Mumbai ITAT holds fair value of ESOP shares to be cost under section 49(2AA) despite ESOP perquisite being non-taxable in India under India-UK DTAA
The Mumbai ITAT held that Fair Market Value (‘FMV’) of ESOP shares on the exercise date would constitute the cost of acquisition under section 49(2AA) of the Income-tax Act, 1961 (the ‘Act’), notwithstanding that the related ESOP perquisite was not taxable in India. The Tribunal ruled that section 49(2AA) of the Act does not require actual taxation of the perquisite in India and directed recomputation of capital gains by considering FMV of ESOP shares as the cost of acquisition.