Lokvir Kapoor challenged the income tax assessment for FY 2015-16, which involved complex issues around the calculation of capital gains on property and shares, and the tax treatment of income from Employee Stock Option Plans (ESOPs).
The main issues in dispute included the correct year for indexation benefits calculation on the sale of property, the categorization of income from the sale of ESOP shares, and the application of section 54F for tax exemption on reinvested capital gains in residential property.
Kapoor argued that the indexation of his capital gains should be calculated from the financial year he made the initial payments for the property, not from when he took possession. Additionally, he disputed the tax authority’s treatment of proceeds from the sale of ESOP shares, which were split into capital gains and ‘income from other sources’ based on exceeding fair market values.
The tribunal found merit in Kapoor’s arguments, instructing a re-assessment for both the indexation benefits and the ESOP income categorization. The case highlighted significant aspects of tax law, particularly the interpretation and application of indexation and the definition of capital assets in ESOP transactions.
The decision provided clarity on the application of tax laws to complex income scenarios, reinforcing the principles of fairness and accuracy in tax assessments. It underscored the tribunal’s role in ensuring equitable treatment of taxpayers and proper application of statutory provisions.
Lokvir Kapoor vs. ACIT: Dispute Over Capital Gains Indexation and ESOP Benefits
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