ITAT Bombay-F rules shares sale proceeds non-taxable due to no acquisition cost

The Appellate Tribunal ITAT BOMBAY-F ruled in favor of the assessee, holding that the amount received from the sale of shares was not taxable under "Income from capital gains" as no cost of acquisition was incurred. The tribunal directed the Assessing Officer to exclude the sum from income computation, allowing the appeal. The decision emphasized the non-taxability of the gain under capital gains due to the absence of a cost of acquisition and highlighted the non-retrospective applicability of tax provisions on employee benefits.

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In the case of Appellate Tribunal ITAT BOMBAY-F, the appeal was filed by the assessee against the order of CIT(A)-XXXV, Mumbai for the assessment year 1993-94. The dispute revolved around the addition of Rs. 5,44,025 as short-term capital gains, which the assessee argued was a capital receipt and thus not taxable. The assessee, an employee of Johnson & Johnson, exercised stock options granted by the USA company and sold shares to realize a sum in Indian currency. The AO considered the profit as taxable either as salary, short-term capital gains, or speculation profit. The CIT(A) agreed that the gain was taxable under "Capital gains" but disagreed with the assessee's claim of nil capital gains. The shares were held for less than three years, leading to assessment as short-term capital gains. The tribunal, however, ruled in favor of the assessee, stating that no cost of acquisition was incurred, and thus the amount received was not taxable under "Income from capital gains." The tribunal directed the AO to exclude the amount from income computation, allowing the appeal. The decision highlighted the absence of retrospective applicability of tax provisions on employee benefits.

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