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DATE: January 13, 2021 (Date of pronouncement)
DATE: January 23, 2021 (Date of publication)
AY: 2014-15
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CITATION:
S. 17(2)(vi): (i) ESOP benefits granted to an assessee when he was resident and in consideration for services rendered in India is taxable even though the assessee is a non-resident in the year of exercise. S. 17(2)(vi) decides the timing of the income to be the year of exercise of the ESOPs but does not dilute or negate the fact that the benefit had arisen at the point of time when the ESOP rights were granted.

(ii) Article 15 of the India-UAE DTAA permits taxation of ESOP benefit, which is included in the scope of the expression "other similar remuneration" appearing immediately after the words "salaries and wages", in the jurisdiction in which the related employment is exercised. Thus, an assessee who gets ESOP benefits in respect of his service in U.A.E. and he exercises these options at a later point of time, say after returning to India and ceasing to be a non-resident, will still have the treaty protection of that income under article 15(1). Conversely, when the assessee gets the ESOP benefit on account of rendering services in India, he cannot have the benefit of article 15 in respect of the said income.

We find that so far as the ESOP benefit is concerned, while the income has arisen to the assessee in the current year, admittedly the related rights were granted to the assessee in 2007 and in consideration for the services which were rendered by the assessee prior to the rights being granted- which were rendered in India all along. The character of income may be inchoate at that stage but certainly what is being sought to be taxed now, on account of the specific provision under section 17(2)(vi), is a fruit of services rendered much earlier and the benefit, which has now become a taxable income, accrued to the assessee in 2007. All that section 17(2)(vi) decides is the timing of an income, but it does not dilute or negate the fact that the benefit, in which is being sought to be taxed, had arisen much earlier i.e. at the point of time when the ESOP rights were granted. On these facts, in our considered view, the income, even if it was inchoate at the point of time when the options were granted, has accrued and has arisen in India. The assessee is a non- resident in the current assessment year, but quite clearly, the benefit, in respect of which the income is bring sought to be taxed now, had arisen at an earlier point of time in India. Viewed thus, the income in respect of ESOP grant benefit accrued and had arisen at the point of time when the ESOP rights were granted, even though the taxability in respect of the same, on account of the specific legal provisions under section 17(2)(vi), has arisen in the present in this year.

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DATE: May 6, 2016 (Date of pronouncement)
DATE: May 20, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 40(a)(ia): Payments by a CA firm to foreign professional entities for services rendered abroad is not taxable under Articles 12 and 15 of the India-USA DTAA. The retrospective amendment to s. 9(1)(vii) to tax services rendered outside India does not apply in the context of a disallowance u/s 40(a)(ia) in the hands of the payer

Ostensibly, the requirement of rendering services in India in order to attract section 9(1)(vii) of the Act was removed by insertion of Explanation by the Finance Act, 2010 with retrospective effect from 1/4/1976. This has been understood by the Revenue to say that inspite of the services having been rendered by the recipients outside India, the same is taxable in India by applying the aforesaid amendment. In our view, such retrospective amendment would be determinative of the tax liability in the hands of the recipients of income. So however, in the present case, what is held against the assessee is the failure to deduct tax at source at the time of payment of such income. Ostensibly, dehors the aforesaid amendment, the impugned income was not subject to tax deduction at source in India as per the prevailing legal position. Taxability of a sum in the hands of recipient, on account of a subsequent retrospective amendment would not expose the assessee-payer to an impossible situation of requiring deduction of tax at source on the date of payment. Therefore, on this count also the assessee cannot be held to be in default in not deducting tax at source so as to trigger the disallowance under section 40(a)(i) of the Act

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DATE: July 8, 2015 (Date of pronouncement)
DATE: July 27, 2015 (Date of publication)
AY: 2009-10
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CITATION:
Articles 13 & 15 of DTAA: Law on whether if a sum cannot be assessed as "fees for technical services" under the "make available" clause of Article 13, it can still be assessed as "Independent personal services" under Article 15 explained

The assessee’s contention that since the services contracted for the by the assessee with non-residents fall within the meaning of Article 13 but get excluded because of not `making available’ any technical knowledge etc., then such services cannot be once again considered under Article 15 is not acceptable. The precise question is that which of the two Articles, namely, 13 or 15, should have primacy in the facts and circumstances as are instantly prevailing?

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