Tax treatment

Save Share

This query is : Resolved

Pankaj kumar goyal (Querist)

12 August 2014 Dear Experts,
Namaste!
I have a small query regarding a tax planning.
Here is the situation, “A Holding Company say M/s H Plc., registered in Europe has a subsidiary company in India say M/s S Ltd. registered in India , M/s H Plc. has agreement with employees of M/s S Ltd., that if the holding company will be sell out in future then some consideration / incentives will be given to the employees of M/s S Ltd.
Now, the Holding Company been sold/ amalgamated and all the conditions been fulfilled hence part of gross receipt has distributed to the employees of the Indian subsidiary company. The proceeds received directly from Europe in the employee account in Indian Rupees.
Now my questions are:
1. Whether M/s S Ltd., the Indian Subsidiary company is required to account for in its books for the transaction?
2. If yes then what will be treatment in the books of M/s S Ltd.
3. Whether it can be shown as ESOP/perquisites or to be shown as incentives as part of salary.
4. What remedy/tax planning available with the recipient employees of the Indian company? for the sum received from M/s H Plc.
5. Whether the employee can treat the sum as capital receipt/capital gain, accordingly he/she can save tax by investment u/s 54 of Income Tax Act,1961.