TaxTMI 
TaxTMI 
2014 (1) TMI 647
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.... from salary of Rs.1,51,07,902/-. Tax of Rs.50,29,219/- was deducted at source by the employer UTIO. The case was selected for scrutiny. As the employee had already left India, the notice remained unserved. The Assessing Officer completed the assessment ex parte under Section 144 of the Income Tax Act, 1961 on 22nd December, 2009 determining the taxable income at Rs.2,39,34,969/- as the employee left India. The Assessing Officer issued notice to UTIO, Indian Office, to treat it as a Representative assessee, for which proposal the UTIO ILO agreed. Thereafter the Assessing Officer passed an order under Section 163(1)(c) dt. 12.5.2010 treated UTIO, ILO as the Representative assessee of the employee. The facts leading to the above addition are stated below. The employee was granted "employee stock options" of 34000 shares on 9th January,2004 by UTIO. These stock options had a vesting period of 3 years from the date of grant of options. Hence the said stock options vested in the employee Mr.Robert Aruther Keltz, on 9th January, 2007 i.e. after a start of the first Indian assignment on 1st April,2006. It is important to note that the employee was eligible to the shares in question, on....
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....d the decision of the Jurisdictional Tribunal in the case DCIT vs. Eric Moroux and Ghorayeb Emile and held that only proportionate amount of stock option benefit is taxable in India. 4. Aggrieved the Revenue is in appeal before us. 5. Ground nos. 1, 2 and 3 deal with this issue. 6. The second issue i.e. ground no.4 is on an addition on account of hypo tax. The Commissioner of Income Tax (Appeals) has brought out the issue at para 5 of his order which is extracted for ready reference. "2. Ground no.2 : The brief background of the case is as under (relevant excerpts from submission dt. 22.12.2010). The subject employee is a tax equalized employee. Tax equalization is one of the methods widely used by multinational corporation to ensure that the employee who accepts international assignment do not suffer combined taxes on income (in home and host country) in excess of what they would have paid had they continued to reside in the home country. This arrangement is quite prevalent to ensure that the employee neither suffers a financial hardship nor realize a financial windfall from the tax consequences of international assignment. Under tax equalization policy, employer....
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....of ESOPs the Ld.D.R. relied on the decision of the Special Bench of the Tribunal in the case of Sumit Bhattacharya vs. ACIT, 112 ITDL. In this decision the Special Bench brought out the distinction between the stock options and stock appreciation rights. In the case of stock options the assessee is granted some shares either at market value or at a concessional rate and such a grant may be subject to certain conditions. The assessee would become the owner of the shares on exercise of the option to purchase the shares. In such circumstances, the Special Bench had held that the benefit or advantage that the employee would get on the date of exercising the option to purchase the shares would be taxable as a perquisite and the value of the perquisite would be the difference between market price of the shares as on the date of grant and the price for which the assessee has purchased the shares. If the shares are granted free of cost, then the entire value of shares would be a perquisite, on the date the employee becomes the owner of the shares. The argument that the employer company had not granted the stock options but the parent company who is not an employer has granted the stock opt....
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....Asia. In the circumstances there is no justification for the AO to have insisted on evidence regarding the nature of services rendered in France and South Asia. There can be no inference that the employees while they were in France and South Asia rendered services in respect of their operations in India. Therefore it cannot be said that their period of employment in France and South Asia should also be considered as services rendered in India. The decision in the case of ex parte employees of Air France clearly supports the stand of the assessee. With regard to the Explanation to S.9(1)(ii) of the Act, the Amendment w.e.f. 1.4.2000 only brings to tax the salary for the rest period or leave period, which is preceded and succeeded by services rendered in India. In the facts of the present case we find that the issue is not with regard to rest period or leave period and, therefore, the amended provisions will not have any impact whatsoever. Consequently the decision in the case of Sedco Forex International Drilling Co.Ltd. 264 ITR 320 (Uttaranchal) will not have any impact whatsoever. In view of the above ground nos. 1 to 3 of the Revenue are dismissed." 14. The principle laid down....