Sumit Bhattacharya Vs ACIT (Bombay High Court)
For AY 1998-99, the assessee, an individual earning salary and professional income, filed a return declaring total income of ₹26,76,900. The assessment was reopened after the Assessing Officer found that the assessee, an employee of M/s. Procter & Gamble (India) Ltd, had received stock appreciation rights (SARs) by virtue of his employment. The SARs were redeemed during financial year 1997-98 for ₹4,79,13,852.
The assessee contended that the amount received on redemption of SARs was in the nature of capital gains and was not taxable as a perquisite. By assessment order dated 20.03.2002 under Section 143(3) read with Section 147 of the Income Tax Act, the Assessing Officer treated the amount as salary income. The first appellate authority, by order dated 25.11.2002, upheld the treatment.
The assessee appealed to the Tribunal. The matter was referred to a Special Bench because of conflicting Tribunal decisions, including Bharat V. Patel Vs. Additional Commissioner of Income Tax and Infosys Technologies Ltd Vs. DCIT. The Special Bench held that receipts connected with the assessee’s employment were to be treated as salary and upheld the Revenue’s position.
The Revenue thereafter filed the appeal before the Bombay High Court under Section 260A. The substantial questions concerned whether SARs and stock options were distinct, whether the SARs redemption receipt was assessable under the head “salary”, whether salary income could be assessed when received from a person other than the employer, whether it could alternatively be taxed as income from other sources, and whether it was assessable under “capital gains”.
