Holding

The Court held that the ESOP benefit was not a perquisite for the assessment years in question and therefore no tax under Section 192 was payable, nor could Infosys be treated as a defaulter under Sections 201(1) and 201(1A).

Summary

The Supreme Court examined whether Infosys Technologies Ltd. was required to deduct tax under Section 192 of the Income Tax Act on the benefit employees derived from an Employees Stock Option Scheme (ESOP) for the assessment years 1997-98, 1998-99 and 1999-2000. The Court held that, at that time, there was no provision making such ESOP benefits taxable as a perquisite because Section 17(2)(iiia) – which defines the valuation of specified securities – was inserted only on 1 April 2000 and was not retrospective. The warrants were merely rights without obligation, the shares were non‑transferable and subject to a five‑year lock‑in, rendering any notional gain unascertainable and without realizable cash flow. Consequently, the Department could not treat the difference between market value and the amount paid by employees as a perquisite, nor could it deem Infosys a defaulter under Sections 201(1) and 201(1A). The appeals filed by the Commissioner of Income Tax were dismissed.

Issues considered

Whether tax under Section 192 of the Income Tax Act is payable on the benefit arising from the ESOP for AY 1997-98 to 1999-2000.
Whether the ESOP benefit constitutes a "perquisite" under Section 17(2)(iii) / 17(2)(iiia) for the said years.
Whether Section 17(2)(iiia) inserted by the Finance Act, 1999 operates retrospectively.
Whether the value of the perquisite can be ascertained given the lock‑in and non‑transferability of the shares.
Whether Infosys can be treated as an assessee in default under Sections 201(1) and 201(1A) for failure to deduct TDS.

Legislation cited

Income Tax Act, 1961s. 17(2)(iii a), s. 17(2)(iiia), s. 192, s. 20, s. 201(1), s. 201(1A)
Securities Contracts (Regulation) Act, 1956s. 2(h)

Subjects

Employees Stock Option SchemeperquisiteSection 192TDSlock‑in periodretrospective legislationIncome Tax Actvaluation of perquisitenon‑transferable shares

Judgment

(2008) 1 S.C.R. 136

A COMMISSIONER OF INCOME TAX, BANGALORE
~- j
II.
INFOSYS TECHNOLOGIES LTD.
(C.A. No. 3725 of 2007)
JANUARY 4, 2008
8
(S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.)

Income Tax Act, 1961; S. 17(2)(iii a) as inserted .by
amendment; Ss.20 & 192:
c Perquisite value - Employees Stock Option Scheme -
Issuance of warrant convertible into equity by Employees
Welfare Trust of a company - Non-transferable for five years
- Liability of assessee to deduct tax on perquisite value/
difference between market value of share and price paid by
D the employees - Held: Not liable - Income earned from shares
allotted under the Scheme not taxable in terms of extant
provisions under the Act - Since shares allotted not
transferable for five years, they have no realizable value - -l~

Thus, there was no cash in flow to employees on account of
E mere exercise of option for allotment of shares in lieu of warrant
- Under the circumstances, Revenue erred in treating the
difference between market value of share and consideration
price of share paid by employees as perquisite value for the
purpose of levy of tax - Since Clause (iii a) of S. 17 defining
F cost introduced in the Act only on 1.4.2000, it is not applicable
to assessment years 1997-98; 1998-99 and 1999-2000, the
assessment years in question - Moreover, the cost/specified
securities as defined under Clause (iii a) of S. 17 means the
amount actually paid for acquiring securities - Shares in the
instant case could not be obtained by employees till lock-in-
G period was over - Moreover, in the absence of legislative
mandate, a potential benefit could not be considered as
income chargeable to tax - Nence, assessee in question
cannot be treated as defauiter for not deducting tax at source
in the absence of clear provisions on valuation of perquisites
H 136
COMMISSIONER OF INCOME TAX, BANGALORE v. 137
INFOSYS TECHNOLOGIES LTD.

