2008 (10) TMI 702 - HC - Income Tax

Challenges to Stock Options Taxation and Interest Imposition Upheld

Shri Anil Kumar Nehru, Mumbai Versus Asst. CIT Circle 28 (2), Mumbai

Shri Anil Kumar Nehru, Mumbai Versus Asst. CIT Circle 28 (2), Mumbai - TMI Issues involved: Approval of reassessment notice u/s 148, nature of stock options granted, employer-employee relationship for stock options, applicability of previous court decisions, dismissal of additional ground, taxability of stock options as capital gains, imposition of interest u/s 234A, 234B, and 234C, validity of Tribunal's order.For the first issue, the Tribunal's approval of the reassessment notice u/s 148 was challenged. The substantial question of law was whether the Tribunal erred in approving the notice issued u/s 147 of the Act. The Respondent did not appear despite being served.Regarding the nature of stock options granted, the Tribunal considered whether the stock options were akin to stock appreciation rights as adjudicated in a previous case. The question was whether the Tribunal correctly held that the stock options granted were similar to stock appreciation rights.The issue of an employer-employee relationship for stock options was also raised. The Tribunal had to determine if an employer-employee relationship existed between the parties, leading to the stock options being assessable as perquisites u/s 17(2)(iii) of the Act.The Tribunal's decision on the applicability of a previous court decision was questioned. It was debated whether the Tribunal misdirected itself in distinguishing a decision of the Apex Court and deeming it not applicable to the present case.The dismissal of an additional ground by the Tribunal was also contested. The question arose as to whether the Tribunal's decision to not address the additional ground separately was justifiable, considering its conclusions on other issues.The taxability of stock options as capital gains was another issue. The Tribunal had to decide if the Appellant acquired any capital asset upon the grant of stock options and if the impugned sum was exigible to tax as capital gains.Furthermore, the imposition of interest u/s 234A, 234B, and 234C of the Act was challenged. It was argued whether the Tribunal erred in approving the imposition of interest under these sections.Lastly, the overall validity of the Tribunal's order was questioned. It was contended that the order was perverse, contrary to evidence, and founded on irrelevant considerations, leading to conclusions that were allegedly vitiated and plagued by infirmities.