TaxTMI 
TaxTMI 
2015 (1) TMI 962
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....or information from M/s. Microsoft India and also ICICI Bank, Madhapur branch, Hyderabad wherein the assessee was having his bank account. As per the information obtained from the Bank, the AO noticed that during the relevant previous year, the assessee has received US $ 2 lakh on 24.04.2006 and another amount of US $ 2 lakh on 24.07.2006, converted to Indian rupee both amounting in total to Rs. 1,80,76,000. On the basis of the aforesaid bank statement and the information submitted by Microsoft India Ltd., in their letter dated 10.03.2009, the AO formed a belief that the amount of Rs. 1,80,76,000 received by the assessee which is more than the value of perquisite declared by the assessee has escaped assessment. Accordingly, assessing officer reopened the assessment under section 147 of the Act by issuing notice under section 148. The gist of reasons recorded by the AO for reopening the assessment are as under : "When the receipts are about Rs. 1,80,76,000 apart from the other credit in the Bank account the assessee claimed the value of the perquisites at Rs. 1,34,06,282 leaving a difference of Rs. 46,69,717 which requires consideration as unexplained income. Though the assessee c....
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....nder dispute actually relate to the period he was under employment of MS, USA and was staying in USA. Hence, exempt from tax in India. The A.O. relying upon the information obtained from Microsoft India, concluded that the employer had rightly deducted TDS and the perquisites of Rs. 1.33 crores as against Rs. 1,50,29,712 as claimed in Form No.12BA which also includes an amount of Rs. 49,000 towards accommodation. The A.O. also rejected assessee's reliance upon FBT provisions and OECD Model Tax, 2010 by observing that this provisions are applicable for A.Y. 2008-09 onwards. As far as the Indo-US DTAA is concerned, the A.O. observed that the assessee had not brought on record any evidence to show that tax was paid in USA and moreover, the employer was not aware of any tax paid by the assessee. Thus, the A.O. concluded that the amount of Rs. 1,49,80,713 being the stock award/SOTP has to be treated as income of the assessee for the impugned assessment year. 4. Further, the A.O. observed that as per the ICICI Bank statement, the total credits are to the tune of Rs. 1,80,76,000 whereas, as per Form No.16, the amount shown towards perquisites is Rs. 1,49,80,713 thereby, leaving a balance....
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....uld be considered non-taxable in the hands of the appellant. (b) Without prejudice to the above, the addition on this account should be restricted to Rs. 4,418,625 only considering the fact that out of total benefit of Rs. 14,980,713, the amount of Rs. 10,562,088 has already been offered to tax. In case the addition of Rs. 44,18,625 is sustained, then the foreign tax credit in respect of federal taxes paid by the appellant in the USA attributable to said amount, should be allowed as per provisions of section 90(2) of the Act. 4(a) On the facts and in circumstances of the case and in law, the Ld. CIT(A) has grossly erred in confirming hat addition of amount of Rs. 89,87,658 received by the appellant as final instalment in respect of the transfer of right of stock option under Stock Option Transfer Plan(SOTP) in the year 2003 when the appellant was non-resident in India. (b) Without prejudice to above ground, the Ld. CIT(A) has erred in not allowing the request of the appellant to allow foreign tax credit in respect of federal taxes paid in the USA on amount of 89,87,658, as per provisions of section 90(2) of the Act in case such addition is sustained. 5. On the facts and in circ....
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....of 10 financial years preceding the relevant financial year or (ii) He has been in India for 729 days or less during the 7 financial years preceding the relevant financial year. 7.1. It was submitted section 5(1)(c) of the Act, provides that in case of a person who is not ordinarily resident in India in a particular financial year, any income earned by him outside India shall not be taxable in India unless it is derived from a business controlled in or a profession set up in India. The learned A.R. submitted that assessee was present in India for 300 days during F.Y. 2006-07 relevant to the assessment year under consideration. Therefore, as per the provisions of section 6(1)(a) of the Act, he was a resident in India in F.Y. 2006-07. Further, during the seven financial years preceding F.Y. 2006-07 the assessee was present in India for 704 days. In this context, learned A.R. referred to the details of stay in India, year-wise at page-5 of the paper book. He submitted that the assessee was in employment with Microsoft, USA prior to his employment with Microsoft India from 1st January, 2004. During this period, the assessee used to visit India for a couple of weeks per year for perso....
