Caterpillar India Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 1575/CHNY/2014

• Counselvise Citation: 157521714 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 16-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-06-2014
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Assessee Lawyers: K R VASUDEVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1575/MDS/2014 / ASSESSMENT YEAR : 2007-08 M/S CATERPILLAR INDIA PVT LTD (IN THE MATTER OF ERSTWHILE CATERPILLAR COMMERCIAL PVT. LTD. SINCE MERGED WITH CATERPILLAR INDIA PVT. LTD) 7 TH FLOOR, INTERNATIONAL TECH PARK, TARAMANI CHENNAI 600 113 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE I(3) CHENNAI [PAN AABCC 4615 K ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI K.R. VASUDEVAN, ADVOCATE /RESPONDENT BY : DR. MILIND MADHUKAR BHUSARI, CIT / DATE OF HEARING : 16 - 09 - 2015 ! / DATE OF PRONOUNCEMENT : 13 - 11 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), LARGE TAX PAYER UNIT, CHENNAI, DATED 3.1.2014 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. THERE IS A DELAY OF 35 DAYS IN FILING THE APPEAL. THE ASSESSEE FILED AN APPLICATION FOR CONDONATION OF DE LAY. AFTER HEARING ITA NO. 1575/14 :- 2 -: BOTH SIDES, WE FIND THAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THE APPEAL BEFORE THIS TRIBUNAL WITHIN THE PRESCRIBED T IME. ACCORDINGLY, THE DELAY OF 35 DAYS IN FILING THE APPEAL IS CONDON ED AND THE APPEAL IS ADMITTED. 2. SHRI K.R. VASUDEVAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERATION IS TAX ATION OF EMPLOYEES STOCK OPTION PLAN UNDER FRINGE BENEFIT TAX. 3. ACCORDING TO THE LD. COUNSEL, THE EMPLOYEES STOCK O PTION PLAN IS SUBJECTED TO TAXATION. HOWEVER, FOR THE YE AR UNDER CONSIDERATION, THE EMPLOYEES STOCK OPTION PLAN CANN OT BE SUBJECTED TO TAXATION. REFERRING TO SEC. 115WB(1)(A) OF THE ACT , THE LD. COUNSEL SUBMITTED THAT IF THE EMPLOYEES STOCK OPTION PLAN F ALLS IN SEC. 115WB(1)(A), THEN IT IS CHARGEABLE TO FRINGE BENEFI T TAX FOR THE YEAR UNDER CONSIDERATION. HOWEVER, EMPLOYEES STOCK OPTI ON PLAN WILL NOT FALL IN SEC. 115WB(1)(A) OF THE ACT. ACCORDING TO THE LD. COUNSEL, EMPLOYEES STOCK OPTION PLAN IS NOT A PRIVILEGE, SER VICE, FACILITY ETC. THE LD. COUNSEL SUBMITTED THAT THE EMPLOYEES SECUR ITY OPTION WOULD SQUARELY FALL IN CLAUSE (D)OF SEC.115WB(1) OF THE A CT. SEC. 115WB(1)(D) WAS INSERTED BY FINANCE ACT, 2007. REF ERRING TO THE CIRCULAR NO.9/2007 DATED 20.12.2007 ISSUED BY THE C BDT, THE LD. COUNSEL SUBMITTED THAT THE CBDT CLARIFIED THAT THE PROVISIONS OF SEC. ITA NO. 1575/14 :- 3 -: 115WB(1)(D) OF THE ACT WOULD BE APPLICABLE WHERE TH E ALLOTMENT OR TRANSFER WAS MADE ON OR AFTER 1.4.2007. IN THIS CA SE, ACCORDING TO THE LD. COUNSEL, EMPLOYEES STOCK OPTION WAS ALLOTTED TO THE EMPLOYEES AFTER 1.4.2007. THEREFORE, FRINGE BENEFIT TAX, IF ANY, HAS TO BE TAXED ON THE EMPLOYEES STOCK OPTION PLAN FOR THE ASSESSME NT YEAR 2008-09 AND NOT FOR THE ASSESSMENT YEAR 2007-08. 