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TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 1474
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.... under Section 143(3) of the Income Tax Act, 1961 (in short 'the IT Act') and determined the total income of the Respondent at Rs. 7,23,11,013/­ against the declared income. (c) Being aggrieved, the Respondent preferred an appeal before the Commissioner of Income Tax (Appeals) being No. CAB/I­643/2000­2001. After considering the case, learned CIT (Appeals), vide order dated 28.03.2002, dismissed the appeal of the Respondent after comprehensively discussing the taxability of the alleged amount and upholding the Assessment Order passed by the Assessing Officer. (d) Being dissatisfied, the Respondent carried the matter before the Tribunal. The Tribunal, vide order dated 27.06.2003, in ITA No. 2241/Ahd/2002 partly allowed the appeal filed by the Respondent. (e) At this juncture, the Respondent as well as the Revenue both preferred cross appeals before the High Court of Gujarat at Ahmedabad. (f) At the same time, consequent to the decision of the Tribunal dated 27.06.2003, the Assessing Officer started the proceeding side by side to give effect to the order dated 27.06.2003. Vide order dated 15.09.2003, the Assessing Officer held that the difference being sum of Rs. 6,80....
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....ted that the amount received by the Respondent from redemption of Stock Appreciation Rights (SARs) can be treated only as capital gains and cannot be treated as perquisite under Section 17(2) (iii) of the IT Act or under Section 28 (iv) of the IT Act. However, it was pointed out that the said capital gains cannot be said to arose to the Respondent since there was no consideration paid as the cost of acquisition by the Respondent. It was also submitted that such amount received on account of redemption of Stock Appreciation Rights could have been taxed if at all under the provisions of Clause (iiia) of Section 17(2) of the IT Act. Finally, it was also submitted that the question of law sought to be raised by the Revenue is no more res integra as settled by this Court in the case of Commissioner of Income Tax vs. Infosys Technologies Ltd., [2008] 297 ITR 167 (SC). Hence, these appeals deserve to be dismissed at the threshold. Discussion:­ 9) Before examining the case at hand, it is pertinent to have an understanding of the words "Perquisite" and "Capital Gains". The word "Perquisite" in common parlance may be defined as any perk or benefit attached to an employee or position be....
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....e IT Act or in alternatively under Section 28(iv) of the IT Act instead of capital gains. The High Court also upheld the view of the Tribunal but the High Court disagreed that such capital gains arose to the Respondent on redemption of Stock Appreciation Rights since there was no cost of acquisition involved from the side of the Respondent. The meaning of the word perquisite for the instant case is given under Section 17(2) of the IT Act. The Revenue alternatively contended that the case of the Respondent should come under the ambit of Section 28(iv) of the IT Act. 12) It is apposite to note here that, particularly, in order to bring the perquisite transferred by the employer to the employees within the ambit of tax, legislature brought an amendment under Section 17 of the IT Act by inserting Clause (iiia) in Section 17(2) of the IT Act through the Finance Act, 1999 (27 of 1999) with effect from 01.04.2000, which was later on omitted by the Finance Act, 2000. The said Clause (iiia) as it was then is reproduced herein below: "(iiia) the value of any specified security allotted or transferred, directly or indirectly, by any person free of cost or at concessional rate, to an indivi....
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....t construe the law in such a way that brings an individual within the ambit of Income Tax Act to pay tax who otherwise is not liable to pay. In the absence of any such specific provision, if an individual is subjected to pay tax, it would amount to the violation of his Constitutional Right. 14) It is pertinent to note that on the point of applicability of clause (iiia) of Section 17(2) of the IT Act, this Court settled the position in Infosys Technologies Ltd (supra), and has held as under:­ "17. Be that as it may, proceeding on the basis that there was "benefit" the question is whether every benefit received by the person is taxable as income? In our view, it is not so. Unless the benefit is made taxable, it cannot be regarded as income. During the relevant assessment years, there was no provision in law which made such benefit taxable as income. Further, as stated, the benefit was prospective. Unless a benefit is in the nature of income or specifically included by the legislature as part of income, the same is not taxable. In this case, the shares could not be obtained by the employees till the lock­in period was over. On facts, we hold that in the absence of legislati....
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....f the perquisite on shares issued to the employees at less than market price. 2. The matter has been considered by the Board. The benefit does amount to a perquisite within the meaning of clause (iii) of sub­section (2) of Section 17 of the Income­Tax Act, 1961. The various situations in this regard have to be dealt with as under: (i) where the shares held by the Government have been transferred to the employee, there will be no perquisite because the employer­employee relationship does not exist between Government and the employee (transferor and the transferee); (ii) where the company offers shares to the employees at the same price as have been offered to the other shareholders or the general public, there will be no perquisite; (iii) where the employer has offered the shares to its employees at a price lower than the one at which the shares have been offered to the other shareholders/public, the difference between the two prices will be taxed as perquisite; (iv) where the shares have been offered only to the employees, the value of perqusite will be the difference between the market price of the shares on the date of acceptance of the offer by the employee....