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....088. In this regard, the Ld. A.R. referred to the detailed computation of stock option awards as submitted in the paper book. The learned A.R. submitted that the A.O. has made the addition solely relying upon the information obtained from Microsoft India. In this regard it was submitted that employer is required to deduct TDS on the income chargeable to tax under the head 'Salaries" on an estimated basis. Therefore, in case of the assessee also the employer has deducted tax at source on a conservative basis to mitigate the possibility of any adverse implication that may arise in case of non-compliance of TDS provisions under the Act. But, that by itself cannot be a reason to conclude that the stock awards of Rs. 1,49,80,713 is taxable in India. It was submitted, while filing the income tax return, the assessee has considered the correct tax position in respect of non taxability of stock awards income attributable to services rendered in the USA. It was submitted out of the stock awards amounting to Rs. 1,49,80,713 vested during the assessment year under consideration, the income attributable to the services rendered in India is to the tune of Rs. 1,05,62,088 which was offered to ta....
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.... years preceding the relevant financial year. 9.1. However, sub-section (6) of section 6 treats a person to be not ordinarily resident in India in any financial year, if either he has been a non-resident in India in 9 out of 10 previous years preceding the relevant previous year or he has been in India for a period of 729 days or less during the seven previous years preceding the relevant previous year. As per proviso to section 5(1) in case of a person who is not ordinarily resident in India in terms with section 6(6), the income which accrues or arises to him outside India shall not be included in the total income of the relevant previous year, unless it is derived from a business controlled in or a profession set up in India. 9.2. Keeping in view aforesaid statutory provisions, the issue in dispute needs to be examined. Before the A.O. assessee has furnished the details of stay in India during the seven previous years preceding the relevant financial year which is as under : S. No. F.Y. No. of days 1. 2005-06 310 2. 2004-05 321 3. 2003-04 40 4. 2002-03 NIL 5. 2001-02 14 6. 2000-01 19 7. 1999-00 NIL Total 704 9.3. As per the aforesaid details,....
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....he head "Salaries shall be deemed to accrue or arise in India if it is earned in India towards services rendered in India. Article 16(1) of India-USA DTAA also provides that salary derived by a resident of USA in respect of an employment exercised in USA shall be taxable in USA. Learned A.R. has also referred to the commentary on OECD model tax convention relating to taxation of stock option income derived by an employee while working in two countries which provides, employment benefit attributable to the stock option should be considered to be derived from a particular country in proportion of the number of days during which employment has been exercised in that country to the total number of days during which the employment services from which the stock option is derived is exercised. In our view, all these aspects have to be examined before coming to the conclusion that the perquisite value of stock awards are taxable in India. Furthermore, assessee's claim that stock awards amounting to Rs. 44,18,625, attributable to services rendered in USA, was offered to tax in USA also needs to be looked into by examining the returns filed before the USA tax authorities, copies of which wer....
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....final installment of SOTP. 11. We have heard the parties and perused the materials on record. As can be seen, from the stage of assessment proceedings itself assessee has consistently stated that out of Rs. 1,49,80,713 added by A.O. an amount of Rs. 44,18,625 is attributable towards services rendered in USA, hence, not taxable in India. Whereas, balance amount of Rs. 1,05,62,088 has been offered to tax by the assessee. On a perusal of assessment order, it is clear that the A.O. has started the computation on the basis of income returned by the assessee at Rs. 2,25,66,227. The only additions made by A.O. are Rs. 1,49,80,713 towards stock awards and Rs. 30,46,287 towards post tax savings. Out of the additions of Rs. 1,49,80,713, assessee admits that an amount of Rs. 1,05,62,088 is taxable in India. Therefore, dispute remains with the amount of Rs. 44,18,625. The A.O. has not separately added the amount of Rs. 89,87,658. In these circumstances, we fail to understand how this ground arises. However, considering the fact that assessee has raised this issue in the petition filed under section 154 of the Act, which is still pending before the A.O., we remit the matter back to the file of....