- Interpretation of Statutes - Legislative intendment. A
~ .v
Words and Phrases:
'Perquisite value', 'specified securities', 'salary' and 'profits'
- Meaning of in the context of S.17(1), (2) and Clause (iii a) of
S.17 of the Income Tax Act, 1961. B
Respondent-assessee, a public limited company,
created a Trust known as Technologies Employees
't· Welfare Trust and allotted 7,50,000 warrants@ Re. 11- each
to the Trust for allotment to employees under the
Employees Stock Option Scheme. Each warrant entitled c
the Holder to get allotment of one equity share of the value
of Rs. 10/- each for total consideration price of Rs. 100/-.
During the assessment years 1997-98, 1998-99 and 1999-
2000, warrants were offered to the eligible employees at
Re. 1/- each by the Trust. Under the Scheme, every warrant D
had to be retained for a minimum period of 1 year.
Thereafter, employee was entitled to elect and obtain
~-
shares allotted to him on payment of the balance amount
of Rs.99. The option could be exercised at any time after
12 months but before expiry of the period of 5 years. E
During the lock-in-period, the custody of shares remained
with the Trust. The shares were non-transferable. The
company also informed the Bombay Stock Exchange
(BSE) that the equity shares, so allotted, were non-
transferable and would not constitute good delivery. For
the assessment year 1999-2000, the Assessing Officer F
~~
(AO) held that the total amount paid by the employees
consequent to the exercise of option was Rs. 6.64 crores
whereas the market value of those shares was Rs. 171
crores. He held that the respondent-assessee was a
defaulter for not deducting TDS in terms of S.192 of the G
Act amounting to Rs. 49.52 crores on the perquisite value
of Rs. 165 crores. Similar orders were also passed by the
--f-
AO for assessment years 1997-98 and 1998-99. These
orders were confirmed by CIT(A). Aggrieved, the assessee
filed appeal before the Tribunal. The Tribunal held that the H
138 SUPREME COURT REPORTS [2008] 1 S.C.R.

A right granted to the employee for participating in the
scheme was not a "perquisite" under Section 17(2)(iii) of
the Income Tax Act, 1961. The order was affirmed by the
High Court. Hence the present appeals.
The question which arose for determination in these
B appeals was as to whether tax had to be deducted under
Section 192 of the 1961 Act, by the respondent-assessee,
on the amount earned by its employees from exercise of
stock option granted to them by the company through
the Trust.
c Dismissing the appeals, the Court
HELD: 1. During the assessment years 1997-98, 1998-
99 and 1999-2000 there was no provision in the Income
Tax Act, 1961 which made the benefit by way of Employees
D Stock Option Scheme taxable as income specifically. It ,..
became specifically taxable only with effect from 1.4.2000
when Section 17(2)(iii a) stood inserted in the Act. (Para
- 7) [143-C]
2.1 Warrant is a right without obligation to buy.
E Therefore, "perquisite" cannot be said to accrue at the
time when warrants were granted in this case. Same would
be the position when options vested in the employees
after lapse of 12 months. (Para - 11) [145-E]
2.2 The shares were stamped with the remark "non-
F transferable" during the lock-in period. It was not open to
the employees to hypothecate or pledge the said shares
during the lock-in-period of 5 years. During the said period,
the said shares have no realisable value, hence, there was
no cash in flow to the employees on account of mere
G exercise of options. On the date when the options were
exercised, it was not possible for the employees to foresee
the future market value of the shares. The benefit,. if any,
which arose on the date when the option stood exercise(!
was only a notional benefit whose value was
H unascertainable. Therefore, the Revenue had erred in

.
COMMISSIONER OF INCOME TAX, BANGALORE v. 139
INFOSYS TECHNOLOGIES LTD.

