SWAMINATHAN SRIDHAR,CHENNAI vs. DCIT, CHENNAI

This appeal of the assessee was earlier disposed of by an order dated 31.05.2017. However, the assessee filed a Miscellaneous Petition in M.P. No. 283/Mds/2017 on the ground that the ground Nos.12, 13, 14, 15 & 16 raised by the assessee were not disposed of. Accordingly, the appeal was reopened only for the purpose of disposal of ground Nos.12 to 16 and posted for hearing.

Shri N.V. Balaji, the Ld.counsel for the assessee submitted that the Stock Appreciation Right was found to be an income as perquisite by this Tribunal. According to the Ld. counsel, the Assessing Officer has taken the same as income. The assessee has offered the profit on sale of Stock Appreciation Right as capital gain. Therefore, according to the Ld. counsel, when the entire profit was taken as income of the assessee and the sale of Stock Appreciation Right, the capital gain offered by the assessee has to be reduced from the income assessed by the Assessing Officer. In other words, when the profit on sale of Stock Appreciation Right was taken as such as income of the assessee, the income offered by the assessee by way of capital gain has to be reduced from that income for the purpose of levying tax. Otherwise, according to the Ld. counsel, there would be double taxation.

We heard Shri V. Nandakumar, the Ld. Departmental Representative also. The Ld. D.R. submitted that the capital gain was levied on allotment of Stock Option Plan to the assessee by the non- resident company. Profit was assessed as income while the same was sold. Therefore, according to the Ld. D.R., these are two independent transactions which took place in the same year, hence, the profit on Stock Option Plan is different and capital gain is different.

We have considered the rival submissions on either side and perused the relevant material available on record. From the material available on record it appears that this Tribunal specifically found that the right obtained by the assessee is only a right on appreciation. It cannot be construed as capital asset. It was also found that what was conferred on the assessee is only a right on the value of appreciation of a specified number of stocks. The stock itself was not conferred on the assessee.

Now coming to ground No.13, the Ld.counsel for the assessee very fairly submitted that this ground would not arise for consideration. In view of submission of the Ld.counsel, ground No.13 is dismissed as not arising out of the order of lower authority.

Now coming to ground No.14, the Ld.counsel for the assessee submitted that M/s Cognizant Technologies India Pvt. Ltd. has offered the profit on sale of Stock Appreciation Rights as fringe benefit and paid the taxes thereof. Therefore, the same cannot be again brought for taxation as perquisite. According to the Ld. counsel, this amounted to double deduction.

We heard Shri V. Nandakumar, the Ld. Departmental Representative also. Admittedly, the Stock Appreciation Right was offered to the assessee as the scheme promoted by the M/s Cognizant Technology Solutions Corporation, a Delaware Corporation, USA. When the Stock Appreciation Right was offered by the non-resident company, this Tribunal is of the considered opinion that the Indian company ought not to have paid fringe benefit tax. The Stock Appreciation Right was conferred on the assessee for the service rendered to the Indian company by the non-resident company. It is not a case of the assessee that the Stock Appreciation Right was given by the Indian company. In lieu of service rendered by the assessee to the Indian company, which is a subsidiary company of non-resident company, the stock option was given by the non-resident company. Therefore, this Tribunal is of the considered opinion that the fringe benefit tax is not liable to be paid by the Indian company. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Thus, ground No.14 is rejected.

We heard Shri N.V. Balaji, the Ld.counsel for the assessee and Shri V. Nandakumar, the Ld. Departmental Representative. The Ld.counsel for the assessee submitted that the excess tax paid by the assessee was refunded to the assessee. Therefore, it cannot be considered to be an income. According to the Ld. counsel, the payment of tax was made out of taxable income, therefore, when the taxable income was assessed for payment of tax, the refund of tax cannot be liable for taxation.

We heard Shri V. Nandakumar, the Ld. Departmental Representative also. It is an admitted fact that tax shall be paid on the net income. Income-tax paid is not an allowable deduction. Therefore, refund of income-tax also cannot be considered to be an income in the hands of the assessee. At the best, the interest, if any, given by the Income-tax Department may be considered to be an income for taxation. Therefore, this Tribunal is of the considered opinion that the Assessing Officer has to verify the refund of ₹7,44,645/-. Accordingly, orders of both the authorities below are set aside and the Assessing Officer is directed to examine the excess refund of ₹7,44,645/- and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

The next issue raised by the assessee at ground No.16 is with regard to deduction towards House Rent Allowance and professional tax.

We heard Shri N.V. Balaji, the Ld.counsel for the assessee and Shri V. Nandakumar, the Ld. Departmental Representative. The Assessing Officer has to verify whether the House Rent Allowance and professional tax are deductible on the salary. Accordingly, orders of both the authorities below are set aside and the Assessing Officer is directed to verify the deductibility of House Rent Allowance and professional tax and thereafter decide the issue afresh, in accordance with law, after giving a reasonable opportunity to the assessee.

It is made clear that other part of the order remains same.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes.