ESOPs from foreign employer are taxable in India if these relate to services rendered by employee in India

ACIT V. ROBERT ARTHUR KELTZ (Delhi - Trib.)

In case of an assessee, being an employee of a foreign company, only such proportion of ESOP is taxable which relates to service rendered by such assessee in India

In the instant case the assessee, an employee of foreign company, had exercised ESOPs while on his assignment in India. He, therefore, offered to tax the amount of proportionate ESOP earned in India, i.e., proportionate to the number of days of his assignment in India. However, the AO while framing the assessment brought to tax the entire amount of perquisite on account of stock options. On appeal, the CIT (A) allowed assessee's appeal. Aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

• The principle laid down by the Delhi 'I' Bench in the case of Asstt. CIT v. Ellin 'D' Rozario [IT Appeal No. 2918 (Delhi) of 2005, dated 5-12-2008] was that only proportionate salary would be taxable in India, if a part of activity done by the assessee had no relation to any India-specific job or activity; 
• In the instant case, it was not in dispute that the assessee was in India only for a short period and prior to it, he had not done any service connected with any activity in India; 
• As the assessee had not rendered service in India for the whole grant period, applying the proposition laid down (supra), only such proportion of the ESOP would be taxable in India as related to the service rendered by the assessee in India.