R.S. Syal, Accountant Member. - This appeal by the assessee arises out of the order passed by the Commissioner of Income-tax (Appeals) on 5-1-2004 in relation to the assessment year 2001-02.

2. The only grievance raised through different grounds is against the direction of the learned CIT(A) of bringing to tax a sum of Rs. 32,75,716 under the head ‘Salaries’ in respect of stock option exercised by the assessee.

3. Briefly stated the facts of the case are that the assessee is employed at the Indian Branch Headquarters of American Express Bank Limited (hereinafter referred to as "AEBL") in the position of Senior Director. AEBL is a wholly owned subsidiary of the American Express International Banking Corporation, New York, which in turn is a wholly owned subsidiary of American Express Company, New York (hereinafter called ‘Amexco’). The assessee showed total income in the revised return at Rs. 66,65,177. The reason for revising the return was that he had not shown the capital gain of Rs. 2,35,310 in the original return, which resulted from sale of 385 shares of Amexco. The Assessing Officer observed that the assessee had not offered Rs. 32,75,716 for taxation, which represented sale of stock option received from Amexco. On being show caused, the assessee stated that Amexco was the parent company of his employer. He further contended that the stock option was given by Amexco and not his employer AEBL. It was therefore, contended that the employer-employee relationship was missing insofar as the acquisition of shares is concerned. The Assessing Officer did not agree with the submission advanced on behalf of the assessee on the ground that he was in the employment of the AEBL, which was wholly owned subsidiary of Amexco which had granted the stock option in recognition of assessee’s continuing contribution to long-term success and development of Amexco. He further held that though the assessee was not directly in employment of Amexco but AEBL did not have any employee stock option plan of its own and as such a common plan was formulated and implemented by Amexco and was allowed to the employees of AEBL also. He further noted that all the employees were not entitled to this plan but it was in the discretion of the management of AEBL that the employees were selected for giving benefits under the scheme. Since the assessee was holding a very high position in the AEBL, stock option was granted to him also. It was further held that the employer-employee relationship, in fact, existed. Accordingly, the amount received by the assessee from sale of stock option amounting to Rs. 32,75,716 was taxed under the head "Salaries". The first appeal did not change the fortune of the assessee.

4. Before us, the learned Counsel for the assessee contended that section 15 puts to tax the amounts under the head "Salaries" received from employer or a former employer. The first submission was that the stock option was provided by Amexco, which was grandparent of the AEBL, being the assessee’s employer and hence the employer-employee relationship was lacking insofar as the stock option to the assessee was concerned. He further relied on the Circular No. 710, dated 24-7-1995 to contend that where such employer-employee relationship was missing, perquisite of shares to the employees could not be taxed. Then he referred to the judgment of the Hon’ble Supreme Court in the case of CIT v. Infosys Technologies Ltd. [2008] 297 ITR 167¹ for the proposition that even if the employer-employee relationship remains, the stock, option could not be treated as perquisite. He referred to the language of section 17(2)(iii) to contend that only the value of any benefit or amenity granted or provided free of cost or at the concessional rate in the specified cases allotted or transferred to the assessee by the employer could be put to tax. He further submitted that since clause (iiia) was omitted by the Finance Act, 2000 with effect from 1-4-2001, the same could not be appl