Ravi Kumar Sinha Vs CIT (Delhi High Court)
Delhi High Court held that addition of value of shares granted under the Employees Stock Purchase Scheme as perquisite in terms of section 17(2)(iiia) of the Income Tax Act unsustainable in law.
Facts- Present petition has been filed majorly on two questions of law i.e. whether on the facts and circumstances of the case the Tribunal erred in law in confirming addition of Rs.86,28,750/ – as perquisite value of shares granted under Employees Stock Purchase Scheme (ESPS) and whether value of stock purchase option exercised by the employee/Assessee is to be reckoned on the date of exercising such option and taxing it for the difference in market price had cost paid by the assessee to its employer.
Conclusion- Held that in light of the restriction with respect to marketability and tradeability of the stock in question, the FMV could not have been recognized to exceed the face value of the shares and thus the determinative being INR 15/-. The Valuation Report, as noted above, was at best a medium adopted by the employer in order to broadly ascertain its obligations for the purposes of withholding tax. The same could not have consequently been taken into consideration for the purposes of FMV. The position which was advocated by the respondents, namely, for the quoted price or the Valuation Report being taken into consideration is clearly untenable, since the same could have had no application to a share which was subject to a lock-in stipulation and could not be sold in the open market owing to a complete embargo on the sale of those shares.
