TMI Blog2018 (8) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... eptance of right or proposal, which comes with certain commitments. As and when the commitment is complete, the proposal said to be accepted. The goal post of acceptance shifted until completion of the commitment which comes along with the scheme. As submitted by AR, the provisions of section 192 is applicable only on payment basis not on accrual basis. The value of the perquisite can be determined as per section 17(2)(vi) of the Act but is taxable only when the assessee makes the payment, in this case, allotment of shares. In case, it is accepted the contention of ld. CIT(A) that separation agreement should not be used to defer the tax liability, the company allots the shares and pays the withholding tax. Then, the company allots the shares without receiving full consideration on such shares. In case, Mr. Vikram fails to comply with the separation agreement, the company cannot cancel the allotment of shares. Therefore, the assessee has to safeguard its interest first. Coming to other argument that withholding tax should have been paid against the non-compete fee, in our view, the non-compete fee is not accrued in this AY, it is also the findings of ld. CIT(A). Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove 7,80,000 Total 6,10,08,571 Later, the AO passed revised order u/s 154 dated 10th November, 2016 reducing the demand raised to ₹ 1,11,36,772. 2.3 The reasons for passing the order u/s 201(1) and 201(1A) by the AO are as under: 1. The Assessee should have withheld taxes on communication of desire to exercise shares by Mr. Vikram on 13 October 2011 itself - being the date of receipt of communication of exercise of ESOP from Mr. Vikram and not the date of allotment of shares, based on the following contentions: 2. Provisions of section 192 of the Act do not permit postponement of tax withholding till receipt of TDS amount from the employee. 3. Assessee was in possession of sufficient funds that were payable to Mr. Vikram to discharge the withholding tax on ESOP and therefore, the Assessee should have adjusted the amount payable against the withholding taxes suo moto. 4. Separation Agreement has been used by the Assessee for deferring the tax liability of Mr. Vikram. Relying on section 23 of The Indian Contract Act, 1872 and the ruling of the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o government treasury and levying interest u/s 201(1A)(ii) of the Act whereas payment has already been made by the Appellant. The Appellant craves, to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of appeal. 7. Before us, the assessee filed its submissions as under: The provisions of Section 192 reads as under: (1) Any person responsible for paying any income chargeable under the head Salaries shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year. Accordingly, as per the provision, the withholding obligation arises when the employer makes any payment to the employee, which is chargeable under the head 'salaries'. Section 17(2)(vi) of the Act, provides for the definition of Perquisite , which is taxable as Salary and sub-clause (vi) to Section 17(2) reads as under: the value of any sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares would have never been allotted to him and there would be no taxable perquisite accruing/arising in the hands of Mr. Vikram. 8. Ld. DR, on the other hand, relied on the order of CIT(A). 9. Considered the rival submissions and perused the material on record. We notice that Mr. Vikram (Ex-employee) exercised the ESOP option on 13/10/2011. The assessee has allotted the shares on 04/05/2012 after completion of certain conditions put forth by the assessee in the separation agreement. The essential conditions are : The non-compete fees payable upon fulfilment of commitments made by Mr. Vikram such as i) Non-disposal agreements entered for enforcing restriction on sale of shares to be allotted under Scheme 2007 ii) On receipt withholding tax on the allotment of shares. These are the essential conditions in order to safeguard the interest of the assessee. 9.1 In our considered view, the ex-employee has a right to exercise, once he exercises the option, the price of the shares are freezed. That means, the exercise of the option is only acceptance of the proposal as per the scheme 2007. The proposal comes with the obligation i.e. with conditions of such exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
