ADDL. COMMISSIONER OF INCOME TAX versus BHARAT V. PATEL

Citation: [2018] 7 S.C.R. 1067 · Decided: 24-04-2018 · Supreme Court of India · Bench: R.K. AGRAWAL · Disposal: Dismissed

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Judgment (excerpt)

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ADDL. COMMISSIONER OF INCOME TAX
 v.
 BHARAT V. PATEL
(Civil Appeal No. 4380 of 2018)
APRIL 24, 2018
[R. K. AGRAWAL AND ABHAY MANOHAR SAPRE, JJ.]
Income Tax Act, 1961 – s.17(2) – ‘Perquisite’ – Amendment
thereto, if retrospective – Respondent, Chairman and MD of Procter
and Gamble (P&G), India (subsidiary of (P&G) USA) was issued
Stock Appreciation Rights (SARs) by (P&G) USA and received an
amount of Rs.6,80,40,724/- on its redemption –  Issue as to the
taxability of the amount so received by the Respondent on redemption
of SARs – Held: “Perquisite” is usually a non-cash benefit given by
an employer to an employee in addition to entitled salary or
remuneration – In order to bring the perquisite transferred by the
employer to the employees within the ambit of tax, legislature brought
an amendment u/s.17 by inserting Clause (iiia) in s.17(2) of the IT
Act through the Finance Act, 1999 with effect from 01.04.2000 which
was later omitted by the Finance Act, 2000 – Since, the transaction
in the instant case pertains prior to 01.04.2000, hence, it cannot be
covered under the said clause in the absence of an express provision
of retrospective effect – Finance Act, 1999 – Finance Act, 2000 –
Interpretation of Statutes.
Interpretation of Statutes – Taxing Statutes – Held: Taxing
provisions to be construed strictly so that no person who is otherwise
not liable to pay tax, be made liable to pay tax.
Income Tax Act, 1961– s.28(iv) – When not applicable –
Respondent, employee of (P&G), India, (subsidiary of (P&G) USA)
was issued Stock Appreciation Rights (SARs.) and received an
amount of Rs.6,80,40,724/- from (P&G),USA on its redemption –
Alternate plea of Revenue that the case of the respondent came
within the ambit of s.28(iv) – Held: Applicability of s.28(iv) is
confined only to the case where there is any business or profession
related transaction involved – However, in the instant case there is
nothing as such and thus cannot be covered u/s.28(iv) for the
purpose of tax liability.
  [2018] 7 S.C.R. 1067
             1067
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SUPREME COURT REPORTS
[2018] 7 S.C.R.
Dismissing the appeals, the Court
HELD: 1.1 The word “Perquisite” in common parlance may
be defined as any perk or benefit attached to an employee or
position besides salary or remuneration. These are usually non-
cash benefits given by an employer to an employee in addition to
entitled salary or remuneration. It may be said that these benefits
are generally provided by the employers in order to retain the
talented employees in the organization. There are various
instances of perquisite such as concessional rent accommodation
provided by the employer, any sum paid by an employer in respect
of an obligation which was actually payable by the employee etc.
Section 17(2) of the Income Tax Act, 1961 was enacted by the
legislature to give the broad view of term perquisite. On the other
hand, the word ‘Capital Gains’ means a profit from the sale of
property or an investment. It may be short term or long term
depending upon the facts and circumstances of each case. This
gain or profit is charged to tax in the year in which transfer of the
capital assets takes place. [Para 9] [1072-G, H; 1073-A-B]
1.2  In order to bring the perquisite transferred by the
employer to the employees within the ambit of tax, legislature
brought an amendment under Section 17 of the IT Act by inserting
Clause (iiia) in Section 17(2) of the IT Act through the Finance
Act, 1999 (27 of 1999) with effect from 01.04.2000, which was
later on omitted by the Finance Act, 2000. The intention behind
the said amendment brought by the legislature was to bring the
benefits transferred by the employer to the employees as in the
instant case, within the ambit of the Income Tax Act, 1961. It was
the first time when the legislature specified the meaning of the
cost for acquiring specific securities. Only by this amendment,
legislature determined what would constitute the specific
securities. By this amendment, legislature clearly covered the
direct or indirect transfer of specified securities from the employer
to the employees during or after the employment. On a perusal
of the said clause, it is evident that the case of the Respondent
falls under such clause. However, since the transaction in the
instant case pertains to prior to 01.04.2000, hence, such
transaction cannot be covered under the said clause in the absence
of an express provision of retrospective effect. There is n

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