4. WE HEARD DR.MILINK MADHUKAR BHUSARI, LD. DEPARTMENT AL REPRESENTATIVE ALSO. THE LD. DR SUBMITTED THAT SEC .115WB(1)(D) OF THE ACT WAS INTRODUCED BY FINANCE ACT, 2007. THE C BDT CIRCULAR NO.9/2007 DATED 20.12.2007 CLARIFIED THAT THE NEW P ROVISIONS OF SEC. 115WB(1)(D) SHALL APPLY IN CASES WHERE THE ALLOTMEN T OR TRANSFER IS MADE ON OR AFTER 1 ST DAY OF APRIL, 2007. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT I S NOT IN DISPUTE THAT THE EMPLOYEES STOCK OPTION IS LIABLE FOR FRINGE BEN EFIT TAX. THE PARLIAMENT, BY FINANCE ACT, 2007 INTRODUCED SUB-CLA USE (D) IN SEC. 115WB(1) OF THE ACT. BY WAY OF EXPLANATION, THE PA RLIAMENT CLARIFIED THAT EMPLOYEES STOCK OPTION INCLUDES SECURITIES. T HEREFORE, EMPLOYEES STOCK OPTION PLAN WOULD FALL U/S 115WB (1)(D) OF THE ACT. THE CIT(A) FOUND THAT SEC. 115WB(1)(D) INTRODUCED BY FINANCE ACT, 2007 WAS APPLICABLE FOR THE ASSESSMENT YEAR 2008-09 . HOWEVER, THE ITA NO. 1575/14 :- 4 -: EMPLOYEES STOCK OPTION PLAN IS A BENEFIT/PRIVILEGE CONFERRED ON THE EMPLOYEES DIRECTLY BY THE EMPLOYER, THEREFORE, BEFO RE ASSESSMENT YEAR 2008-09 IT WOULD FALL U/S 115WB(1)(A) OF THE ACT. HENCE, THE EMPLOYEES STOCK OPTION PLAN, ACCORDING TO THE LD. D R, IS LIABLE FOR FRINGE BENEFIT TAX U/S SEC. 115WB(1)(A) OF THE ACT FOR THE ASSESSMENT YEAR 2007-08. 6. WE HAVE ALSO CAREFULLY GONE THROUGH THE CIRCULAR NO .9/2007 DATED 20.12.2007 ISSUED BY THE CBDT. FOR THE PURPO SE OF CONVENIENCE, WE REPRODUCE BELOW THE SAID CIRCULAR: IN TERMS OF THE PROVISIONS OF CHAPTER XII-H OF TH E INCOME-TAX ACT (HEREINAFTER REFERRED TO AS ACT) AN EMPLOYER, BEING A COMPANY, IS LIABLE TO PAY FRINGE BENEFIT TAX (FBT) IN RESPECT OF THE FRINGE BENEFITS PROVIDED OR DEEMED TO HAVE BEEN PROVIDED BY IT TO ITS EMPLOYEES, DIRECTLY OR INDIRECTLY, DURING THE PREVIOUS YEAR. WITH A VIEW TO BRING GRANT OF STOCK OPTIONS BY EMPL OYERS TO EMPLOYEES WITHIN THE PURVIEW OF FBT, FINANCE ACT, 2007 H AS INSERTED A NEW CLAUSE (D) IN SUB-SECTION (1) OF SEC TION 115WB. THE SALIENT FEATURES OF THIS PROVISION ARE:- (I) FBT SHALL APPLY IN ALL CASES WHERE ANY SPECIFI ED SECURITY OR SWEAT EQUITY SHARES HAS BEEN ALLOTTED OR TRANSFERRE D BY THE EMPLOYER TO HIS EMPLOYEES; (II) FBT SHALL BE PAYABLE IN THE PREVIOUS YEAR IN WHICH SUCH ALLOTMENT OR TRANSFER HAS TAKEN PLACE; (III) THE PROVISIONS OF THIS NEW CLAUSE SHALL APP LY EVEN IF THE ALLOTMENT OR TRANSFER IS DIRECTLY OR INDIRECTLY; (IV) THE PROVISIONS OF THIS NEW CLAUSE SHALL APPL Y EVEN IF THE ALLOTMENT OR TRANSFER IS FREE OF COST OR AT CONCESS IONAL RATE; ITA NO. 1575/14 :- 5 -: (V) THE PROVISIONS OF THIS NEW CLAUSE SHALL APPLY EVEN IF THE ALLOTMENT OR TRANSFER IS TO CURRENT OR FORMER EMPLO YEE OR EMPLOYEES; (VI) THE PROVISIONS OF THIS NEW CLAUSE SHALL APPL Y IN CASES WHERE THE ALLOTMENT OR TRANSFER IS ON OR AFTER 1ST DAY OF APRIL, 2007. 