TaxTMI 
TaxTMI 
2011 (9) TMI 186
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....aw and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in treating the long term capital gain as shown by the assessee in the return as "short term capital gain" and accordingly made the addition. 4. That in any case and in any view of the matter action of Ld. CIT(A) in not reversing the action of Ld. AO in making the impugned addition and framing the impugned assessment order is bad in law and against the facts and circumstances of the case, void ab initio, beyond jurisdiction, by recording incorrect facts and findings and the same is not sustainable on various legal and factual grounds. 5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of the Income Tax Act, 1961." 6. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds ae without prejudice to each other. 2. At the time of hearing, groun....
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....-2-2009 as AO was of the view that the shares were never transferred to the assessee. The shares were actually held by a trustee i.e. Barry Group at USA. The assessee actually received the differential amount between gross sale consideration and the cost price. In reassessment AO held that the issue date or date of grant was immaterial in this case. The shares were allotted to the assessee and sold by him on the same date, therefore, they were liable to tax as short term capital gains. Since they were held to be short term capital gains, no further deduction u/s 54F was allowed to the assessee. 4.2. Aggrieved, assessee preferred first appeal to the CIT(A), before whom it was submitted as under: (i) The reliance placed by the AO on the cases, Infosys Technologies Ltd. Vs. CIT, Garric D'Silv Vs. JCIT (2006) 105 TJ 445 (T del T) and Gridhar Krishan Vs. ACIT (2008) 117 TTJ (Bang) 965 was misplaced because facts of appellant's case are materially different. (ii) The ESOP scheme and especially the terms stock and option has not been correctly appreciated by the AO (iii) The AO has not appreciated that what was transferred was valuable right and not tangible ....
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....case for a fresh decision after examining the date of acquisition. In the present case the date of exercising of option is not in dispute as the option was exercised in the present case on the date of sale of shares and hence as per Tribunal decision, the capital gain in question is short term capital gain only. It is the claim of the assessee that this Tribunal decision put in by RBI for not making payment for purchase of shares from India. We are of the considered opinion that for this reason alone, it cannot be said that the shares were acquired by the assessee before the date of exercise o option. After going through the ESOP scheme in the present case, we find that he assessee was given an option for purchase of shares at a fixed price at any point of time within 10 years but until and unless the assessee exercises his option, the assessee does not become the owner of shares because if the assessee becomes the owner of anything he is entitled for gain on that account and he is liable to suffer the loss for the same. But in the present case, if the market price of shares is more than the offer price, the assessee is entitled for the gain but if the market price of the shares fa....
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....7-01-2000 4963 34.00 (iii) These shares as per scheme were offered on the dates mentioned above and were encashable in a period of ten years after elapse of initial period of three years from the date of acceptance of ESOP stock offer. (iv) All employees were given the option on the date of their eligbility to sign and own it on the date they are eligible and keep the same till they reach their optimum time in the eyes of employee to sell/liquidate. It is important to note that shares are never issued by Pepsico Inc in the name of the employee but in the name of designated trust or acquired by this trust from market and stored in their stock also called "capital stock" for the employees of worldwide Pepsico. Thus, the employee became the owner of the stock on the day when he signed the agreement and could redeem or encash his rights(part of stock) any time after lock in period of three years. No transfer of shares took place from company to employee but were held by this trust Barry group in its stock on behalf of the employee. They allocated and sold them as and when asked for by assessee. The Barry group of Merrill Lynch acted as the custodian of the....
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....pleaded that in the similar facts and circumstances Hyderabad Bench of the ITAT, after considering various ITAT and High Courts judgments in a group of cases, held as under: "With regard to the question as to the nature of the capital gains, viz., long-term or short-term capital gains, we are of the considered opinion that it is the date of grant of the stock option in favour of the assessee that is material for determining the period of holding the asset in question, and not the date on which the option was exercised and stock option were converted into shares. As already noted above, Mumbai Benches of this Tribunal in the cases cited above, specifically considered this issue also and decided the same in favour of the assessee following the decisions of the Bombay High Court in CIT vs. Sterling Investment Corporation Ltd. (1Rs. 979) 12 CTR (Bom) 263; (1980) 123 ITR 441 (Bom) and CIT vs. Tata Services Ltd. (1979) 13 CTR (Bom) 227; (1980) 122 ITR 394. At this juncture, we may also notice that there was a significant change in the position on account of amendment to cl. (ba) under s. 115wC(1) of the Act whereby, the date of liability for fringe benefit tax (FBT) on such conc....
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....ion of the Delhi Bench of the Pubjab High Court in the case of Hari Bros. (P) Ltd. Vs. ITO (1964) 52 ITR 399 (Punj), wherein it was held that right to subscribe for shares of a company is also a capital assets. On exercising the option, the assessee gets shares, which is only conversion of one capital asset into another capital asset. It is evident from the details of the date of acquisition of such right by the assessee, as submitted in the paper book, the shares were held by the assessee for a period more than twelve months and hence the resultant gains must be computed as long-term capital gains." 5.3. It is pleaded that this case clinches the issue and unequivocally holds that ESOP account allotted to assessee at a market value when sold after a period of one year ought to be held as long term capital gains. 5.4. Adverting to the order of the ITAT in the case of Mr. Bomi S. Billimoria Vs. ACIT (2009) 124 TTJ (Mumbai) 960, learned counsel contends that this case lays down following propositions: (i) In case of cashless ESOPs the cost of acquisition was unascertainable and therefore relying on the ratio of decision of Hon'ble Supreme Court in the case of CIT Vs. B.....
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....o be unascertainable as the ESOPs were allotted on the basis of a cashless scheme whereas in assessee's case there is a corresponding cost of undistinctive but ascertained quantity of shares allotted in 1995-96 to 1999-2000 as per the US market value. Therefore, the assessee is not raising the plea of unascertainable cost. Sine the cost of acquisiton is apparent and not disputed the gains ae liable as long term capital gains. 5.7. If the logic adopted by lower authorities is taken, then the assessee's right to distinctive shares was acquired on the same day when it is sold, then there will be no capital gains as the right on such shaes accrued on the same day and the cost will be same. 6. Learned DR is heard who supports the order of lower authorities. 7. We have heard rival submissions and gone through the entire material available on record. The facts have been narrated in details above. A perusal of the clauses of allotment clearly reveals that the particular numbers of shares were allotted to assessee in different years at different prices; only distinctive numbers were not allotted which has not been disputed by department. The apparent benefit to assessee out of ESOP....