Ramesh Nagarajan, CHENNAI V. ACIT, CHENNAI

ITA 1416/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5914 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 02-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVANJCIT
• Assessee Lawyers: N SURESH
• Keywords: Double taxation relief; Tangible material; Fair market value; Difference of opinion; Change of opinion
• Section: 143(3); 147; 148; 90; 154; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . .. , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NOS. 1415 & 1416/MDS/2017 / ASSESSMENT YEARS : 2012-13 & 2014-15 SHRI RAMESH NAGARAJAN, O.NO. 51, NEW NO. 121, 12 BBC THALLAM GARDENS, NEW AVADI ROAD, KILPAUK, CHENNAI 600 010. [PAN: ADSPR 4514M] VS. ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE -17, CHENNAI. ( / APPELLANT) ( / RESPONDENT) %& / APPELLANT BY : SHRI. N. SURESH, CA )*%& / RESPONDENT BY : SHRI. N. MADHAVAN, JCIT & /DATE OF HEARING : 17.08.2017 & /DATE OF PRONOUNCEMENT : 31.10.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THESE APPEALS AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI, IN ITA NOS085& 209 CIT(A)-5/16-17 DATED 08.5.17 FOR AYS 2012-13 & 2014 -15, RESPECTIVELY. :-2-: I.T.A. NOS. 1415 & 1416/MDS/2017 2. SHRI RAMESH NAGARAJAN, T HE ASSESSEE, AN EMPLOYEE OF COGNIZANT TECHNOLOGIES SOLUTIONS INDIA PVT LTD WAS GRANTED ES OPS IN OCT 2002 & JAN 2006 DURING HIS STAY IN THE US. HE EXERCISED THE OP TIONS IN FEB/MAR 2012& IN SEP 2013 AND SOLD THE SHARES ON THE SAME DATE OF EX ERCISING THE OPTIONS. SINCE, HE WAS A RESIDENT UNDER THE INCOME TAX ACT, 1961 FOR AYS 12-13& 14- 15, THE DIFFERENCE BETWEEN THE GRANT PRICE AND THE SALE PRICE (WHICH WAS ALSO THE FAIR MARKET VALUE OF THESE SHARES) WAS ADDED AS PERQUISITES IN HIS SALARY AND TAXED AS SUCH. THE GAINS ON THE SALE OF ESOP SH ARES WAS ALSO SUBJECTED TO TAX IN THE US FOR THE PERIOD OF THE ASSESSEE'S R ESIDENCE IN THE US BETWEEN THE GRANT DATE AND VESTING DATE OF THE OPTION. THE ASSESSEE WAS PAID THE BALANCE OF THE SALE CONSIDERATION AFTER DEDUCTION O F BOTH THE US AND THE INDIAN WITHHOLDING TAXES. AS HIS INCOME FROM THE S ALE OF ESOP SHARES HAD SUFFERED DOUBLE TAXATION, THE ASSESSEE SOUGHT RELI EF U/S 90.SUBSEQUENTLY,WHEN THE ASSESSEE FILED A RETURN FO R US TAX COMPLIANCE , HE HAD TO PAY ADDITIONAL TAX ON THE INCOME FROM SALE O F ESOPS TO THE US AUTHORITIES, WHICH WAS PAID ON 03.10.2013. AT WHICH POINT OF TIME, THE PROCEEDINGS U/S 143(2) FOR AY 2012-13 HAD COMMENCED AND HENCE THE ASSESSEE MADE A CLAIM FOR THE ENHANCED RELIEF U/S 9 0 DIRECTLY TO THE AO AS PART OF THE 143(2) PROCEEDINGS. THE DCIT NCC 17(1) (AO) HAD IN THE ORDER U/S 143(3) DATED 