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July 2025

Income — Valuation of shares — Shares allotted as part of employee stock purchase scheme — Lock-in period during which shares could not be transferred — Valuation of shares taking into account restrictive condition:

By Keshav Bhujle | Ritu Punjabi, Advocates
Reading Time 4 mins

18 Ravi Kumar Sinha vs. CIT:

[2025] 474 ITR 594 (Del.):

A.Ys.: 1997-98 to 1999-00: Date of order 14 August 2024:

S. 17 of ITA 1961

Income — Valuation of shares — Shares allotted as part of employee stock purchase scheme — Lock-in period during which shares could not be transferred — Valuation of shares taking into account restrictive condition:

The Assessee was allotted 11,50,500 shares at ₹15 per share under the Employees Stock Purchase Scheme (ESPS). Out of these, 25% of the shares were subject to lock-in period of 12 months and the balance 75% of the shares were subject to lock in period of 18 months. During the previous financial year, the Assessee paid only ₹10.50 per share against the issue price of ₹15 per share. The employer company obtained independent valuation report in respect of the shares in question, the value of which was determined at ₹22.50 per share. In the return of income filed by the Assessee, the Assessee took the position that due to lock-in period, the shares were not marketable and therefore the Fair Market Value (FMV) of the shares could not exceed the face value of the shares. Thus, the Assessee did not offer any income in respect of t

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