Tribunal directs reassessment of Tax Residency Certificate & share acquisition cost

The Tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to re-examine the Tax Residency Certificate (TRC) provided by the assessee and determine the cost of acquisition of shares at Rs.2,13,73,563 as claimed, emphasizing compliance with procedural requirements and providing necessary documentation in tax assessments for a fair resolution of disputes.

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Issues:
Restriction of cost of acquisition in respect of shares sold

Analysis:
The judgment involves an appeal against a final assessment order concerning the restriction of the cost of acquisition of shares sold. The assessee, an individual employed with M/s.Wipro Limited, declared a total income for the assessment year 2019-2020, including income from salary, house property, capital gains, and other sources. The dispute arose when the Assessing Officer restricted the cost of acquisition of shares sold to Rs.72,27,660, contrary to the amount of Rs.2,13,73,864 claimed by the assessee. The assessee had acquired shares under the Employee Stock Option Scheme and provided documentation to support the claimed cost of acquisition. However, the AO restricted the cost based on the perquisite value offered to tax in the previous assessment year. The Dispute Resolution Panel (DRP) considered the submissions and directed the AO to verify taxes paid with reference to the Tax Residency Certificate (TRC) and adopt the cost of acquisition at Rs.2,13,73,563.

The final assessment order was passed, maintaining the cost of acquisition at Rs.72,27,660 due to the assessee's failure to submit the TRC as directed by the DRP. The assessee challenged this decision before the Tribunal, presenting the TRC and arguing that it was not mandatory for determining the cost of acquisition under section 49(2AA) of the Income Tax Act. The Tribunal, considering the submissions and the DRP's directions, upheld the DRP's decision, emphasizing that since the TRC was produced as per the DRP's directions, the cost of acquisition should be taken at Rs.2,13,73,563 as claimed by the assessee in the return of income. The Tribunal directed the AO to re-examine the TRC and decide the issue accordingly, affording a reasonable opportunity of hearing to the assessee. Ultimately, the appeal was allowed for statistical purposes.

In conclusion, the judgment addresses the contentious issue of the cost of acquisition of shares sold by the assessee, emphasizing the importance of complying with procedural requirements such as producing the TRC. The Tribunal's decision underscores the significance of following due process and providing necessary documentation to support claims in tax assessments, ensuring a fair and just resolution of disputes.

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