28.3.2015 ALLOWED THE RELIEF U/S 9 0 ALBEIT WITH A MISTAKE IN THE QUANTIFICATION BUT NEGATED THE REFUND WITH AN E RRONEOUS CHARGE OF INTEREST :-3-: I.T.A. NOS. 1415 & 1416/MDS/2017 U/S 234B. WHEN THE ASSESSEE FILED A PETITION U/S 15 4 DATED 10.4.2015 AGAINST THIS ORDER, HE WAS GIVEN TO UNDERSTAND THAT THE MIS TAKE WAS RECTIFIED AND THE CONSEQUENTIAL REFUND WAS PUT UP FOR APPROVAL TO THE SUPERVISORY AUTHORITY TO THE AO, THE JCIT NCC 17.THE ASSESSEE WAS SUBSEQUENT LY GIVEN TO UNDERSTAND THAT THE JCIT NCC 17 HAD REJECTED THE REFUND CLAIM ON THE GROUND THAT THE RELIEF U/S. 90 WAS NOT TENABLE. NO ORDER U/S. 154 WAS FURNISHED TO THE ASSESSEE IN THIS REGARD AS MANDATED BY THE ACT AND ALSO BY THE DIRECTIVE OF THE CBDT IN THIS REGARD (INSTRUCTIONS 01/2016 & 02/ 2016 BOTH DATED 15.02.2016).THE CASE FOR THE AY 2012-13 WAS REOPENE D U/S. 147 VIDE A NOTICE U/S. 148 DATED 30.03.2016 BY THE ACIT NCC 17(1), FO LLOWED BY A NOTICE U/S. 143(2) DATED 13.04.2016. COPIES OF ALL THE RECORDS IN SUPPORT OF THE CLAIM FOR RELIEF U/S. 90 WHICH WERE FILED BEFORE THE DCIT NCC 17(1) DURING THE EARLIER PROCEEDINGS U/S. 143(2) WERE FILED ONCE AGAIN WITH THE ACIT NCC 17(1) TOSUBSTANTIATE THE CLAIM. THE REASSESSMENT WAS COM PLETED BY AN ORDER U/S. 143(3) R.W.S. 147 DATED 28.04.2016 DENYING THE RELI EF U/S.90. THE RELIEF SOUGHT U/S.90 WAS REFUSED FOR SIMILAR REASON IN TH E SCRUTINY ASSESSMENT MADE FOR AY 2014-15 ALSO. ON APPEALS, THE LEARNED C IT(A)-5 BY HIS ORDERS DATED 08.05.2017 CONFIRMED THE ORDERS OF THE ACIT N CC 17(1) DENYING THE RELIEF U/S. 90 FOR BOTH THE AYS. AGGRIEVED, THE AS SESSE FILED THESE APPEALS WITH FOLLOWING COMMON GROUNDS FOR BOTH THE AYS. 1. THE ORDER OF THE LEARNED CIT(A)-5 IS BAD IN LAW AND CONTRARY TO THE FACTS OF THE CASE. :-4-: I.T.A. NOS. 1415 & 1416/MDS/2017 2. THE LEARNED CIT(A)-5 HAS WRONGLY CONCLUDED THAT THE PROFIT ON SALE OF ESOP SHARES HAS NEITHER BEEN DISCLOSED IN THE RETURN OF INCOME NOR TAXED IN INDIA WHILE HIS ORDER CLEARLY CONFIRMS THE FACT THAT THE SAME HAS BEEN OFFERED TO TAX AND DULY TAXED IN INDIA. 3. THE LEARNED CIT(A)-5 HAS COMMITTED A FACTUAL ERR OR WHILE STATING THAT PROOF OF TAX PAID ON THE SALE OF ESOP SHARES IN USA HAS NOT BEEN FURNISH ED WHILE THE SAME HAS BEEN FURNISHED TO THE LEARNED CIT(A)-5 DURING THE APPEAL PROCEEDINGS AND THE A.O DURING THE ASSESSMENT PROCEEDINGS. 4. THE ORDER OF THE LEARNED CIT(A)-5 IS BASED ON IN CORRECT INFERENCES DRAWN FROM THE DELHI ITAT DECISION CITED IN HIS ORDER AS THE FACTS OF TH AT CASE ARE TOTALLY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. FOR THE AY 2012-13, THEASSESSEE MADE THE FOLLOWING GROUND ALSO 5. THE LEARNED CIT(A)-5 HAS NOT ADJUDICATED ON THE GROUND RAISED DURING THE APPEAL PROCEEDINGS OF THE TENABILITYOF THE OF THE 147 PROC EEDINGS. 