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The Tax Publishers ITO v. Khaitan Polyfab (P) Ltd. [ITA No. 507/Kol/2012 & ITA No. 608/Kol/2009, dt. 22-4-2016] : 2016 TaxPub(DT) 2198 (Kol-Trib) Buy back whether re-characterized as dividend. *Facts:* Assessee executive search company was held by its sole Mauritian parent. During the assessment year, the parent did a buy back of the shares at a premium. Since falling in the Mauritian DTAA article 13(4) read with section 46A the said buy back was not taxable in India. Assessing Officer gave it a reading that the buy back at a premium was done so as a disguise to avoid dividend payout and thus was a colourable transaction. By not paying dividend despite making profits the exchequer was deprived of dividend distribution tax which they would have paid instead of the same transaction being done as a buy back. The same was negated in appeal by the Commissioner (Appeals) holding that section 2(22)(iv) specifically treats dividend thus section 2(22)(d) is not to be read in a buy back. Aggrieved the department went in appeal: Held the buy back is not a colourable transaction. It has been done well within the provisions of the law. Cited & Applied: Goldman Sachs (India) Securities Pvt. Ltd. v. ITO, (International taxation) ITA no. 3726/Mum/2015/assessment year 2011-12/dtd. 12-2-2016 Payment to group parent for allotment of ESOP allowability with FBT applied only on vested portion *Facts:* Assessee firm in executive search business had allotted ESOP shares of its group parent. FBT was paid on the vested portion of INR 50.6 lakhs. However the parent had charged INR 1.07 crores as the full price of the allotted ESOP. The assessing officer/ Commissioner (Appeals) had disallowed the balance INR 56 lakhs as no FBT was paid on the same. On appeal - assessee pleaded that the allowability of ESOP deduction was separate to FBT and FBT would be applicable only on the vested portion of the ESOP also the entire amount was INR 1.07 crores was paid by them to the group parent for such ESOP thus eligible for deduction. Held in favour of the assessee applying Biocon Ltd.(144ITD21)(SB)(Bang.); Novo Nordisk India Pvt. Ltd.(42 taxmann.com168) that the ESOP amount paid was an allowable expenditure no matter FBT un-paid wholly on the same.

The Tax Publishers

ITO v. Khaitan Polyfab (P) Ltd. [ITA No. 507/Kol/2012 & ITA No. 608/Kol/2009, dt. 22-4-2016] : 2016 TaxPub(DT) 2198 (Kol-Trib)

Buy back whether re-characterized as dividend.

Facts:

Assessee executive search company was held by its sole Mauritian parent. During the assessment year, the parent did a buy back of the shares at a premium. Since falling in the Mauritian DTAA article 13(4) read with section 46A the said buy back was not taxable in India. Assessing Officer gave it a reading that the buy back at a premium was done so as a disguise to avoid dividend payout and thus was a colourable transaction. By not paying dividend despite making profits the exchequer was deprived of dividend distribution tax which they would have paid instead of the same transaction being done as a buy back. The same was negated in appeal by the Commissioner (Appeals) holding that section 2(22)(iv) specifically treats dividend thus section 2(22)(d) is not to be read in a buy back. Aggrieved the department went in appeal:

Held the buy back is not a colourable transaction. It has been done well within the provisions of the law.

Cited & Applied: Goldman Sachs (India) Securities Pvt. Ltd. v. ITO, (International taxation) ITA no. 3726/Mum/2015/assessment year 2011-12/dtd. 12-2-2016

Payment to group parent for allotment of ESOP allowability with FBT applied only on vested portion

Facts:

Assessee firm in executive search business had allotted ESOP shares of its group parent. FBT was paid on the vested portion of INR 50.6 lakhs. However the parent had charged INR 1.07 crores as the full price of the allotted ESOP. The assessing officer/ Commissioner (Appeals) had disallowed the balance INR 56 lakhs as no FBT was paid on the same. On appeal - assessee pleaded that the allowability of ESOP deduction was separate to FBT and FBT would be applicable only on the vested portion of the ESOP also the entire amount was INR 1.07 crores was paid by them to the group parent for such ESOP thus eligible for deduction.

Held in favour of the assessee applying Biocon Ltd.(144ITD21)(SB)(Bang.); Novo Nordisk India Pvt. Ltd.(42 taxmann.com168) that the ESOP amount paid was an allowable expenditure no matter FBT un-paid wholly on the same.