J U D G M E N T

PURUSHAINDRA KUMAR KAURAV, J.

1. The petitioner, vide the instant petition, seeks to assail the order dated 15.07.2023 passed under Section 197 of the Income Tax Act, 1961 [“Act”], whereby, the Revenue rejected the petitioner‟s application seeking „Nil‟ deduction at source certificate.

2. The brief facts relevant to appreciate the controversy at hand would reveal that the petitioner is an ex-employee of the company namely Flipkart Internet Private Limited [“FIPL”] which is a wholly-

owned subsidiary of Flipkart Marketplace Private Limited [“FMPL”]. In addition thereto, the FMPL is the wholly-owned subsidiary of Flipkart Pvt. Ltd., Singapore [“FPS”].

3. In 2012, the FPS rolled out an Employee Stock Option Plan [“ESOP”] called as Flipkart Stock Option Plan [“FSOP”], wherein, the FPS granted certain stock options to the eligible persons, including employees of its subsidiaries. As per the clauses of FSOP, the petitioner was granted 1,27,552 stock options on and from 01.11.2014 to

31.11.2016 with a vesting schedule of 4 years.

4. On 23.12.2022, FPS announced the disinvestment of its wholly- owned subsidiary called PhonePe. Thereafter, the value of the stock options of FPS fell pursuant to the disinvestment and subsequent remittances to the shareholders of FPS on account of dividend payments, buy-back etc.

5. Consequently, on 21.04.2023, the petitioner received a communication from FPS stating that as a one-time measure, FPS had decided to grant the option holders a payment of USD 43.67 per option as compensation towards loss in the value of the options and it was based on the number of options held by the petitioner as on 23.12.2022. Furthermore, it was also stated that the FPS would be withholding tax on the said compensation.

6. Subsequently, on 29.04.2023, the petitioner preferred an application under Section 197 of the Act seeking a „Nil‟ declaration certificate on the deduction of TDS by FPS. On 23.05.2023, the petitioner preferred a revised application under Section 197 of the Act.

7. Thereafter, on 15.07.2023, the Revenue passed the impugned order rejecting the petitioner‟s application on the score that the amount received would be in the nature of perquisite under Section 17(2)(vi) of the Act.

8. Aggrieved thereby, the petitioner has invoked the writ jurisdiction of this Court to ventilate his grievance.

9. Mr. Tarun Gulati, learned Senior Counsel, appearing on behalf of the petitioner submitted that the Revenue has misconstrued the one- time payment made on behalf of FPS as perquisite and characterized it as income chargeable to tax under Section 17(2)(vi) of the Act. He argued that ESOPs merely constitute a right, not an obligation to buy the underlying instrument and represent a right to subscribe to the shares of a company. He contended that on vesting, the option holder had acquired an unfettered right to exercise the option and got allotment of shares. He argued that ESOPs are taxable only in two contingencies firstly, when the employee exercises his option and secondly, when the shares are sold by an employee. He iterated that in the present case, the stock options were merely held by the petitioner and the same had not been exercised till date.

10. Furthermore, he argued that the one-time voluntary payment made by FPS was not in relation to the employment of the petitioner with FIPL and thus, cannot partake the character of salary which was liable to be taxed under Section 15 of the Act. It is, therefore, submitted that since the payment made by FPS cannot be construed as perquisite, the direction for deduction of TDS cannot be countenanced in law. In order to substantiate his submissions, he placed reliance on the decisions of Empire Jute Co. Ltd. v. CIT,1 Shrimant Padmaraje R. Kadambande v. CIT,2 Godrej and Co. v. CIT3 and Empire Jute Co.

Ltd. v. CIT 4.

11. Per contra, Mr. Prashant Meherchandani, learned Senior Standing Counsel appearing on behalf of the Revenue, vehemently opposed the submissions. He argued