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TMI Blog2014 (10) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... res and 8,13,900 shares, respectively, of M/s. Dr. Reddy's Laboratories Ltd. in the financial year 1994-95 at a concessional rate of Rs. 90 per share. The acquisition of shares was reflected in the returns filed for the assessment year 1995-96. The Income-tax Officer (ITO) took the view that the market value of the shares was about Rs. 455, per share and that the differential amount being Rs. 365 deserves to be treated as "benefit", as defined under section 2(24)(vd) read with section 28(iv) of the Act. The Income-tax Officer passed separate orders dated March 27, 1998, levying tax on the differential amount, apart from dealing with other questions. The respondents filed appeals before the Appellate Commissioner. The appeals were dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate authority have virtually expanded the scope of the relevant provisions of law and have brought the non-existent income under the purview of taxation. He con- tends that it is only when the shares that were allotted to the respondents were capable of yielding income instantly, irrespective of the preparedness of the respondents to sell their shares, that the benefit can be said to have accrued. He further submits that the Tribunal has analysed the matter with reference to the relevant provisions of law and has arrived at the correct conclusions. Learned senior counsel further submits that even if one ignores the volatility or fluctuating nature of the prices of shares, the bene- fit in the form of difference between the market price an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r perquisite taxable under clause (iv) of section 28." In a way, it is a circular phenomenon, in that the definition refers to the charging section and the charging section relies upon the definition, under the Act. The only way to extricate this appears to be, referring to the further ingredients added under section 28(iv) of the Act. After adopting the expression "value of any benefit or perquisites", the provision proceeds to qualify the same by adding the words, "whether convertible into money or not, arising from business or the exercise of a profession." The benefit, which is sought to be taxed, in the instant case, is the dif- ference between the market price, on the one hand, and the allotted price of a share, on the other. It has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, has arisen, but also the one that has accrued. When Parliament has consciously chosen to restrict the taxation of benefit only when it has arisen, it is not permissible to tax the benefits by treating them as "accruals". A close scrutiny of the concept of "arising of income" discloses that, it, in fact, must flow into the assets of the assessee, during previous year, and thereby, it became taxable in the financial year. The Income-tax Officer was not even able to show, much less demonstrate, that the income in the form of "benefit" has arisen to the respondents at all. The sole basis for levying income-tax on the amount was on the assumption that in case the shares are sold, they would have yielded the differential price and that, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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