is pertinent here to refer to the decision of the hon ble jurisdictional ITAT Chennai in ITA No 390/Mds/2016 and ITA No 335 2 09/M ds/2 016. In the common order for the cases of Shri Soundarajan Parthasarathy vs DCIT (ITA No 90/Mds/2016) for A.Y 2011-12 and Shri Kummathi Rameswar Reddy vs DCIT (ITA No 335 209/Mds/2016) for A.Y. 2011-12 2012-13 the hon ble ITAT A bench Chennal held - - not taxable in India, this Tribunal is of the considered opinion that the benefit was conferred on the assessee in the form of Stock Appreciation Rights for the /. -rendered service outside India during the vesting period that cannot be a reason . 8. From the above facts and discussion, it is clear that the Employer has correctly shown the gain on ESOPs option as perquisite in Form-16. Hence, all the grounds of appeal are dismissed and the action of Assessing Officer to determine the total income as per Form-16 is upheld. 5. Before us the Ld.AR submitted that the observations of the Ld.AO in his order are factually incorrect which was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the relevant assessment year. Therefore the view of the Ld.AO as well as the Ld.CIT(A) that the entire amount received during the relevant assessment year from the sale proceeds of the stock option has to be taxed under the head perquisites in the hands of the assessee is erroneous. The assessee had already acquired the asset viz., stock from the employee s stock options scheme when he was serving abroad in the parent company and during that assessment year, the assessee was non-resident. Therefore during the beginning of the relevant assessment year, the stock viz., the asset was already vested on the assessee. Any gain on sale arising out of such asset during the relevant assessment year when he is a resident but NOR has to be necessarily treated as capital gain in the hands of the assessee as per the provisions of the act, needless to mention that the value of the stock allotted to the assessee shall be treated as the cost of acquisition of the stock. Therefore if the facts understood by us and enumerated herein above is correct, then it is obvious that the findings of the Ld.AO as well as that of the Ld.CIT(A) and their decision to treat the entire amount receive on li ..... X X X X Extracts X X X X X X X X Extracts X X X X
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