TaxTMI 
TaxTMI 
2015 (11) TMI 1367
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....rs (A.Ys.) 2002-03 and 2004-05. 2. The only issue arising in the instant appeal is the taxability of the gain on the transfer of sweat equity shares during the relevant previous years allotted to the assessee. While the Revenue seeks to bring the entire gain to tax as short-term capital gain, the assessee concedes it to be income by way of capital gains, albeit long term in nature and, accordingly, exempt u/s.10(38) of the Act. The Revenue's alternate claims are of the income being assessable as speculation income u/s. 43(5) or even as income from other sources u/s. 56. 3. The basis of the assessee's case is the sweat equity offer to the assessee by his employer, M/s. Parke Davis, of shares in it's parent, a foreign company, on 20.2.1....
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.... what the assessee, by endorsing his signature thereon, assuming it to have been at the relevant time, did was to acknowledge having received the offer and, at best, convey his intention to accept the offer in future. The offer was even otherwise valid for a period of 10 years, so that the assessee's 'acceptance', as it is stated to be, is of little consequence. The so called 'acceptance' is in fact a promise to accept (in future). A promise to offer or, as the case may be, to accept, is not 'offer' or 'acceptance' per se, and no binding contract or even contractual relationship comes into existence at this stage. The said endorsement thus does not signify anything and no right crystallizes in favour of the assessee thereat. It is only when....
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....ential ingredient for allotment of shares in a company, as is the case under the Indian law, i.e. as per the law of the relevant country. Yet, the same must permit allotment of shares against a debt, presumably secured and, further, without interest. Even considering so, a contractual relationship would only fructify on the exercise of the option by the employee, resulting in a debt, non-interest bearing, permissible by law, crystallizing in favour of the employer- company. Clearly, therefore, it is only upon allotment and transfer of shares, which per force the circumstances had to be simultaneous, that a benefit in terms of excess of sale price over cost, or net gain, arises to the assessee. The allotment/acquisition and sale of shares....
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....that point of time, which would only be on the translation into shares upon exercise of the option. In our foregoing analysis, we find ourselves as being in agreement with the decision by the tribunal in the assessee's own case on an earlier occasion (in ITA No. 4699/Mum/2004 dated 10.08.2011 for A.Y. 1998-999/copy on record). Each of the difference aspects of the transaction, representing a part of the sophisticated plan of compensation to its employees, stands discussed in detailed. In essence and substance though, as afore-stated, the co-ordinate Bench express the same opinion, i.e., that the rights to the assessee, undoubtedly a capital asset, vests on the exercise of the option/s by the assessee, and not at any time earlier, who, at....
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....ed by the CIT(A), in treating the gains on sale of stock option shares as 'long term capital gain, is, for the detailed reasons set out earlier in this order - particularly in paragraph 10 above, erroneous and it does not meet our approval. In this view of the matter, and as we are dealing with limited issue in appeal as raised by the Revenue, it is not really necessary for us to deal with other aspects of the matter.' In so holding, reliance was placed on the decision in the case of Summit Bhattacharya vs. Asst. CIT [2008] 112 ITD 1 (Mum) (SB) and Shripad S. Nadkarni (in ITA No. 4698/Mum/2004 dated 20.01.2009). The assessee's reliance on the decision in Bomi S. Billimoria vs. Asst. CIT (in ITA No. 2120/Mum/1998 dated 30.06.2009), a subs....