Rameswara Reddy Kummathi, CHENNAI V. ACIT NCC-17, CHENNAI

ITA 349/CHNY/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7396 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 25-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M MATHIVANAN
• Assessee Lawyers: AVINASH WADHWANI
• Keywords: Capital asset; Difference of opinion; Capital receipt

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.350/CHNY/2018 ( )( / ASSESSMENT YEAR : 2011-12 SHRI SOUNDARARAJAN PARTHASARATHY, 37, EAST MADA STREET, B2, NAHARDESHNA, THIRUVANMIYUR, CHENNAI - 600 041. PAN : AAEPP 4945 K V. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE 17, CHENNAI - 600 006. (+,/ APPELLANT) (-.+,/ RESPONDENT) ./ ITA NOS.348 & 349/CHNY/2018 ( )( / ASSESSMENT YEARS : 2011-12 & 2012-13 SHRI RAMESWARA REDDY KUMMATHI, FLAT NO.6, VISWARETHA APARTMENTS, OLD NO.28, NEW NO.16, 7 TH CROSS STREET, SHASTRI NAGAR, ADYAR, CHENNAI - 600 020. PAN : AASPR 9595 D V. THE DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 17(1), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANTS BY : SHRI AVINASH WADHWANI, ADVOCATE -.+, / 0 / RESPONDENT BY : SHRI M. MATHIVANAN, ADDL. CIT 1 / 2% / DATE OF HEARING : 27.06.2018 3') / 2% / DATE OF PRONOUNCEMENT : 24.07.2018 2 I.T.A. NO.350/CHNY/18 I.T.A. NOS.348 & 349/CHNY/18 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: ALL THE APPEALS OF THE TWO INDEPENDENT ASSESSEES ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE COMMI SSIONER OF INCOME TAX (APPEALS) -5, CHENNAI, CONFIRMING THE PE NALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF TH E INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). WE HEARD ALL THESE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. SHRI AVINASH, WADHWANI, THE LD.COUNSEL FOR THE A SSESSEES, SUBMITTED THAT THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ON APPEAL, THE CIT(APPEALS) CONFIRMED THE SAME. ACCORDING TO THE LD. COUNSEL, BOTH THE ASSES SEES ARE EMPLOYEES OF M/S COGNIZANT TECHNOLOGIES INDIA PVT. LTD. THE PARENT COMPANY OF THE ASSESSEES, NAMELY, M/S COGNIZ ANT TECHNOLOGY SOLUTIONS CORPORATION, A DELWARE CORPORA TION, USA PROMOTED AN INCENTIVE PLAN FOR THE EMPLOYEES OF M/S COGNIZANT TECHNOLOGIES INDIA PVT. LTD. AS PER THIS PLAN, ACC ORDING TO THE LD. COUNSEL, THE ASSESSEES WERE GIVEN OPTION FOR AVAILI NG STOCK APPRECIATION RIGHTS. ACCORDING TO THE LD. COUNSEL, STOCK 3 I.T.A. NO.350/CHNY/18 I.T.A. NOS.348 & 349/CHNY/18 APPRECIATION RIGHT IS NOTHING BUT A RIGHT FOR APPRE CIATION OF THE VALUE OF SHARES ALLOTTED BY THE PARENT COMPANY. ACCORDIN G TO THE LD. COUNSEL, THE ASSESSEES DID NOT HAVE RIGHT OVER THE SHARE, ONLY THE VALUE OF APPRECIATION RIGHT WAS GIVEN TO THE ASSESS EES. THE STOCK APPRECIATION RIGHT ALLOTTED TO THE ASSESSEE WAS ALS O SUBJECTED TO TAX IN USA. ACCORDING TO THE LD. COUNSEL, THE STOC K APPRECIATION RIGHTS OFFERED TO THE ASSESSEES ARE CAPITAL ASSET, THEREFORE, THE VALUE REALIZED BY THE ASSESSEES ON STOCK APPRECIATI ON RIGHTS IS NOTHING BUT A CAPITAL GAIN. ACCORDINGLY, THE ASSES SEES OFFERED THE SAME FOR TAXATION. HOWEVER, ACCORDING TO THE LD. C OUNSEL, THE ASSESSING OFFICER FOUND THAT THE STOCK APPRECIATION RIGHTS IS A REVENUE RECEIPT. THE ORDERS OF THE ASSESSING OFFIC ER WERE ALSO CONFIRMED BY THE CIT(APPEALS) AND THIS TRIBUNAL. A CCORDING TO THE LD. COUNSEL, A FURTHER APPEAL WAS MADE BEFORE THE H IGH COURT WHICH IS PENDING FOR ADJUDICATION. 3. SHRI AVINASH, WADHWANI, THE LD.COUNSEL FOR THE A SSESSEES, FURTHER SUBMITTED THAT THE STOCK APPRECIATION RIGHT WAS GIVEN BY USA COMPANY AND THE ASSESSEES ARE NOT EMPLOYEES OF USA COMPANY. ACCORDING TO THE LD. COUNSEL, THERE WAS N O EMPLOYER AND 4 I.T.A. NO.350/CHNY/18 I.T.A. NOS.348 & 349/CHNY/18 EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEES AND USA COMPANY. MOREOVER, THE ASSESSEES HAVE ALSO DISCLOSED THE STO CK APPRECIATION RIGHTS ALLOTTED TO THE ASSESSEES IN TH EIR RETURN OF INCOME AND CLAIMED THE SAME AS CAPITAL RECEIPT. AC CORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER HAS TREATED THE SAME AS REVENUE RECEIPT WHICH WAS CONFIRMED BY THIS TRIBUNAL ALSO. THE QUESTION ARISES FOR