TMI Blog2018 (4) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... t would amount to the violation of his Constitutional Right. It is apparent that such benefit or perquisite shall have arisen from the business activities or profession whereas in the instant case there is nothing as such. The applicability of Section 28(iv) is confined only to the case where there is any business or profession related transaction involved. Hence, the instant case cannot be covered under Section 28(iv) of the IT Act for the purpose of tax liability. Respondent got the Stock Appreciation Rights (SARs) and, eventually received an amount on account of its redemption prior to 01.04.2000 on which the amendment of Finance Act, 1999 (27 of 1999) came into force. In the absence of any express statutory provision regarding the applicability of such amendment from retrospective effect, no force in the argument of the Revenue that such amendment came into force retrospectively. It is well established rule of interpretation that taxing provisions shall be construed strictly so that no person who is otherwise not liable to pay tax, be made liable to pay tax. High Court didn't erred in law while upholding that the amount received on redemption of Stock Appreciation Rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated as capital gains on transfer/redemption of shares, and hence, the Respondent is liable to pay tax on capital gains. Being aggrieved with the order dated 15.09.2003, the Respondent filed an appeal before the CIT (Appeals) being No. CAB/V 37/04 05 which was upheld by learned CIT (Appeals) in favour of Assessing Officer while dismissing the appeal of the Respondent. (g) Being dissatisfied, the Respondent further preferred an appeal before the Tribunal. The Tribunal, vide order dated 24.09.2010, dismissed the appeal. The decision of the Tribunal dated 24.09.2010 was not challenged further. (h) The Division Bench of the High Court, vide judgment and order dated 23.12.2004, allowed the appeal filed by the Respondent while dismissing the appeal of the Revenue. (i) Hence, the present appeals have been filed by the Revenue before this Court. 4) We have given our thoughtful consideration to the submissions of leaned senior counsel for the parties and perused the factual matrix of the case. Point(s) for consideration: 5) Whether in the present facts and circumstances of the case, any interference by this Court is required with the impugned decision of the High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are usually non cash benefits given by an employer to an employee in addition to entitled salary or remuneration. It may be said that these benefits are generally provided by the employers in order to retain the talented employees in the organization. There are various instances of perquisite such as concessional rent accommodation provided by the employer, any sum paid by an employer in respect of an obligation which was actually payable by the employee etc. Section 17(2) of the IT Act was enacted by the legislature to give the broad view of term perquisite. On the other hand, the word Capital Gains means a profit from the sale of property or an investment. It may be short term or long term depending upon the facts and circumstances of each case. This gain or profit is charged to tax in the year in which transfer of the capital assets takes place. In the instant case, the fundamental question which arises for consideration before this Court is with regard to the taxability of the amount received by the Respondent on redemption of Stock Appreciation Rights (SARs.) 10) It is a matter of record that the Respondent was employed as the Chairman cum Managing Director of the (P G) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Provided that in a case where allotment or transfer of specified securities is made in pursuance of an option exercised by an individual, the value of the specified securities shall be taxable in the previous year in which such option is exercised by such individual. Explanation For the purposes of this clause, (a) cost means the amount actually paid for acquiring specified securities and where no money has been paid, the cost shall be taken as nil; (b) specified securities means the securities as defined in clause(h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and includes employees stock option and sweet equity shares; (c) sweat equity shares means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know how or making available rights in the nature of intellectual property rights or value additions, by whatever name called; and (d) value means the difference between the fair market value and the cost for acquiring specified securities; 13) The intention behind the said amendment brought by the legislature was to bring the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as income of the employee(s) chargeable under the head salaries .. 15) The Revenue also contended before the High Court that the amendment brought in by Section 17(2) of the IT Act was clarificatory, hence, retrospective in nature. However, the High Court rejected the stand of the Revenue. The High Court, in its impugned judgment, on the point of the applicability of clause has held as under: 15. In the case of Commissioner of Income Tax, Bangalore vs B.C. Srinivasa Setty [(1981) 128 ITR 294 (SC)] this Court held that the charging section and computation provision under the 1961 Act constituted an integrated code. The mechanism introduced for the first time under the Finance Act, 1999 by which cost was explained in the manner stated above was not there prior to 1.4.2000. The new mechanism stood introduced w.e.f. 1.4.2000 only. With the above definition of the word cost introduced vide clause (iiia), the value of option became ascertainable. There is nothing in the Memorandum to the Finance Act, 1999 to say that this new mechanism would operate retrospectively. Further, a mechanism which explains cost in the manner indicated above cannot be read retrospectively unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red. On a perusal of the above, prima facie, it appears that such Circular dealt with the cases where the employer issued shares to the employees at less than the market price. In the instant case, the Respondent was allotted Stock Appreciation Rights (SARs.) by the (P G) USA which is different from the allotment of shares. Hence, in our opinion such Circular has no applicability on the instant case. Moreover, a Circular cannot be used to introduce a new tax provision in a Statute which was otherwise absent. 17) Alternatively, the Revenue also contended that the case of the Respondent shall come within the ambit of the Section 28(iv) of the IT Act. At this juncture, we deem it appropriate, for the sake of convenience, to refer Section 28(iv) of the IT Act which is reproduced herein below: 28. Profits and gains of business or profession. The following income shall be chargeable to income tax under the head Profits and gains of business or profession (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession. On a first look of the said provision, it is apparent that such benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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