7. IN VIEW OF THE CIRCULAR, THE PROVISIONS OF NEW CLAU SE (D) TO SEC. 115WB(1) SHALL APPLY IN CASES WHERE THE ALLOTM ENT OR TRANSFER IS MADE ON OR AFTER 1 ST DAY OF APRIL 2007. THE CBDT CIRCULAR FURTHER CLARIFIED THAT WITH A VIEW TO BRING GRANT OF STOCK OPTIONS BY EMPLOYERS TO EMPLOYEES WITHIN THE PURVIEW OF FRINGE BENEFIT T AX, SUB-SECTION (D) WAS INTRODUCED IN SEC. 115WB(1) OF THE ACT BY FINAN CE ACT, 2007. THEREFORE, THE INTENTION OF THE PARLIAMENT IS TO BR ING STOCK OPTION WITHIN THE PURVIEW OF FRINGE BENEFIT TAX FOR THE FI RST TIME BY FINANCE ACT, 2007. THEREFORE, THE OBSERVATION OF THE CIT(A ) THAT THE EMPLOYEES STOCK OPTION PLAN IS A PRIVILEGE/BENEFIT BEFORE INTRODUCTION OF SEC. 115WB(1)(D) MAY NOT BE CORRECT. WHEN THE C BDT CLARIFIED THAT WITH A VIEW TO BRING STOCK OPTIONS WITHIN THE PURVI EW OF FRINGE BENEFIT TAX, FINANCE ACT, 2007 HAS INSERTED A NEW CLAUSE (D ) IN SUB-SECTION (1) OF SEC. 115WB OF THE ACT, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE EMPLOYEES STOCK OPTION PLAN CANNOT BE BROU GHT UNDER ANY OTHER SUB CLAUSES BEFORE INTRODUCTION OF CLAUSE(D) TO SEC. 115WB(1) BY FINANCE ACT, 2007. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN CASE THE EMPLOYEES STOCK OPTION WA S ALLOTTED OR ITA NO. 1575/14 :- 6 -: TRANSFERRED ON OR AFTER 1.4.2007, THE SAME IS LIABL E FOR FRINGE BENEFIT TAX. FROM THE MATERIAL AVAILABLE ON RECORD, IT IS NOT CLEAR THE DATE ON WHICH THE EMPLOYEES STOCK OPTION WAS ALLOTTED OR TR ANSFERRED. THERE IS NO REFERENCE ABOUT THE DATE OF SUCH ALLOTMENT IN THE ASSESSMENT ORDER ALSO. THE CIT(A), WITHOUT REFERRING TO THE D ATE OF THE ACTUAL ALLOTMENT, HAS PROCEEDED ON THE FOOTING THAT SEC.11 5WB(1)(D) IS APPLICABLE IN RESPECT OF EMPLOYEES STOCK OPTION ALL OTTED OR TRANSFERRED ON OR AFTER 1.4.2007. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DATE OF ACTUAL ALLOTMENT OR TRANSF ER OF EMPLOYEES STOCK OPTION IS CRUCIAL FOR DETERMINATION OF THE IS SUE ARISES FOR CONSIDERATION. IN THE ABSENCE OF ANY MATERIAL, TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ACTUAL DATE OF ALLOTMEN T OR TRANSFER NEEDS TO BE VERIFIED BY THE ASSESSING OFFICER. ACCORDING LY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ENTIRE ISSU E RAISED BY THE ASSESSEE IS REMITTED BACK TO THE FILE OF THE ASSES SING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE ISSUE AFRESH AND BRING ON RECORD THE DATE OF ACTUAL ALLOTMENT OR TRANSFER OF EMPLOYE ES STOCK OPTION AND THEREAFTER DECIDE THE ISSUE AS INDICATED ABOVE BY THIS TRIBUNAL. WITH THE ABOVE OBSERVATION, THE APPEAL OF THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 1575/14 :- 7 -: 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2015, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 13 TH NOVEMBER, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF