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TMI Blog2023 (1) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... ic and practical point of view (the reversal of entries in the books of M/s RHL having taken place subsequently), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) would be inapplicable to the facts and circumstances of the Essentially, the law evolved by the apex Court requires the Assessing Officer to be pragmatic and not pedantic. Section 28(iv) lays down that any benefit accruing to an assessee in the course of exercise of his profession shall be considered as his income. CIT(A) held that even assuming that a benefit could have said to have accrued, then also it has been held in the case of Helios Food Improvers Pvt. Ltd. [ 2007 (2) TMI 348 - ITAT MUMBAI] that the word benefit has to be interpreted that one party should give to the other an irretrievable benefit or advantage as an obligation or facility or concessions. It was further held that if only the seller had incurred an expense or liability or had provided facility to the purchaser, then the value of cash of such expense or benefit or perquisite shall be treated as income. The same was reiterated in Rupee Finance Management (P) Ltd. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is shown as Intellectual Property Rights as assets of the company. The A.O. noted that M/s RHL has entered into agreement that the appellant for the issue of these shares. The A.O. noted that agreement clearly states that these shares have been allotted to the appellant without any amount being paid as consideration by the appellant, in lieu of the appellant being an expert having vast experience in a particular field, and supplying professional contribution, dedication and value addition to M/s RHL. As per the agreement, for availing entitlement of sweat equity shares, professional shareholders shall remain in the continuous association with the company for at least a minimum period of 10 years from the date of allotment of sweat equity. 6. The shares are subject to a lock-in period of 3 years from the date of allotment of sweat equity. The A.O. further noted that Sh. Prabhat Srivastava, Director of M/s Rockland Hospitals has stated on 07.10.2011 that allottees of sweat equity shares (including the appellant) are either employees of M/s RHL or associated with Rockland Group as friends/relatives. It was stated that such people have worked hard for the growth of M/s RHL, who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an irretrievable benefit or advantage as an obligation or facility or a concession. He relied upon the decision of the Hon ble ITAT Mumbai in the case of Helios Food Improvers (D) Ltd. v. DCIT (2007) 14 SOT 546 (Mumbai). It was submitted that in the appellant s case, the transaction was not of any irretrievable benefits; rather, the benefit was conditional because of the two conditions of minimum association of 10 years and a lock-in period of three years. It further submitted that due to the lock-in period of three years, ownership and enjoyment starts only after the lock-in period expires and therefore the market value of the shares in its hands has to be zero in the A.Y. 2007-08. (2) The value of Rs. 200 per share was only an actuarial valuation of what the share might be valued at after 5 years. The actual book value per share was only Rs.9.98/-. (3) It has been held in the case of M/s Rupee Finance and Management Pvt. Ltd. Vs. ACIT (2008) 22 SOT 174 (Mum) that a mere purchase of shares for a consideration which less than the market value does not constitute a benefit or perquisite u/s 28(iv). (4) In September, 2009 and 26.02.2010 under the approval of Hon ble Delhi H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held, after referring to Morvi Industries, that real accrual of income and not a hypothetical accrual of income ought to be taken into consideration. For a similar conclusion, reference was made to Poona Electric Supply Co. Ltd. vs. Commissioner of Income Tax, [1965] 57 ITR 521 (SC) wherein it was held that income tax is a tax on real income, the apex Court then considered the facts of the case and came to the conclusion (in Godhra Electricity) that no real income had accrued to the assessee in respect of the enhanced charges for a variety of reasons. The apex Court took the view that one has to look at things from a practical point of view. (R.B. Jodha Mai Kuthiala vs. Commissioner of Income Tax [1971] 82 ITR 570 (SC)). The Hon ble Supreme Court took the view that the probability or improbability of realization has to be considered in a realistic manner. 11. In the case of State Bank of Travancore vs. Commissioner of Income Tax, [1986] 158 ITR 102 (SC) wherein the majority view was that accrual of income must be real, taking into account the actuality of the situation; whether the accrual had taken place or not must, in appropriate cases, be judged on the principles of rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or arose in the hands of the appellant, and hence there is no taxability u/s 28(iv). 14. The ld. CIT(A) held that even assuming that a benefit could have said to have accrued, then also it has been held in the case of Helios Food Improvers Pvt. Ltd. vs. DCIT (2007) 14 SOT 546 (Mum) that the word benefit has to be interpreted that one party should give to the other an irretrievable benefit or advantage as an obligation or facility or concessions. It was further held that if only the seller had incurred an expense or liability or had provided facility to the purchaser, then the value of cash of such expense or benefit or perquisite shall be treated as income. The same was reiterated in Rupee Finance Management (P) Ltd. (supra). In the case of the appellant, the offer of sweat equity shares is conditional, and not irretrievable. Furthermore, it is seen that the entry of share premium liability and corresponding asset Intellectual Property Rights reflected in the books of M/s RHL have also been reversed subsequently. It thus follows that the appellant was never in receipt of any irretrievable benefit by way of share premium otherwise payable. Even this amount has no real ..... X X X X Extracts X X X X X X X X Extracts X X X X
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