6. IN LIGHT OF THE ABOVE AND SUCH OTHER GROUNDS AS MAY BE ADDUCED AT THE TIME OF THE HEARING IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A)-5 BE SET ASIDE AND THE LEARNED ACIT BE DIRECTED TO GRANT THE RELIEF U/S 90 ALONG WITH T HE CONSEQUENTIAL REFUND OF TAX AS CLAIMED. 3. THE AR SUBMITTED THAT THE ASSESSEE IS AN EMPLOYE E OF COGNIZANT TECHNOLOGY SOLUTIONS INDIA PRIVATE LIMITED. FOR THE PERIOD BETWEEN 2002 AND 2008, HE WAS SENT ON DEPUTATION TO COGNIZANT TECHNO LOGY SOLUTIONS US CORPORATION, A COMPANY REGISTERED AND EXISTING IN T HE US. ON VARIOUS DATES DURING THE PERIOD OF SUCH DEPUTATION, NON- QUALIFIE D STOCK OPTIONS WERE GRANTED BY COGNIZANT TECHNOLOGY SOLUTIONS US CORPOR ATION TO HIM. THESE OPTIONS ARE FOR US$ DESIGNATED SHARES OF THE SAID U S CORPORATION LISTED IN THE US STOCK EXCHANGES. THESE OPTIONS WERE EXERCISED AN D INCOME FOR THE SALE OF THE RESULTANT SHARES WAS REALISED BY THE ASSESSEE D URING AYS 2012-13 AND :-5-: I.T.A. NOS. 1415 & 1416/MDS/2017 2014-15. THE INCOME FROM THESE OPTIONS ARE PRIMARIL Y TAXABLE IN THE US UNDER THEIR TAX LAWS AS IS CLEARLY STATED IN THE CERTIFIC ATE OF GRANT OF OPTION GIVEN TO THE ASSESSEE EMPLOYEE. THE SAID CERTIFICATE ALSO ME NTIONS THAT THE FEDERAL WITHHOLDING TAX REQUIRED UNDER US TAX LAWS ON EXERC ISE OR SALE OF THESE SHARES WOULD BE RECOVERED FROM THE PAYMENTS DUE TO THE ASS ESSEE FROM THE US CORPORATION. ACCORDINGLY, WHEN THE ASSESSEE EXERCIS ED AND SOLD THE SHARES UNDER THIS ESOP SCHEME, THE US CORPORATION WHICH HA NDLED THE SALE AND MADE THE PAYMENT OF THE PROCEEDS TO THE ASSESSEE WI THHELD THE TAX DUE UNDER THE US TAX LAWS FROM THE SALE PROCEEDS. THIS WAS DULY REPORTED BY THEM TO THE US TAX AUTHORITIES UNDER FORM W2 A COPY OF WHICH WAS ALSO ISSUED TO THE ASSESSEE. IT IS THEN, THE DUTY OF TH E ASSESSEE TO FILE THE TAX RETURN TO THE US AUTHORITIES UNDER FORM 1040NR AND DISCHARGE THE ADDITIONAL TAX LIABILITY,IF ANY ,OR GET THE REFUND OF EXCESS T AX WITHHELD. THUS, THE ASSESSEE HAS ALSO FILED RETURNS WITH THE US TAX AUTHORITIES FOR THE RELEVANT ASSESSMENT YEARS, AND HAS ALSO DISCHARGED AN ADDITIONAL TAX LI ABILITY FOR AY 2012-13. THE PAYMENT OF THIS INCOME, I.E. PROCEEDS FROM THE SALE OF THE ESOP SHARES, WAS MADE BY THE US CORPORATION TO THE ASSESSEE TOWARDS SERVICES RENDERED OVERSEAS WHEN THE ASSESSEE WAS ON THEIR PAYROLL. TH E INCOME PERTAINING TO THE TIME SPAN BETWEEN THE GRANT DATE AND VESTING DA TE (PERTAINING TO THE DURATION THAT THE ASSESSEE WAS ON THE PAYROLL OF TH E US CORPORATION) IS TAXABLE UNDER US LAWS