I-'( treating Rs. 165 crores as perquisite value being the A
difference in the market value of shares on the date of
exercise of option and the total amount paid by the
employees consequent upon exercise of the options.
(Para - 11) [145-H; 146-A-C]
2.3 During the assessment years 1997-98, 1998-99 B
and 1999-2000, the fifth anniversary of the Scheme .had
not taken place and, therefore, it was not possible for the
'+-· assessee company to estimate the value of the perquisite
during that period. It was not open to the Revenue to
ignore the lock-in-period. Therefore, the Revenue had c
erred in treating the respondent as an assessee in default
for not deducting the TDS at 30% as stated in the order of
assessment. (Para - 17) [149-C]
3.1 Unless a benefit/receipt is made taxable, it cannot
be regarded as "income". This is an important principle D
of taxation under the 1961 Act. Applying the said principle
to the insertion of clause (iiia) in Section 17(2) of the Act
,~.
one finds that for the first time w.e.f. 1.4.2000 the word
"cost" stood explained to mean the amount actually paid
for acquiring specified securities and where no money E
had been paid, the cost was required to be taken as nil.
(Para - 14) [147-E]
3.2 There is nothing in the Memorandum to the
Finance Act, .1999 to say that this new mechanism would
operate retrospectively. Further, a mechanism which F
_.,.
explains "cost" in the manner as indicated cannot be read
retrospectively unless the Legislature expressly says so.
It was not capable of being implemented retrospectively.
Till 1.4.2000, in the absence of the definition of the word
"cost", value of the option was not ascertainable. Clause
G
(iiia) is not clarificatory. Moreover, the meaning of the
words "specified securities" in section (iiia) was defined
or explained for the first time vide Finance Act, 1999 w.e.f.
1.4.2000. Moreover, the words allotted or transferred in
clause (iiia) made things clear only after 1.4.2000. Lastly,
even clause (iiia) has been subsequently deleted w.e.f. H
'
I-

j--

140 SUPREME COURT REPORTS [2008] 1 S.C.R. l

~
I-
A 1.4.2001. For the aforestated reasons, clause (iiia) of S.17 •
l'- 1
cannot be read as retrospective in operation. (Para - 15)
[147-H, 148-A·C) ~
'
Commissioner of Income- Tax, Bangalore vs. B. C.
Srinivasa Setty (1981) 128 ITR 294 (SC) - relied on.
8
3.3 Be that as it may, proceeding on the basis that
there was "benefit", the question is as to whether every
benefit received by the person is taxable as income. It is
~
not so. Unless the benefit is made taxable, it cannot be
regarded as income. During the relevant assessment
c years, there was no provision in law which made such
benefit taxable as income. The benefit was prospective.
Unless a benefit is in the nature of income or specifically
included by the Legislature as part of income, the same
is not taxable. In this case, the shares could not be
D obtained by the employees till the lock-in period was over.
In the absence of legislative mandate a potential benefit
could not be considered as "income" of the employee(s)
chargeable under the head "salaries". (Para 16) [148-D-F] --+.
4. Estimation of TDS under Section 192 in the
E
absence of clear provisions on valuation of "perquisite"
in this case would not justify the Revenue in treating the
respondent as assessee in default. Therefore, the AO and
the CIT (A) had erred in treating the respondent as
defaulter for not deducting TDS under Section 192.
F Consequently, Section 201 (1) and 201 (1 A) were also not
........
applicable to the facts of this case and that the Revenue
had erred in invoking the two sections against the
assessee. (Para - 18) [149-E-F]
GIVILAPPELLATE JURISDICTION : Civil Appeal No. 3725
G
of 2007.
From the final Judgment and Order dated 15.12.2006 of 'r
the High Court of Karnataka at Bar.galore in l.T.A. No. 430/2002.
IJVITH
H C.A. No. 17/2008@ S.L.P.(C) No. 16926 of 2007.
COMMISSIONER OF INCOME TAX, BANGALORE v. 141
INFOSYS TECHNOLOGIES LTD. [KAPADIA, J.)
-..Y· Vikas Singh, Amrita Narayan, Shilpa Singh and B.V. A
Balaram Das, for the Appellant.
Harish N. Salve, Arvind P. Datar, Haripriya Padmanabhan,
Senthil Jagadeesan, Meenakshi Grover, Gayatri Goswami,
Kamal Deep Dayal and Christi Jain for the Respondent.
B
The Judgment of the Court was delivered by

