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2015 (1) TMI 962 - AT - Income TaxReopening of assessment - Assessee filed the return as ‘Resident but not ordinarily Resident’ - SOTP attributable to services rendered in India - value of perquisites as unexplained income - Indo-US DTAA - whether the provisions of the section 5(1)(c) and section 9(1)(ii) of the Act are not applicable to the appellant? - Held that:- As can be seen from facts on record, prior to his joining Microsoft India (R & D) P. Ltd., on 01.01.2004, assessee was an employee of Microsoft Corporation, USA and was a non-resident. While, he was employed with Microsoft, USA assessee was granted stock awards as per stock awards scheme of Microsoft USA. As per the scheme, stock awards granted to assessee between August, 2002 and September, 2005, amounting to ₹ 1,49,80,713 vested with the assessee during previous year 2006-07 relevant to assessment year under dispute. It is the claim of the assessee that out of stock amount vested of ₹ 1,49,80,713, an amount of ₹ 1,05,62,088 was attributable to services rendered in India and ₹ 44,18,625 is relatable to services rendered in USA. To substantiate such claim assessee has also submitted before the A.O. a working showing the details of stock amount granted. A perusal of the working, a copy of assessee’s paper book, reveals assessee has furnished all details relating to stock award granted, date of grant, date of vest of stock amount, total period between grant date and vest date, no. of days present in India between the grant date and vest date etc., Through this working assessee has also demonstrated the perquisite value of stock award which can be apportioned towards services rendered in India, depending upon the number of days stayed in India. As it appears, these facts and figures have not at all been examined by the Assessing Officer. Ld. CIT(A) has also not examined this issue with the attention it deserved. The order of the Ld. CIT(A) is non-speaking and bereft of any reasoning. When the residential status of the assessee is accepted as ‘not ordinarily resident’, income which accrues or arises to him outside India cannot and should not form part of the total income, unless the other conditions of proviso to section 5(1) are satisfied. Moreover, section 9(1)(ii) also makes it clear, income under the head “Salaries shall be deemed to accrue or arise in India if it is earned in India towards services rendered in India. The information submitted by the employer under section 133(6) in letter dated 10.03.2009 also does not conclusively prove that amount received under SOTP is entirely relatable to services rendered in India. The employer has only stated that the stock awards proceeds were received by the assessee in India. Rather, in the aforesaid letter the employer has clarified that stocks were allotted to assessee when he was under employment of Microsoft Corporation, USA. Further, assessee sold the stocks to broker appointed by Microsoft, USA in the year 2003. Assessee only received the final installment of SOTP sales in financial year 2006-07. Therefore, without ascertaining how much of the SOTP is attributable to services rendered in India, the entire amount cannot be made taxable only because the money was received in India. Therefore, we are of the view that the assessee having residential status of ‘not ordinarily resident’, only that portion of the stock awards and SOTP attributable to services rendered in India can form part of total income for the impugned assessment year. As neither the A.O. nor Ld. CIT(A) have examined the facts properly, we are inclined to remit the matter back to the file of A.O. for taking a fresh decision on the issue of taxability of amount received from stock amounts/SOTP. - Decided in favour of assessee for statistical purposes. Addition of an amount of ₹ 89,87,658 being final installment of SOTP - Held that:- The only additions made by A.O. are ₹ 1,49,80,713 towards stock awards and ₹ 30,46,287 towards post tax savings. Out of the additions of ₹ 1,49,80,713, assessee admits that an amount of ₹ 1,05,62,088 is taxable in India. Therefore, dispute remains with the amount of ₹ 44,18,625. The A.O. has not separately added the amount of ₹ 89,87,658. In these circumstances, we fail to understand how this ground arises. However, considering the fact that assessee has raised this issue in the petition filed under section 154 of the Act, which is still pending before the A.O., we remit the matter back to the file of the A.O. for deciding afresh after providing an opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Addition of an amount of ₹ 30,46,287 - Held that:- Neither the A.O. nor the learned CIT(A) have decided the issue with reference to evidences brought on record by the assessee. Accordingly, we consider it appropriate to remit this issue back to the file of the A.O. for deciding afresh after affording reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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