AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 343
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....Company ('NBFC') with the Reserve Bank of India. The Company is engaged in the business of granting micro loans in rural areas, across 19 states in India. 2.1 A survey operation u/s 133A of the Act was conducted in the case of assessee on 17 December 2014 to verify the compliance with TDS provisions. During the survey, it was observed by the Deputy Commissioner of Income Tax, TDS Circle - 2(1), Hyderabad that Mr. Vikram Akula (here-in-referred to as Mr. Vikram'), then employee of the Company, has received compensation in the form of Employee Stock Options 'ESOP' in short) granted to him and a certain amount as non-compete fee vide a Separation and General Release Agreement dated 23rd November, 2011 (the separation agree....
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.... Vikram. Relying on section 23 of The Indian Contract Act, 1872 and the ruling of the Mumbai Tribunal in the case of Hathway Investments (P.) Limited (104 DTR 217), the Ld. AO has held that Separation Agreement has been used to defeat the provisions of withholding tax and therefore invalid. 5. As per the Ld. AO, the Appellant should have withheld taxes on non compete fee on entering into the Separation Agreement i.e. 23 November 2011 as the non-compete fee had 'accrued' to Mr. Vikram on entering into the Separation Agreement." 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A). 4. Before the CIT(A), the assessee filed written submissions, which were extracted by the CIT(A) in his order at pages....
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....Appellant is to be re-characterized and adjusted towards interest u/s 201(1A) of the Act b. Erred in holding the appellant as assessee in default both in law as well as in facts for non deposit of TDS to government treasury and levying interest u/s 201(1A)(ii) of the Act whereas payment has already been made by the Appellant. The Appellant craves, to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of appeal." 7. Before us, the assessee filed its submissions as under: " The provisions of Section 192 reads as under: "(1) Any person responsible for paying any income chargeable under the head "Salaries" shall, at the time o....
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....ied security or sweat equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from, the assessee in respect of such security or shares" Therefore, for the purpose of valuing the perk, the difference between the Fair Market Value ('FMV) of shares (as on the date of which option exercised) and amount paid by the assessee is treated as value of perk in the hands of the assessee. * Accordingly, on combined reading of above provision the following points can be noted: - Withholding triggers on payment of any income chargeable as Salaries. - A perquisite arises in hands of employees as on the date of allotment of shares pursuant to ESOP....
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....ng tax on the allotment of shares. These are the essential conditions in order to safeguard the interest of the assessee. 9.1 In our considered view, the ex-employee has a right to exercise, once he exercises the option, the price of the shares are freezed. That means, the exercise of the option is only acceptance of the proposal as per the scheme 2007. The proposal comes with the obligation i.e. with conditions of such exercise of option. Once the option is exercised, the company which allots the shares has certain obligation on their part to safeguard their interest. The allotment cannot be completed without receiving the full price of the shares. In the given case, mere receipt of the price agreed is not enough but to receive the cost ....