.i KAPADIA, J. 1. Leave granted .
2. Respondent-assessee is public limited IT company
based in Bangalore. To implement Employees Stock Option c
Scheme ("ESOP"}, the assessee created a Trust known as
Technologies Employees Welfare Trust and allotted 7,50,000
warrants at Re. 1/- each to the said Trust. Each warrant entitled
the Holder thereof to apply for and be allotted one equity share
of the face value of Rs. 10/- each for total consideration of Rs.
D
100/-. The Trust was to hold the warrant and transfer the same
,.. to the employees of the company under the Terms and
Conditions of the scheme governing ESOP. During the
assessment years 1997-98, 1998-99 and 1999-2000, warrants
were offered to the eligible employees at Re. 1/- each by the
E
Trust. They were issued to employees based on their
performance, security and other criteria. Under the ESOP
Scheme, every warrant had to be retained for a minimum period
of 1 year. At the end of that period, the employee was entitled to
elect and obtain shares allotted to him on payment of the balance
-'• Rs. 99. The option could be exercised at any time after 12 F
months but before expiry of the period of 5 years. The allotted
shares were subject to a lock in period. During the lock in period,
the custody of shares remained with the Trust. The shares were
non-transferable. The employee had to continue to be in service
for 5 years. If he resigned or if his services be terminated for G
y any reason, he lost his right under the scheme and the shares
were to be re-transferred to the Trust for Rs. 100 per share.
Intimation was also given to BSE that "134500 equity shares
were non-transferable and would not constitute good delivery.
Till 13.9.1999 all the shares were stamped with the remark "non- H
142 SUPREME COURT REPORTS [2008] 1 S.C.R.

A transferable". Thus the said shares were incapable of being
converted into money during the lock in period.
3. For the assessment year 1999-2000, the AO held that
the total amount paid by the employees consequent to the
exercise of option was Rs. 6.64 crores whereas the market
8
value of those shares was Rs. 171 crores. He held that the
"perquisite value" was the difference between the market value
and the price paid by the employees for exercise of the option.
He, therefore, treated Rs. 165 crores as "perquisite value" on
which TDS was charged at 30%. It was held that the respondent-
C assessee was a defaulter for not deducting TDS under Section
192 amounting to Rs. 49.52 crores on the above perquisite value
of Rs. 165 crores. Similar orders were also passed by the AO
for assessment years 1997-98 and 1998-99. These orders were
confirmed by CIT(A). No weightage was given by both the
D authorities to the lock in period. Both the authorities took into
account the "perquisite value" as on the date of exercise of
option.
4. Aggrieved by the aforesaid decisions, the respondent-
E assessee carried the matter in appeal to the Tribunal, which
took the view that the right granted to the employee for
participating in the scheme was not a "perquisite" under Section
17(2)(iii) of the Income Tax Act, 1961 ("1961 Act"). This decision
of the Tribunal stood confirmed by the impugned judgment
deli 11ered by the Karnataka High Court on 15.12.2006. Hence,
F these civil appeals by the Department.
5. Vl/hether tax had to be deducted under Section 192 of
the 1961 Act, by the respondent-assessee, on the amount earned
by its employees from exercise of stock option granted to them
G by the company through the Trust, is the question which arises
for determination in these civil appeals.
6. In the case of Govind Saran Ganga Saran v.
Commissioner of Sales Tax and Ors. [(1985) 155 ITR 144 (SC)]
this Court held that there are foUi components of tax. The first
H component is the character of the imposition, the second is the ·
COMMISSIONER OF INCOME TAX,'BANGALORE v. 143
INFOSYS TECHNOLOGIES LTD. [KAPADIA, J.]
i ·1' persen on whom the levy is imposed, the third is the rate at A
which tax is imposed and the fourth is the value to which the
rate is applied for computing tax liability. It was further held that

