Daily Archives: March 6, 2019

Assessee, an employee of Infosys BPO Ltd, was granted ESOP options, of which 6000 options vide Option Transfer Agreement dated 07.02.2007 were transferred to/bought back by Infosys Technologies Ltd., with Infosys BPO Ltd., as a confirming party. 6000 options comprised of 1250 options granted on 28.02.2003; 2500 options granted on 02.02.2004 and 2250 options granted on 01.06.2005. The options granted on 28.02.2003 and 02.02.2004 were held for a period of more than 3 years before their transfer on 07.03.2007. For the AY 2007-08, the assessee filed his return of income declaring Long Term Capital Gains ('LTCG') arising on transfer of above 3750 ESOP options amounting to Rs. 20,41,672. Assessee's case was selected for scrutiny and the Assessing Officer ('AO') treated the said capital gains as Short Term Capital Gains ('STCG') instead of LTCG. The AO held that the options have no value without their exercise and the gains derived by the assessee by transfer thereof, essentially represents the exercise by the assessee of the rights that the options had rendered to him.

ESOP transfer (prior to exercise) chargeable to tax as capital gains – Bangalore ITAT