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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
All the appeals of the two independent assessees are directed against the respective orders of the Commissioner of Income Tax (Appeals) -5, Chennai, confirming the penalty levied by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act'). We heard all these appeals together and disposing of the same by this common order.
Shri Avinash, Wadhwani, the Ld.counsel for the assessees, submitted that the Assessing Officer levied penalty under Section 271(1)(c) of the Act. On appeal, the CIT(Appeals) confirmed the same. According to the Ld. counsel, both the assessees are employees of M/s Cognizant Technologies India Pvt. Ltd. The parent company of the assessees, namely, M/s Cognizant Technology Solutions Corporation, a Delware Corporation, USA promoted an incentive plan for the employees of M/s Cognizant Technologies India Pvt. Ltd. As per this plan, according to the Ld. counsel, the assessees were given option for availing Stock Appreciation Rights. According to the Ld. counsel, Stock Appreciation Right is nothing but a right for appreciation of the value of shares allotted by the parent company. According to the Ld. counsel, the assessees did not have right over the share, only the value of appreciation right was given to the assessees. The Stock Appreciation Right allotted to the assessee was also subjected to tax in USA. According to the Ld. counsel, the Stock Appreciation Rights offered to the assessees are capital asset, therefore, the value realized by the assessees on Stock Appreciation Rights is nothing but a capital gain. Accordingly, the assessees offered the same for taxation. However, according to the Ld. counsel, the Assessing Officer found that the Stock Appreciation Rights is a revenue receipt. The orders of the Assessing Officer were also confirmed by the CIT(Appeals) and this Tribunal. According to the Ld. counsel, a further appeal was made before the High Court which is pending for adjudication.
Shri Avinash, Wadhwani, the Ld.counsel for the assessees, further submitted that the Stock Appreciation Right was given by USA company and the assessees are not employees of USA company. According to the Ld. counsel, there was no employer and employee relationship between the assessees and USA company.
Moreover, the assessees have also disclosed the Stock Appreciation Rights allotted to the assessees in their return of income and claimed the same as capital receipt. According to the Ld. counsel, the Assessing Officer has treated the same as revenue receipt which was confirmed by this Tribunal also. The question arises for consideration, according to the Ld. counsel, is whether there was concealment of income or furnishing inaccurate particulars of income? The allotment of Stock Appreciation Rights was disclosed by the assessees. The gain arising out of Stock Appreciation Rights was also disclosed to the Revenue. According to the Ld. counsel, the difference of opinion between the assessees and Assessing Officer is whether the gain on Stock Appreciation Rights is a revenue receipt or capital receipt. According to the Ld. counsel, it is a capital receipt but the Revenue authorities found that it is a revenue receipt. Therefore, the difference of opinion in classification of particular income cannot be construed as concealment of particulars of income or furnishing of inaccurate particulars of income. Therefore, according to the Ld. counsel, it cannot be said that the assessees have concealed any part of income or furnished inaccurate particulars of income, hence, the CIT(Appeals) is not justified in confirming the penalty levied by the Assessing Officer.
On the contrary, Shri M. Mathivanan, the Ld. Departmental Representative, submitted that the assessees claimed the gain on the value of Stock Appreciation Rights as a capital gain. According to the Ld. D.R., in fact, it is a profit in lieu of salary, therefore, it has to be assessed as revenue receipt. To that extent, the assessees have furnished inaccurate particulars of income. According to the Ld. D.R., the claim of the assessees as capital gain amounts to inaccurate particulars of income.
We have considered the rival submissions on either side and perused the relevant material available on record. It is not the case of the Revenue that the shares were allotted to the assessees.
What was given to the assessees is a right of appreciation on the shares of the USA company. The assessees have disclosed the value of the Stock Appreciation Rights and gain thereon and claimed the same as capital gain. The Assessing Officer treated the gain as revenue receipt and levied tax. On appeal by the assessees before the CIT(Appeals) and this Tribunal, the view of the Assessing Officer that the gain is a revenue receipt was confirmed and now further appeal is said to be pending before the High Court.
The question arises for consideration is whether there was concealment of income or whether the assessees have furnished inaccurate particulars of income? It is nobody’s case that the assessees have concealed the allotment of Stock Appreciation Rights or gain arising out of such appreciation. As rightly pointed out by the Ld.counsel for the assessees, the difference of opinion between the assessees and the Assessing Officer is on classification of head of income. In other words, whether the gain arising on appreciation rights is a capital gain or revenue receipt.
This Tribunal is of the considered opinion that the classification of head of income is depending upon the understanding of the scheme and provisions of Income-tax Act. There may be difference of opinion among various authorities on classification of head of income. Therefore, a mere difference of opinion between the assessees and the Assessing Officer or other Revenue authorities on classification of income under different heads cannot be construed as furnishing of inaccurate particulars of income or concealing any part of assessee’s income. In view of the above, this Tribunal is of the considered opinion that it is not a fit case for levy of penalty under Section 271(1)(c) of the Act. Accordingly, we are unable to uphold the orders of the authorities below. Accordingly, orders of both the authorities below are set aside and the penalty levied by the Assessing Officer under Section 271(1)(c) of the Act is deleted.
In the result, the appeals filed by both the assessees are allowed.
Order pronounced on 24th July, 2018 at Chennai.