I
if there is ambiguity in any of the four concepts then levy would
fail. In this case, we are concerned with the forth concept. There
is one more principle which is required to be noted. A benefiU B
receipt under the 1961 Act must be made taxable before it can
be regarded as "income".
't·
7. During the assessment years 1997-98, 1998-99 and
1999-2000 there was no provision in the said 1961 Act which
made the benefit by way of ESOP taxable as income specifically. c
I It became specifically taxable only with effect from 1.4.2000
when Section 17(2)(iiia) stood inserted.
8. At the outset, we may state that in these civil appeals

I we are not concerned with taxability but with the value of a
perquisite.
D

tt 9. The question for consideration is whether "perquisite"
could be said to accrue at the time when warrants were granted
or at the time when the option vested in the employee or at the
time when the options stood exercised or at the time when the E
lock-in conditions were removed or at the time when the shares
were to be sold in the share market. According to the AO, the
"perquisite value" was the difference between the total amount
paid by the employee(s) consequent to the exercise of option
_,;. amounting to Rs. 6.46 crores on which date the market value of F
the shares was in all Rs. 171 crores. Therefore, according to
the AO, the benefit arose on the date when the options stood
exercised. In this case we are concerned with the period prior
to 1.4.2000.
10. We quote herein below Sections 17(1) and (2), which G
-(
read as follows:
""Salary", "perquisite" and "profits in lieu of salary"
defined.
17. For the purposes of sections 15 and 16 and of this H
144 SUPREME COURT REPORTS [2008] 1 S.C.R.

A section,-
(1) "salary" includes-
(i) wages;
(ii) any annuity or pension;
B
(iii) any gratuity;
(iv) any fees, commissions, perquisites or profits in lieu
of or in addition to any salary or wages;
c (v) any advance of salary;
(va) any payment received by an employee in respect of
any period of leave not availed of by him;

D
(vi) the annual accretion to the balance at the credit of an
employee participating in a recognised provident fund,
to the extent to which it is chargeable to tax under Rule
6 of Part A of the Fourth Schedule; and
-
·(vii) the aggregate of all sums that are comprised in the
transferred balance as referred to in sub-rule (2) of Rule
E 11 of Part A of the Fourth Schedule of an employee
participating in a recognised provident fund, to the extent
to which it is chargeable to tax under sub-rule (4) thereof,·
(2) "perquisite" includes-

F (i) the value of rent-free accommodation provided to the
assessee by his employer;
(ii) the value of any concession in the matter of rent
respecting any accommodation provided to the assessee
by his employer;
G
(iii) the value of any benefit or amenity granted or
provided free of cost or at concessional rate in any of the
following cases:-
(a) by a company to an employee who is a director thereof;
H
COMMISSIONER OF INCOME TAX, BANGALORE v. 145
INFOSYS TECHNOLOGIES LTD. [KAPADIA, J.]

. i ·'f (b) by a company to an employee being a person who A
has a substantial interest in the company;
(c) by any employer (including a company) to an
employee to whom the provisions of paragraphs (a) and
(b) of this sub-clause do not apply and whose income
under the head "Salaries" (whether due from, or paid or
B
allowed by, one or more employers), exclusive of the
value of all benefits or amenities not provided forby way
"\· of monetary payment, exceeds twenty-four thousand
rupees;
c
Explanation. -For the removal of doubts, it is hereby
declared that the use of any vehicle provided by a
company or an employer for journey by the assessee
from his residence to his office or other place of work, or

I from such office or place to his residence, shall not be
regarded as a benefit or amenity granted or provided to
him free of cost or at concessional rate for the purposes
D