ONLY AT THE POINT OF EXERCISE AND SALE OF THE SHARES FROM THESE OPTIONS AS MENTIONED IN THE CERTIFICATE OF GRANT OF OPTION, AND :-6-: I.T.A. NOS. 1415 & 1416/MDS/2017 ACCORDINGLY, THE US CORPORATION DEDUCTED THE APPLIC ABLE TAX AND REMITTED THE SAME TO THE US TAX AUTHORITIES AT THE TIME OF EXERC ISE CUM SALE. THE RIGHT OF THE US TAX AUTHORITIES TO LEVY TAX ON THIS INCOME I S CLEARLY COVERED UNDER ARTICLE 2 READ WITH ARTICLE 16 OF THE INDO US DTAA. THE INCOME IN THE PRESENT CASE HAS BEEN PAID AND BORNE BY COGNIZANT TECHNOLOG Y SOLUTIONS US CORPORATION, WHICH IS REGISTERED AND EXISTING IN TH E US, AND THUS, A RESIDENT OF THAT COUNTRY. ARTICLE 16(2) OF THE INDO US DTAA WIL L THEREFORE, NOT OPERATE TO RESTRICT THE RIGHT TO TAX THIS INCOME ONLY TO INDIA . IN ANY EVENT, THE INCOME IN QUESTION HAS ARISEN IN THE US INASMUCH AS THE EXERC ISE CUM SALE OF THE OPTIONS TOOK PLACE IN THE US, AND HAS BEEN DULY TAX ED THERE. THUS, THE CASE FALLS SQUARELY WITHIN THE PURVIEW OF AND IS ENTITLE D TO THE BENEFIT OF ARTICLE 25 (2) OF THE INDO US DTAA. 3.1 THE FACT THAT THE INCOME FROM SALE OF ESOP SHAR ES OF RS.1,37,10,290/- HAS BEEN OFFERED TO TAX AS PART OF SALARY AND HAS I NDEED DULY SUFFERED TAX IN INDIA IS CONFIRMED BY THE ACIT NCC 17(1) IN HIS ORD ER U/S 143(3) R.W.S 147 DT. 28.04.2016.IN LIGHT OF THIS, THE ASSESSEE'S EMPLOYE R HAS CONSIDERED THE DIFFERENCE BETWEEN THE GRANT PRICE AND THE SALE VAL UE OF THE SHARES (WHICH ALSO HAPPENED TO BE THE FMV) AS PERQUISITE IN THE H ANDS OF THE ASSESSEE AND DEDUCTED TAX ON THE SAME. THIS FACT IS EVIDENCED BY THE TRANSACTION ADVICE LETTERS GIVEN TO THE ASSESSEE FOR EACH SUCH TRANSAC TION WHICH CLEARLY INDICATE:- :-7-: I.T.A. NOS. 1415 & 1416/MDS/2017 I) THE NUMBER OF SHARES SOLD, II) THE GRANT PRICE, III) THE SALE PRICE, IV) INDIA WITHHOLDING TAX, V) RECOVERY OF THE US TAX, VI) THE NET AMOUNT PAID TO THE ASSESSEE AND VII) THE PERQUISITE VALUE IN INR FOR T AXATION PURPOSES. THE COPIES OF THE TRANSACTION ADVICE LETTERS (WHICH WERE AVAIL ABLE ON THE RECORD OF THE LEARNED CIT (A)-5 AND TO WHICH HIS ATTENTION WAS AL SO DRAWN DURING THE SUBMISSIONS MADE IN THE APPEAL PROCEEDINGS) ARE INC LUDED AT PAGES 9 TO 15 OF THE PAPER BOOK ENCLOSED HEREWITH. IT CAN BE SEEN FR OM THESE ADVICES THAT THE EXERCISE AMOUNT (BEING THE FMV OF THE SHARES) IS TH E SAME AS THE SALE PRICE OF THESE SHARES AS THE EXERCISE OF OPTION AND SALE TOOK PLACE ON THE SAME DAY. UNDER SUCH CIRCUMSTANCES: I. THE ENTIRE GAIN FROM THE SALE OF ESOP SHARES WAS TAXED AS PERQUISITE (AS PART OF SALARY); AND II. THERE WAS NO CAPITAL GAIN ON THE SALE, AS THE S ALE PRICE AND FMV WERE THE SAME. THIS HAS BEEN DULY