2025 (4) TMI 531

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....900/- made by the AO on account of Income earned as Perquisites u/s 17 (2) of the I.T. Act, 1961, in the form of company shares allocated on discounted/subsidised rates, without appreciating the facts mentioned by the AO in the assessment order. 2. The Ld. CIT(Appeals) has erred in law and facts is not appreciating the provisions of section 17 (2) (vi) of the Act read with Rule 3 (8) (iii) where the FMV of the shares should have been taken by the Merchant Banker for valuation of shares. 3. The Ld. CIT(Appeals) has erred in accepting additional evidences without giving opportunity to the AO. 4. That the order of CIT(Appeals) being erroneous in law and on facts deserves to be set aside/ cancelled and the order of the AO to be restored." 3. We are next taken to the learned CIT(A)/NFAC lower appellate discussion reversing the assessment findings making section 17 (2) perquisites addition of Rs. 4,53,18,900/- in assessee's hands, reading as under: "7.3 I have carefully considered the facts on record and submission of the appellant. The fact of the case is that the A.O. has received information from DCIT Cir-1(2), New Delhi that M/s Acidaes Solution....

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....ined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and, where employees' stock option has been granted under any plan or scheme therefor, includes the securities offered under such plan or scheme; 1. "sweat equity shares" means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called; 1. The value of any specified security or sweat equity shares shall be the fair market value of the specified 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; 1. "fair market value" means the value determined in accordance with the method as may be prescribed; 1. "option" means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price; 7.6 For the purpose income....

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....e employer has valued the perquisite at Rs. 58,72,113/- as per the valuation report of Category-I Merchant Banker, which was not disputed by Assessing Officer. Though the appellant failed in mentioning value of perquisites in the prescribed column of the return of income in the original ITR, but from verification of Form 16 and Form 12BA, it is found that the value of perquisite has been included in the salary head. 7.7 After exercising the stock option by the appellant, the company has issued shares to Non-Resident Foreign Company namely Norwest Venture Partner, Mauritius at a value of Rs. 97,465/- per equity share on 27/03/2014. While issuing the equity shares to Non-Resident Company, the valuation of equity share of employer company is to be done according to Master Circular on Foreign Investment in India No. 15/2013-14 dated July 01, 2013 issued by Reserve Bank of India. As per the Master Circular, the valuation of equity shares of company as per following pricing guidelines: 5. Pricing guidelines * Fresh issue of shares: Price of fresh shares issued to persons resident outside India under the FDI Scheme, shall be: - on the basis of SEBI guid....

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....ing before us is that the Assessing Officer herein had rightly made the impugned addition going by the fair market value "FMV" of the very shares issued to M/s Norwest Venture Partners Mauritius on 27.03.2014 which was much more than that allotted to the assessee's director(s); by his company M/s Acidaes Solutions Pvt. Ltd. on 25.02.2014. The Revenue's case in very terms in nutshell is that learned CIT(A) ought not to have deleted the impugned 'perquisites' addition made in the assessee's hands as the latter market value deserved to be adopted as per shares issued to the "Mauritius" based entity only a month later, in above terms. 5. We have given our thoughtful consideration to the Revenue's sole substantive grievance herein and find no merit therein. Suffice to say, the assessee admittedly happens to be one of the director(s) of the company herein M/s Acidaes Solutions Pvt. Ltd., who had issued shares to him on 25.02.2014 @ 12628.20 each unit. The said premium was undisputedly based as per the prescribed merchant banker going by Rule 3(8)(i), (ii) & (iii), wherein the clinching date is that of "exercise of the option" involving unlisted shares. 5.1 This case file further re....