~
of this sub-clause."
(emphasis supplied)
11 . Warrant is a right without obligation to buy. Therefore, E
"perquisite" cannot be said to accrue at the time when warrants
were granted in this case. Same would be the position when
options vested in the employees after lapse of 12 months. It is
important to note that in this case options were exercisable only
after the cooling period of 12 months. Further, it was open to F
~·
~ the employees not to avail of the benefit of option. It was open
to the employees to resign. There was no certainty that the option
would be exercised. Further, the shares were not transferable
for 5 years (lock-in period). If an employee resigned during the
lock-in period the shares had to be retransferred. During the
G
lock-in period, the possession of the shares, which is an
important ingredient of shares, remained with the Trust. The
i Stock Exchange was duly notified about non-transferability of
the shares during the lock-in period. The shares were stamped
with the remark "non-transferable" during the lock-in period. It
H
146 SUPREME COURT REPORTS [2008] 1 S.C.R.

A was not open to the employees to hypothecate or pledge the 'I"- '
said shares during the lock-in period. During the said period,
the said shares have no realisable value, hence, there was no
cash in flow to the employees on account of mere exercise of
options. On the date when the options were exercised, it was
B not possible for the employees to foresee the future market value
of the shares. Therefore, in our view, the benefit, if any, which
arose on the date when the option stood exercised was only a
notional benefit whose value was unascertainable. Therefore, _,,,
'
in our view, the Department had erred in treating Rs. 165 crores
c perquisite value being the difference in the market value of
as
shares on the date of exercise of option and the total amount
paid by the employees consequent upon exercise of the said
options.
12. We also do not find merit in the contention advanced
D on behalf of the Department that Section 17(2)(iiia) inserted by
Finance Act, 1999 w.e.f. 1.4.2000 was clarificatory and,
therefore, retrospective in nature.
i--
13. We quote hereinbelow Section 17(2)(iiia), which reads
as under:
E
"(iiia) the value of any specified security allotted or
transferred, directly or indirectly, by any person free of
cost or at concessional rate, to an individual who is or has

F
been in employment of that person :
Provided that in a case where allotment or transfer of
specified securities is made in pursuance of an option
. ·-
exercised by an individual, the value of the specified
securities shall be taxable in the previous year in which
such option is exercised by such individual.
G
Explanation.-For the purposes of this clause,-
(a) cost means the amount actually paid for
acquiring specified securities and where no
money has been paid, the cost shall be taken
H as nil;
COMMISSIONER OF INCOME TAX, BANGALORE v. 147
INFOSYS TECHNOLOGIES LTD. [KAPADIA, J.]

j 1 (b) specified security means the securities as A
defined in clause (h) o~ section 2 of the
Securities Contracts (Regulation) Act, 1956
(42 of 1956) and includes employees stock
option and sweat equity shares;
(c) sweat equity shares means equity shares B
issued by a company to its employees or
directors at a discount or for consideration
"' other than cash for providing know-how or
making available rights in the nature of
intellectual property rights or value additions, c
by whatever name called; and
(d) value means the difference between the fair
market value and the cost for acquiring
specified securities;"
D
(emphasis supplied)
14. As stated above, unless a benefiUreceipt is made
~
taxable, it cannot be regarded as "income". This is an important
principle of taxation under the 1961 Act. Applying the above
principle to the insertion of clause (iiia) in Section 17(2) one E
finds that for the first time w.e.f. 1.4.2000 the word "cost" stood
· explained to mean the amount actually paid for acquiring
specified securities and where no money had been paid, the
cost was required to be taken as nil.

~ 15. In the case of Commissioner of Income-Tax, F
· Bangalore v. B.C. Srinivasa Setty [(1981) 128 ITR 294 (SC)]
this Court held that the charging section and computation
provision under the 1961 Act constituted an integrated code.
The mechanism introduced for the first time under the Finance
Act, 1999 by which "cost" was explained in the manner stated G
above was not there prior to 1.4.2000. The new mechanism
stood introduced w.e.f. 1.4.2000 only. Vl/ith the above definition
of the word "cost" introduced vide clause (iiia), the value of option
became ascertainable. There is nothing in the Memorandum to
the Finance Act, 1999 to say that this new mechanism would H
148 SUPREME COURT REPORTS [2008] 1 S.C.R.

