TMI Blog2016 (5) TMI 819X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Appre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for participation in 1999 Incentive Compensation Plan announced by the parent company. According to the Ld. counsel, Stock Appreciation Right is nothing but a right for appreciation of the value of shares given / allotted to the assessees by the parent company. As per the Stock Appreciation Rights, the assessees were not offered any security or sweat equity shares. What was given to the assessees is a right for appreciating the value of certain specified number of securities. During the year under consideration, M/s Cognizant Technologies India Pvt. Ltd. deducted tax by treating the Stock Appreciation Rights as a perquisite in the hands of the assessees. Stock Appreciation Rights was also subjected to tax in USA since the parent company, namely, M/s Cognizant Technology Solutions Corporation, a Delaware Corporation, USA has also deducted tax. According to the Ld. counsel, the Stock Appreciation Rights availed by the assessees suffered tax twice, once in USA and again in India. 3. Shri N.V. Balaji, the Ld.counsel for the assessees, submitted that Stock Appreciation Rights offered to the assessees is a capital asset, therefore, the realization of value of the Stock Appreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961 (in short 'the Act'), the Ld. D.R. submitted that the value of any specified security or sweat equity shares allotted or transferred directly or indirectly by the employer at free of cost or at concessional rate to its employees should be taxed as perquisite in the hands of the employees. In this case, the assessees claim that the option was given by the parent company to the employees of Indian subsidiary company. 5. Referring to Section 17(2)(vi) of the Act, the Ld. D.R. submitted that when the value of specified security or sweat equity shares was transferred directly or indirectly by the employer either free of cost or at concessional rate, the same has to be treated as perquisite in the hands of the recipient employees. In this case, the assessees were employees of Indian company, which is subsidiary of M/s Cognizant Technology Solutions Corporation, a Delaware Corporation, USA. The assessees, being employees of the subsidiary company to the parent company, namely, M/s Cognizant Technology Solutions Corporation, a Delaware Corporation, USA, were allotted Stock Appreciation Rights. Therefore, according to the Ld. D.R., the benefit was conferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation Rights under the scheme. It is the case of the assessees that the Stock Appreciation Rights was given to all the persons who are not connected with M/s Cognizant Technology Solutions Corporation, a Delaware Corporation, USA. The option was given to the employees who are in association or connected with USA company, either directly or indirectly, so as to motivate the employees to perform their best in their work. Therefore, directly the M/s Cognizant Technologies India Pvt. Ltd. would be benefited and indirectly M/s Cognizant Technology Solutions Corporation, a Delaware Corporation, USA is also benefited. Therefore, the contention of the assessees the incentive was not provided by the employer of the assessees is not correct. The parent company, who is interested in the business of the M/s Cognizant Technologies India Pvt. Ltd., in order to promote their business and for commercial expediency, the scheme was promoted and offered to the assessees an option. The assessees being employees of M/s Cognizant Technologies India Pvt. Ltd., accepted the offer and benefited and enriched themselves. This payment is in addition to salary for the service rendered to M/s Cognizant Technol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, when the Stock Appreciation Rights was vested irrespective of the residency, the same is liable for taxation in India. 10. The assessees also contended before this Tribunal that the value of Stock Appreciation Rights on realization suffered tax in USA, therefore, it cannot be taxed again in India. As rightly submitted by the Ld. D.R., 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 O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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