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2009 (6) TMI 115 - AT - Income TaxValuation of stock options - capital gain determination - gain as realised on the value of the options under the scheme - whether there is any cost of acquisition? - shares purchased under the employees stock option plan (ESOP) - amount retained in US dollars in EEFC account and bank charges the net gain - Nature of receipts ''salary or short-term capital gains or long-term capital gain" - RBI has approved the stock option scheme on the condition that there should not be any payment, either in India or abroad, for acquiring the shares - During the previous year assessee sold 1,000 shares in USA and in return received a sum in Indian currency. By taking into consideration the amount retained in US dollars in EEFC account and bank charges the net gain was computed - assessee submitted before the AO that this amount is not liable to tax since the assessee did not pay any amount towards cost of acquisition. HELD THAT:- It could be noticed from the stock option plan and the terms of RBI, no payment was made by the assessee nor exercised the right to purchase shares before 13th Aug., 1992 and thus so far as the assessee is concerned, there is no cost of acquisition to the assessee in which event, by applying the decision of B.C. Srinivasa Setty [1981 (2) TMI 1 - SUPREME COURT], the amount received is not liable to tax under the head "Income from capital gains". Even if it is assumed that the market value of the share is the benefit given to the assessee, such benefit can be said to accrue to the assessee only on the date of exercise of the option. In the instant case, the date of exercise of option as well as the date of sale is same and thus there is no difference between the deemed cost of acquisition and the actual price realised by the assessee and thus CIT(A) was not justified in directing the AO to bring to tax the amount as short-term capital gain. Therefore, we set aside the orders passed by the tax authorities and direct the AO to exclude the impugned amount from the computation of income.
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