9911796707
Advanced Search 
TMI Blog2025 (4) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... .2023 in case no. NFAC/2013-14/10151823 in proceedings u/s 147 read with section 144 of the Income-tax Act, 1961, hereinafter referred to as the 'Act'. Heard both the parties at length. Case files perused. 2. The Revenue raises the following revised substantive grounds in the instant appeal: "1. The CIT(Appeals) has erred in law and on facts by deleting the additions of Rs. 4,53,18,900/- made by the AO on account of Income earned as Perquisites u/s 17 (2) of the I.T. Act, 1961, in the form of company shares allocated on discounted/subsidised rates, without appreciating the facts mentioned by the AO in the assessment order. 2. The Ld. CIT(Appeals) has erred in law and facts is not appreciating the provisions of section 17 (2) (vi) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Rule 3 (8) (i) (iii) of the Income Tax Rules 1961. The valuation arrived by the Merchant Banker is solely based on the audited financials, as given by the Management of Acidaes. The appellant has submitted the copy of valuation report of Merchant Banker. 7.4 Further, the said company has also issued shares to one entity named M/s Norwest Venture Partners Mauritius on 27.03.2014 i.e. just after one month of issuing shares to its Directors. This time the shares were issued at a hefty premium of Rs. 97,460/- to that Mauritius Company. The valuation thereof was done by a chartered Accountant. As per FDI policy, which is effective from 5th April 2013, the issue price of shares to a foreign resident of unlisted company shall not be less t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from, the assessee in respect of such security or shares; 1. "fair market value" means the value determined in accordance with the method as may be prescribed; 1. "option" means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price; 7.6 For the purpose income chargeable under the head "Salaries", the value of perquisites in the form of sweat equity shares issued by the employer to its employee, the fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing price of the share on that date on the said stock exchange : (iii) In a case where, on the date of exercising of the option, the share in the company is not listed on a recognised stock exchange, the fair market value shall be such value of the share in the company as determined by a merchant banker on the specified date. As per the above provisions, it is clear beyond doubt that the employer of the appellant has rightly carried out the valuation of perquisite in the form of sweat equity share issued under employee stock option and deducted tax at source for the year under consideration. Appellant has submitted Salary certificate in Form 16, and on perusal of the same it is verified that the employer has valued the perquisite at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular of RBI on FDI Scheme, from a Chartered Accountant as per the Discounted Free Cash Flow (DCF) Method. According to DCF method the fair market value of the shares is determined at Rs. 97,465/- per share and therefore, the issue price of shares to Non-Resident entity shall not be less than that. Therefore, the value of equity shares is deferred as compared to the valuation done as per Rule 3(8) (ii) & (iii) of the Income Tax Rules, 1962. The method adopted at the time of valuation of perquisite in the form of sweat equity is Net Asset Value (NAV) on specified date & while issue of shares to Non-Resident Entity the method to be adopted is Discounted Free Cash Flow (DCF). 7.8 From the above discussion, it is clear that the employer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the assessee's director(s); by his company M/s Acidaes Solutions Pvt. Ltd. on 25.02.2014. The Revenue's case in very terms in nutshell is that learned CIT(A) ought not to have deleted the impugned 'perquisites' addition made in the assessee's hands as the latter market value deserved to be adopted as per shares issued to the "Mauritius" based entity only a month later, in above terms. 5. We have given our thoughtful consideration to the Revenue's sole substantive grievance herein and find no merit therein. Suffice to say, the assessee admittedly happens to be one of the director(s) of the company herein M/s Acidaes Solutions Pvt. Ltd., who had issued shares to him on 25.02.2014 @ 12628.20 each unit. The said premium was undisputedly ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
