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2011 (8) TMI 480 - AT - Income TaxCapital gain or not - Assessment under section 143(3) read with section 147 - sale of shares which the assessee received on account of stock option - The claim of the assessee was that he had acquired a valued right, i.e., right to subscribe to shares in future - Though subject to certain conditions stipulated at the time of grant of options, and, therefore, the amount so received on exercise of this valuable right should be treated as a long-term capital gain - The Assessing Officer did not agree with these submissions - He was of the view that since the holding period of these shares, i.e., from the date of exercising the stock option to sale of the shares, was less than twelve months, the gains on sale of such shares cannot be treated as capital gains - the assessee has been offered by JJ USA is not specified number of shares in the company at the specified price but only an option to exercise the right to buy, in a specified time frame, a specified number of shares at a specified price-subject to fulfilment of certain further conditions set out in the document. There is no compulsion on the assessee to buy these shares as the assessee has been granted an option to buy, at the market rate prevailing as on the date of grant of option, the specified number of shares within certain time frame - which essentially implies that the assessee may, if so desires, buy the shares or may not buy these shares - It means the assessee was not the owner of these shares before the shares were sold, and entries, to that extent, were mere notional in nature - Section 45(1) provides that any profits or gains from the transfer of capital asset are taxable as capital gains, but then, even going by the documents produced by the assessee, here is a case in which the assessee did not own any capital asset in the form of shares when he claims to have sold the same - The impugned gains are, therefore, cannot be taxed under the head 'Capital gains' - Decided in favour of assessee.
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