CONSIDERATION, ACCORDING TO THE LD. COUN SEL, IS WHETHER THERE WAS CONCEALMENT OF INCOME OR FURNISHING INACC URATE PARTICULARS OF INCOME? THE ALLOTMENT OF STOCK APPR ECIATION RIGHTS WAS DISCLOSED BY THE ASSESSEES. THE GAIN ARISING O UT OF STOCK APPRECIATION RIGHTS WAS ALSO DISCLOSED TO THE REVEN UE. ACCORDING TO THE LD. COUNSEL, THE DIFFERENCE OF OPINION BETWE EN THE ASSESSEES AND ASSESSING OFFICER IS WHETHER THE GAIN ON STOCK APPRECIATION RIGHTS IS A REVENUE RECEIPT OR CAPITAL RECEIPT. AC CORDING TO THE LD. COUNSEL, IT IS A CAPITAL RECEIPT BUT THE REVENUE AU THORITIES FOUND THAT IT IS A REVENUE RECEIPT. THEREFORE, THE DIFFERENCE OF OPINION IN CLASSIFICATION OF PARTICULAR INCOME CANNOT BE CONST RUED AS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THEREFORE, ACCORDING TO THE LD. COUNSEL, IT CANNOT BE SAID THAT THE ASSESSEES HAVE CONCEALED AN Y PART OF 5 I.T.A. NO.350/CHNY/18 I.T.A. NOS.348 & 349/CHNY/18 INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E, HENCE, THE CIT(APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE PEN ALTY LEVIED BY THE ASSESSING OFFICER. 4. ON THE CONTRARY, SHRI M. MATHIVANAN, THE LD. DEP ARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEES CLAIME D THE GAIN ON THE VALUE OF STOCK APPRECIATION RIGHTS AS A CAPITAL GAIN. ACCORDING TO THE LD. D.R., IN FACT, IT IS A PROFIT IN LIEU OF SALARY, THEREFORE, IT HAS TO BE ASSESSED AS REVENUE RECEIPT. TO THAT EXTENT, THE ASSESSEES HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. A CCORDING TO THE LD. D.R., THE CLAIM OF THE ASSESSEES AS CAPITAL GAI N AMOUNTS TO INACCURATE PARTICULARS OF INCOME. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT THE CASE OF THE REVENUE THAT THE SHARES WERE ALLOTTED TO THE ASSESSEES. WHAT WAS GIVEN TO THE ASSESSEES IS A RIGHT OF APPRE CIATION ON THE SHARES OF THE USA COMPANY. THE ASSESSEES HAVE DISC LOSED THE VALUE OF THE STOCK APPRECIATION RIGHTS AND GAIN THE REON AND CLAIMED THE SAME AS CAPITAL GAIN. THE ASSESSING OF FICER TREATED THE GAIN AS REVENUE RECEIPT AND LEVIED TAX. ON APPEAL BY THE 6 I.T.A. NO.350/CHNY/18 I.T.A. NOS.348 & 349/CHNY/18 ASSESSEES BEFORE THE CIT(APPEALS) AND THIS TRIBUNAL , THE VIEW OF THE ASSESSING OFFICER THAT THE GAIN IS A REVENUE RE CEIPT WAS CONFIRMED AND NOW FURTHER APPEAL IS SAID TO BE PEND ING BEFORE THE HIGH COURT. 6. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THERE WAS CONCEALMENT OF INCOME OR WHETHER THE ASSESSEES HAVE FURNISHED INACCURATE PARTICULARS OF INCOME? IT IS NOBODYS C ASE THAT THE ASSESSEES HAVE CONCEALED THE ALLOTMENT OF STOCK APP RECIATION RIGHTS OR GAIN ARISING OUT OF SUCH APPRECIATION. A S RIGHTLY POINTED OUT BY THE LD.COUNSEL FOR THE ASSESSEES, THE DIFFER ENCE OF OPINION BETWEEN THE ASSESSEES AND THE ASSESSING OFFICER IS ON CLASSIFICATION OF HEAD OF INCOME. IN OTHER WORDS, WHETHER THE GAIN ARISING ON APPRECIATION RIGHTS IS A CAPITAL GAIN OR REVENUE RECEIPT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CLASSIFICATION OF HEAD OF INCOME IS DEPENDING UPON THE UNDERSTANDING OF THE SCHEME AND PROVISIONS OF INCOME-TAX ACT. THERE MAY BE DIF FERENCE OF OPINION AMONG VARIOUS AUTHORITIES ON CLASSIFICATION OF HEAD OF INCOME. THEREFORE, A MERE DIFFERENCE OF OPINION BE TWEEN THE ASSESSEES AND THE ASSESSING OFFICER OR OTHER REVENU E AUTHORITIES 7 I.T.A. NO.350/CHNY/18 I.T.A. NOS.348 & 349/CHNY/18 ON CLASSIFICATION OF INCOME UNDER DIFFERENT HEADS C ANNOT BE CONSTRUED AS FURNISHING OF INACCURATE PARTICULARS O F INCOME OR CONCEALING ANY PART OF ASSESSEES INCOME. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, WE ARE UNABLE TO UPHOLD THE ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW A RE SET ASIDE AND THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER S ECTION 271(1)(C) OF THE ACT IS DELETED. 7. IN THE RESULT, THE APPEALS FILED BY BOTH THE ASS ESSEES ARE ALLOWED. ORDER PRONOUNCED ON 24 TH JULY, 2018 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 24 TH JULY, 2018. KRI. 8 I.T.A. NO.350/CHNY/18 I.T.A. NOS.348 & 349/CHNY/18 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-5, CHENNAI-34 4. PRINCIPAL CIT-9, CHENNAI. 5. 7: -2 /DR 6. ;( < /GF.