DISCLOSED IN THE RETURN OF THE A SSESSEE AND WAS ALSO CLEARLY EXPLAINED TO THE LEARNED CIT (A)-5 DURING T HE APPEAL PROCEEDINGS. HOWEVER, THE LEARNED CIT (A)-5 HAS MADE AN ERRONEOU S OBSERVATION AND CONCLUDED THAT NO GAIN ON THE SALE OF ESOP HAS BEEN DISCLOSED IN THE RETURN, CONTRARY TO THE FACT THAT THE ENTIRE GAIN ON SALE O F ESOP SHARES HAS BEEN OFFERED TO TAX IN THE RETURN AS PART OF SALARY AND HAS BEEN DULY TAXED IN INDIA. :-8-: I.T.A. NOS. 1415 & 1416/MDS/2017 3.2 THE COPIES OF THE TRANSACTION ADVICE LETTERS FO R THE SALE OF ESOP SHARES (AT PAGES 9 TO 15 IN THE ENCLOSED PAPER BOOK) CLEAR LY SHOW THAT THE EMPLOYER COMPANY HAS WITHHELD TAX TO BE REMITTED BY THE EMPL OYER COMPANY TO TAX AUTHORITIES (BOTH THE INDIAN AND US TAX REGIMES). T HAT THE TAX WITHHELD BY THE EMPLOYER COMPANY HAS INDEED BEEN REMITTED TO THE RE SPECTIVE TAX AUTHORITIES IN INDIA AND THE US IS EVIDENCED BY THE FORM 16 (FO R TAXES PAID IN INDIA) AND FORM W2 (FOR TAXES PAID IN THE US), BOTH OF WHICH A RE ALSO ON RECORD. B. IT IS PERTINENT TO NOTE THAT THE FORM W2 (EQUIVA LENT OF FORM 16 UNDER THE IT ACT, 1961) IS THE EARNINGS SUMMARY ISS UED BY THE EMPLOYER COMPANY TO THE ASSESSEE UNDER THE US TAX LAWS WHICH DISCLOSES THE TOTAL AMOUNT OF INCOME OF THE ASSESSEE WHICH IS TAXED UND ER US LAWS AS ALSO THE FEDERAL INCOME TAX THAT IS WITHHELD AGAINST THIS IN COME. THE AMOUNTS DISCLOSED IN THE FORM W2 OF THE ASSESSEE FOR THE RE LEVANT PERIOD (WHICH IS INCLUDED AT PAGE 16 OF THE ENCLOSED PAPER BOOK) ARE THE INCOME FROM THE SALE OF ESOP SHARES WHICH IS TAXED IN THE US AND THE AGG REGATE TAX WITHHELD AGAINST THE SAME UNDER THE US LAWS. C. FURTHER, THE INCOME-TAX RETURN OF THE ASSESSEE I N FORM 1040NR (INCLUDED AT PAGES 17 TO 21 OF THE ENCLOSED PAPER B OOK) IS THE RETURN SUBMITTED BY THE ASSESSEE TO THE US TAX AUTHORITIES FOR THE RELEVANT PERIOD. THIS FORM CLEARLY DISCLOSES THE TOTAL INCOME TO BE TAXED AND THE FEDERAL TAX WITHHELD WHICH TALLIES WITH THE DETAILS IN THE FORM W2. THIS FORM 1040NR ALSO SHOWS THE TOTAL TAX PAYABLE, TAX WITHHELD AND THE B ALANCE TAX PAYABLE TO THE :-9-: I.T.A. NOS. 1415 & 1416/MDS/2017 US AUTHORITIES. THE COPY OF THE CHALLAN FOR PAYMENT OF THIS BALANCE TAX IS ALSO INCLUDED AT PAGE 22 OF THE ENCLOSED PAPER BOOK. D. THE ABOVE FORM W2 AND FORM 1040NR WERE ALSO AVAI LABLE ON THE RECORD OF THE LEARNED CIT(A)-S. IT CAN BE CLEARLY S EEN FROM THESE FORMS THAT THE ESOP SALE INCOME OF THE ASSESSEE WAS INDEED TAX ED IN THE US. THESE ARE THE STANDARD DOCUMENTS THAT EVIDENCE DETAILS OF THE INCOME ASSESSED AND TAXED IN THE US. IT IS SUBMITTED THAT THE US TAX AU THORITIES DO NOT ISSUE ANY SEPARATE CERTIFICATE STATING THAT THE SAME INCOME W AS SUBJECTED TO TAX IN USA. IN FACT, THE ISSUE OF ANY SUCH CERTIFICATE FROM THE US TAX AUTHORITIES WAS NOT RAISED EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPEAL PROCEEDINGS NOR WAS THE ADEQUACY OF THE FORMS W2 AN D 1040NR AS SUPPORTING DOCUMENTS FOR THE TAX PAID IN THE USA QU ESTIONED AT ANY EARLIER STAGE. THE FINDINGS AND CONCLUSION OF THE LEARNED C IT(A)-5 ON THIS ISSUE ARE THUS, ERRONEOUS. 3.3 THE ASSESSEE DID NOT CLAIM ANY SUCH SPECIFIC DE DUCTION FROM THE INCOME FROM SALE OF ESOP SHARES TAXED IN INDIA WHICH WAS A LSO TAXED IN THE US, AS CAN BE SEEN FROM THE FORM ITR 1 FILED FOR THE AY AN D THE COMPUTATION OF INCOME SHEET (INCLUDED AT PAGES 1 TO 3 OF THE ENCLO SED PAPER BOOK). IN FACT, THE ORDER OF THE ACIT, NCC 17(1) REPRODUCED IN PAGE NO.5 OF THE IMPUGNED ORDER CLEARLY CONFIRMS THE FACT THAT THE ENTIRE INC OME FROM THE SALE OF ESOP SHARES OF RS. 1,37,10,290/- HAS BEEN OFFERED TO TAX AS PART OF SALARIES AND :-10-: I.T.A. NOS. 1415 & 1416/MDS/2017 THERE IS NO MENTION OF ANY CLAIM FOR ANY DEDUCTION AGAINST THE SAME EITHER IN THE ORDER OF THE ACIT, NCC 17(1) OR THE IMPUGNED OR DER OF THE LEARNED CIT(A)-5. EVEN OTHERWISE THE DECISION IN MANPREET S INGH'S CASE IS NOT AGAINST THE RELIEF U/S 90 IN TOTO AND IT STRENGTHENS THE CA SE FOR FULL RELIEF U/S 90 WHERE THE SAME QUANTUM OF INCOME IS TAXED IN INDIA AND TH E US. THIS BEING SO ,THE INFERENCE DRAWN BY THE LEARNED CIT(A)-5 IS INCORREC T AND THE DECISION BASED ON SUCH INCORRECT INFERENCE IS BAD IN LAW. 3.4 THE LEARNED CIT(A)-5 HAS NEITHER CONSIDERED NOR ADJUDICATED THE ISSUE OF THE MAINTAINABILITY OF SECTION 147 PROCEEDINGS, WHICH HAS BEEN RAISED BY THE ASSESSEE. IN THE ORDER U/S 143(3) DATED 28.3.20 15, THE DCIT, NCC 17(1) HAD GRANTED RELIEF U/S 90 BASED ON THE MATERIAL FUR NISHED DURING THE ASSESSMENT PROCEEDINGS. THE INVOCATION OF THE PROCE EDINGS U/S 147 HAS BEEN THE RESULT OF JUST A CHANGE OF OPINION ON THE PART OF THE AO AND NOT BASED ON ANY TANGIBLE MATERIAL WHICH WAS NOT AVAILABLE WITH THE AO EARLIER. IT IS WELL SETTLED LAW THAT INVOKING THE PROVISIONS OF SEC 147 SHOULD BE BASED ON TANGIBLE MATERIAL AND NOT EXERCISED MECHANICALLY OR ARBITRARILY BASED ON A MERE CHANGE OF OPINION. [MJ. PHARMACEUTICALS LTD. V S. DCIT (297 ITR 119 (BOM.)); ASTEROIDS TRADING AND INVESTMENTS P. LTD. VS. DCIT (308 ITR 190 (BOM.)); PURITY TECHTEXTILE (P) LTD. VS. ACIT (230 CTR 157 (BOM.))] UNDER SUCH CIRCUMSTANCES, THE NOTICE U/S 148 AND THE CON SEQUENTIAL ORDER U/S 143(3) R.W.S 147 ARE BAD IN LAW, AND THE NON-CONSID ERATION OF THIS ISSUE BY :-11-: I.T.A. NOS. 1415 & 1416/MDS/2017 THE LEARNED CIT(A)-5 AND RENDERS THE IMPUGNED ORDER BAD IN LAW, SINCE THIS IS AN ISSUE THAT GOES TO THE ROOT OF THE MATTER. 