Sri. Ravindra Vyudaygiri Subbanarasu, Bangalore V. ACIT, Bangalore

CO 5/BANG/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7322 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N.K SAINI, ACCOUNTANT MEMBER AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 280/BANG/2011 (ASST. YEAR - 2007-08) THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-14(1), BANGALORE. . APPELLANT VS. SHRI RAVINDRA VYUDAGIRI SUBBANARASU, NO.97/A, 6 TH CROSS, 20 TH MAIN, RAJAJINAGAR, 1 ST N BLOCK, BANGALORE-560 010. . RESPONDENT PAN ACDPS8606F. (CO NO.5/BANG/2012) (BY ASSESSEE) REVENUE BY : SMT. SUSAN THOMAS JOSE, JCIT ASSESSEE BY : SHRI S.R KIRON, C.A DATE OF HEARING : 18-06-2012 DATE OF PRONOUNCEMENT : 18-06-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE AND THE CROSS-O BJECTION IS FILED BY THE ASSESSEE. THE APPEAL IS DIRECTED AGAI NST THE ORDER OF THE ITA NO.280/B/11 2 CO NO.5/B/12 COMMISSIONER OF INCOME-TAX (APPEALS) -V AT BANGALOR E DATED 30.06.2010. THE APPEAL ARISES OUT OF THE ASSESSMEN T COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR T HE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE WISHES TO WITHDRAW THE CROSS-OBJECTIONS FILED BY THE ASSESSEE. THEREFORE, THE CROSS-OBJECTI ONS ARE DISMISSED, AS NOT PRESSED. 3. COMING TO THE REVENUES APPEAL FOR THE ASSESSMEN T YEAR 2007- 08, WE FIND THAT IT IS AGAINST THE ORDER OF THE CIT (A) IN GIVING RELIEF TO THE ASSESSEE BY DELETING THE ADDITION MADE ON ACCOU NT OF SALE OF SHARES HELD BY THE ASSESSEE UNDER THE EMPLOYEES STOCK OPT ION PLAN. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN EMPLOYEE OF M/S MOTOROLA INDIA PVT. LTD. THE ASSESSEE HAS F ILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME-TAX ACT, THE A O OBSERVED THAT THE ASSESSEE HAS DECLARED LONG TERM CAPITAL GAINS O N SALE OF SHARES HELD UNDER THE EMPLOYEES STOCK OPTION PLAN OF THE EMPLO YER COMPANY AND THE SALE CONSIDERATION IS ARRIVED ON THE PRICE OF T HE SHARES SOLD IN THE ITA NO.280/B/11 3 CO NO.5/B/12 MARKET. THE AO OBSERVED THAT THE ASSESSEE HAS EXERC ISED THE OPTION FOR THE PURCHASE OF THESE SHARES AT A CONCESSIONAL OR SPECIAL ESOP STRIKE PRICE ON EACH OCCASION AS PER THE AGREEMENT OF OPTION SCHEME. BUT THE STOCK OPTION PLAN IS NOT MADE AVAILABLE FOR VERIFICATION AS TO WHETHER THE SAME IS IN ACCORDANCE WITH THE GUIDELIN ES ISSUED IN THIS BEHALF BY THE CENTRAL GOVERNMENT. HE, THEREFORE, HE LD THAT THE CONCESSIONAL RATE GIVEN BY THE EMPLOYER TO EMPLOYEE S SHOULD BE TREATED AS PERQUISITE WITHIN THE MEANING OF SEC. 17 (2)(III) OF THE INCOME-TAX ACT, AND THEREFORE, THE PROVISIONS OF SE C. 17(2)(III) ARE APPLICABLE AND THE DIFFERENCE BETWEEN THE RATE AT W HICH THE SHARES ARE PURCHASED AND THE MARKET RATE OF THE SHARES ON THAT DATE WOULD AMOUNT TO THE VALUE OF PERQUISITE AND IS TAXABLE IN THE HA NDS OF THE ASSESSEE. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) WHO ALLOWED THE SAME HOLDING THAT THE ASSESSING OFF ICER HAS NOT VERIFIED WHETHER THE ESOP SCHEME ISSUED BY M/S MOTO ROLA INDIA PVT. LTD. WAS IN ACCORDANCE WITH THE GUIDE LINES OF CENT RAL GOVERNMENT OR NOT. HE FURTHER HELD THAT THE ASSESSEE IS COVERED BY THE EXEMPTION CONTAINED IN THE PROVISO TO SEC. 17(2)(III) AND, TH EREFORE, GAINS ARISEN TO THE ASSESSEE OUT OF SALE OF SHARES COULD NOT HAV E BEEN BROUGHT TO TAX ITA NO.280/B/11 4 CO NO.5/B/12 AS PERQUISITE. AGAINST THE RELIEF GIVEN BY THE CIT (A), THE REVENUE IS IN APPEAL BEFORE US. 6. THE LEARNED DR, SMT. SUSAN THOMAS JOSE, WHILE SU PPORTING THE ORDER OF THE AO, SUBMITTED THAT EXEMPTION IN THE PR OVISION TO SEC. 17(2)(III) IS AVAILABLE TO THE ASSESSEE ONLY IF THE ESOP SCHEME HAS BEEN APPROVED OR IS AS PER THE GUIDELINES ISSUED BY THE CENTRAL GOVERNMENT. SHE SUBMITTED THAT THE ASSESSEE HAS FA ILED TO FURNISH THE COPY OF THE SCHEME BEFORE THE AO OR THE CIT(A) TO E NABLE THEM TO VERIFY WHETHER THE SAID SCHEME WAS IN ACCORDANCE WI TH THE GUIDELINES OF THE CENTRAL GOVERNMENT AND IN THE ABSENCE OF THE SAME, ACCORDING TO HER, THE CIT(A) HAS ERRED IN GRANTING THE RELIEF . THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUPPOR TED THE ORDER OF THE CIT(A) AND PLACED RELIANCE UPON THE PROVISO TO SEC. 17(2)(III) OF THE INCOME-TAX ACT. 8. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS, WE FIND THAT WHILE SEC. 17 DEFINES THE PERQUISITE, PROVISO TO SUB SEC. 2 AND CLAUSE (III) THERETO PROVIDES THA T THE BENEFIT ARISING TO THE ASSESSEE ON ACCOUNT OF ESOP, GIVEN BY THE EMPLO YER IN ACCORDANCE WITH THE GUIDELINES ISSUED BY THE CENTRA L GOVERNMENT ITA NO.280/B/11 5 CO NO.5/B/12 CANNOT BE TREATED AS PERQUISITE. THEREFORE THE PRI MARY REQUIREMENT IS THAT THE ESOP SCHEME OFFERED BY M/S MOTOROLA PVT. L TD., I.E THE EMPLOYER OF THE ASSESSEE, SHOULD BE IN ACCORDANCE W ITH THE GUIDELINES OF THE CENTRAL GOVERNMENT. ON VERIFICATION OF THE SCHEME ONLY, IT CAN BE ALLOWED UNDER THE PROVISO TO SUB-SEC.(2)(III) OF SEC. 17 OF THE ACT. IT IS THE DUTY OF THE EMPLOYEE, WHO HAS EXERCISED T HE OPTION, TO FURNISH THE RELEVANT DOCUMENT BEFORE THE AO FOR VER IFICATION. WITHOUT PROPER VERIFICATION, IN OUR OPINION, THE CIT(A) HAS ERRED IN GRANTING RELIEF TO THE ASSESSEE. IN VIEW OF THE SAME, WE SE T ASIDE THE ORDER OF THE CIT(A) AND REMIT THE ISSUE TO THE FILE OF THE A SSESSING AUTHORITY DIRECTING HIM TO GIVE THE ASSESSEE AN OPPORTUNITY O F PRODUCING THE ESOP SCHEME AND AFTER VERIFICATION AS TO WHETHER TH E SAID SCHEME IS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY THE CEN TRAL GOVERNMENT, GIVE APPROPRIATE RELIEF TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ITA NO.280/B/11 6 CO NO.5/B/12 ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JUNE, 2012. SD/- SD/- (N.K SAINI) (P MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 18/06/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.