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2016 (5) TMI 819 - AT - Income TaxTDS on Stock Appreciation Rights as a perquisite in the hands of the assessees - India - USA DTAA - whether the Stock Appreciation Rights availed by the assessees suffered tax twice, once in USA and again in India? - Held that:- The incentive was given to the assessees as a compensation for the services rendered to M/s Cognizant Technologies India Pvt. Ltd. It was not given for transfer of capital asset or termination of any source of income. Therefore, the right conferred on the assessees, namely, Stock Appreciation Rights under the scheme cannot be construed as capital asset. What was conferred on the assessees is only valuation of appreciation for a specified number of stocks. The stock itself was not conferred on the assessees. The stock was retained in the common kit and the appreciation value was given to the assessees. This was given because the assessees were employees of subsidiary company of M/s Cognizant Technology Solutions Corporation, a Delaware Corporation, USA. Since the right to receive the appreciation value alone was conferred on the assessees and not right on the stock itself, this Tribunal is of the considered opinion that what was received by the assessees is not capital asset. Hence, the same is liable for taxation as revenue receipt. There is no material available on record to suggest that the value of Stock Appreciation Rights was suffered tax in USA. The assessees have not produced the certificate before the authorities below or before this Tribunal from USA tax authorities to support the claim that the same was subjected to tax in USA. Since the assessees claim that the value of Stock Appreciation Rights was subjected to taxation in USA, this Tribunal is of the considered opinion that the same has to be examined in the light of the Double Taxation Avoidance Agreement between Government of India and Government of USA on the basis of the certificate issued by the tax authorities in USA. Therefore, while confirming that the value of Stock Appreciation Rights received by the assessees is liable for taxation, the matter is remitted back to the file of the Assessing Officer for limited purpose of examining whether the assessee has paid tax in USA on the value of the very same Stock Appreciation Rights in the light of the Double Taxation Avoidance Agreement between Government of India and Government of USA. The benefit was conferred on the assessees in the form of Stock Appreciation Rights for the services rendered to the subsidiary company, M/s Cognizant Technologies India Pvt. Ltd. Therefore, merely because the assessees were nonresidents and rendered service outside India during the vesting period that cannot be a reason for claiming that the same was not taxable in India. Admittedly, when the assessees exercised option for Stock Appreciation Rights, they were residents in India. Therefore, when the Stock Appreciation Rights was vested irrespective of the residency, the same is liable for taxation in India. - Decided partly in favour of assessee for statistical purposes.
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