3.5. PER CONTRA, THE DR SUPPORTED THE ORDERS OF THE AO AND THE CIT (A). 4. WE HEARD THE RIVAL CONTENTIONS, GONE THROUGH REL EVANT ORDERS AND THE MATERIAL. THOUGH, THE ASSESSEE RAISED SPECIFIC GROU NDS CHALLENGING THE VALIDITY OF REOPENING THE ASSESSMENT FOR AY 2012-13, WE FIND THAT THE CIT(A) HAS NOT ADJUDICATED THIS MATTER. HENCE WE DEEM IT FIT TO RE STORE THE MATTER TO THE FILE OF THE CIT (A). THE CIT (A) AFTER GIVING DUE OPPORT UNITY TO THE ASSESSEE WOULD DECIDE THE CASE FOR AY 2012-13 IN ACCORDANCE WITH LAW. ON MERITS FOR BOTH THE ASSESSMENT YEARS, IT IS SUBMITTED THAT THE ASSESSEE IS AN EMPLOYEE OF COGNIZANT TECHNOLOGY SOLUTIONS INDIA PRIVATE LIM ITED. FOR THE PERIOD BETWEEN 2002 AND 2008, HE WAS SENT ON DEPUTATION TO COGNIZANT TECHNOLOGY SOLUTIONS US CORPORATION, A COMPANY REGISTERED AND EXISTING IN THE US. ON VARIOUS DATES DURING THE PERIOD OF SUCH DEPUTATION, NON-QUALIFIED STOCK OPTIONS WERE GRANTED BY COGNIZANT TECHNOLOGY SOLUTI ONS US CORPORATION TO HIM. THESE OPTIONS ARE FOR US$ DESIGNATED SHARES OF THE SAID US CORPORATION LISTED IN THE US STOCK EXCHANGES. THESE OPTIONS WER E EXERCISED AND INCOME FOR THE SALE OF THE RESULTANT SHARES WAS REALISED B Y THE ASSESSEE DURING AYS 2012-13 AND 2014-15. THE INCOME FROM THESE OPTIONS ARE PRIMARILY TAXABLE IN THE US UNDER THEIR TAX LAWS AS IS CLEARLY STATED IN THE CERTIFICATE OF GRANT OF :-12-: I.T.A. NOS. 1415 & 1416/MDS/2017 OPTION GIVEN TO THE ASSESSEE EMPLOYEE. THE SAID CER TIFICATE ALSO MENTIONS THAT THE FEDERAL WITHHOLDING TAX REQUIRED UNDER US TAX L AWS ON EXERCISE OR SALE OF THESE SHARES WOULD BE RECOVERED FROM THE PAYMENTS D UE TO THE ASSESSEE FROM THE US CORPORATION. IF THE ASSESSEE LAYS MATERIAL T O PROVE THAT HE WAS AN EMPLOYEE OF COGNIZANT TECHNOLOGY SOLUTIONS US CORPO RATION DURING THE PERIOD BETWEEN 2002 AND 2008, THEN HE IS ENTITLED F OR THE RELIEF SOUGHT U/S 90 ON THE TAXES PAID IN THE US. SINCE THE MATTER REGAR DING THE VALIDITY OF REOPENING OF THE ASSESSMENT FOR AY 2012-13 IS BEING REMITTED BACK TO THE CIT(A), WE ARE OF THE VIEW THAT THESE ISSUES BE RE- EXAMINED BY THE CIT(A). AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSES SEE, THE CIT (A) SHALL PASS SPEAKING ORDERS ON THESE ISSUES TOO. 5. IN THE RESULT, THE ASSESSEES APPEALS FOR THE AY S 2012-13 & 2014-15 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 31 ST OCTOBER, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) !' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 31 ST OCTOBER, 2017 JPV &)1232 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2) /DR 6. 7 /GF