A operate retrospectively. Further, a mechanism which explains
~i
"cost" in the manner indicated above cannot be read
retrospectively unless the Legislature expressly says so. It was
not capable of being implemented retrospectively. Till 1.4.2000,
in the absence of the definition of the word "cost", value of the ---
8 option was not ascertainable. In our view, clause (iiia) is hot
clarificatory. Moreover, the meaning of tl:ie words "specified
securities" in section (iiia) was defined or explained for the first
time vide Finance Act, 1999 w.e.f. 1.4.2000. Moreover, the
~
words allotted or transferred in clause (iiia) made things clear
c only after 1.4.2000. Lastly, it may be pointed out that even clause
(iiia) has been subsequently deleted w.e.f. 1.4.2001. For the
aforestated reasons, we are of the view the clause (iiia) cannot
be read as retrospective.
16. Be that as it may, proceeding on the basis that there
D was "benefit", the question is whether every benefit received by
the person is taxable as income? In our view, it is not so. Unless
the benefit is made taxable, it cannot be regarded as income.
During the relevant assessment years, there was no provision "i..
in law which made such benefit taxable as income. Further, as
E stated, the benefit was prospective. Unless a benefit is in the
nature of income or specifically included by the Legislature as
part of income, the same is not taxable. In this case, the shares
could not be obtained by the employees till the lock-in period
was over, On facts, we hold that in the absence of legislative
mandate a potential benefit could not be consi(lered as "income"
F
of the employee(s) chargeable under the head "salaries". The /tr.
stock was non-transferable and the stock exchange was also •
accordingly notified. This is where the weightage ought to have
been given by the AO to an important factor, namely, lock in
period. This has not been done. It is important to bear in mind
G that if the shares allotted to the employee had no realizable sale
value on the day when he exercised his option then there was
no cash inflow to the employee. It was not possible for the
·amployee to know the future value of the shares allotted to him.
on the day he exercises his option.·Even the cost of acquisition
H as "nil" came to be introduced in the 1961 Act by the Finance
COMMISSIONER OF INCOME TAX, BANGALORE v. 149
INFOSYS TECHNOLOGIES LTD. [KAPADIA, J.]
j ~
.Act, 1999 only with effect from 1.4.2000. In fact, the later deletion A
of clause (iiia) is Cl:n indicator of the Ineffective Charge.
17. For the aforestated reasons, we are of the view that
the Department had erred in treating Rs. 165 crores as a
··perquisite value for the assessment years 1997-~8, 1998-99
and 1999-2000. During those years, the fifth anniversary had B
not taken place and, lherefore, it was not possible for the·
"l<\ assessee company to estimate the value of the perquisite during
)
that period. It was not open to the Department to ignore the lock
in period. Therefore, the Department had erred in treating the
respondent herein as an assessee in default fot not deducting c
the TDS at 30% as st~ted in ,the order of assessment. This is
not the case of tax evasion. The assessee had floated the Trust
because of the buy back problems, which were genuine
problems in cases where the employees stood dismissed,
removed or in the case of resignation in which cases they were D
required to return the allotment.
~-
18. Estimation of TDS under Section 192 in the absence
of clear provisions on valuation of "perquisite" in this case would
not justify the-Department in treating the respondent as assessee
in default. Therefore, in our view, the AO and the CIT(A) had E
erred in treating the respondent as defaulter for not deducting
TDS under Sec.tion 192. Consequently, Section 201 (1) and
201(1A) were also not applicable to the facts of this case and
·that the Department had erred in invoking the said two sections
( ~ against the assessee. F

19. Before concluding, we express no opinion on the law
· prevailing after 1.4.2000 except to the extent indicated
hereinabove.
20. Accordingly, we find no merit in these civil appeals G
"l" which stand dismissed with no order as to costs.
S.K.S. Appeals dismissed.