India boasts of one of the largest start-up ecosystems in the world. Such an ecosystem has seen significant interest from global investors, which is made much more obvious by the number of companies that have hit unicorn valuations. One of the path-breaking concepts championed by start-ups has been providing stock/shares to employees by way of employee stock options plans ("ESOP"). ESOPs were constructed to ensure that all the employees of the company work towards the same goal, i.e., improve performance and, therefore, profitability of a company. However, as cap tables become more complex, companies have also experimented with other ways to give employees the incentive derived from ESOPs. A stock appreciation right scheme is one such construct, and we have set out in this article, how we see them playing out in the backdrop of Indian laws and commercial practice.
2. Definition of "stock appreciation right"
A stock appreciation right ("SAR") is generally defined as the right to receive the benefit of the increase or appreciation in the value of a company stock. A SAR is specifically defined under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (the "SEBI (SBEB) Regulations") as being "a right given to a SAR grantee entitling him to receive appreciation for a specified number of shares of the company where the settlement of such appreciation may be made by way of cash payment or shares of the company."1 A SAR is normally paid in cash, although it could also be settled in equivalent value of stock. Alternatively, a SAR could also be settled in a combination of cash and stock.
3. Objective and Advantages of SARs
SARs are a form of employee incentive arrangement to reward employees for growth in the value of the company's business, much like ESOPs, but have some distinct advantages:
- From the company's perspective, (a) by virtue of settlement of SARs in cash, dilution of the shareholders' stake in the company can be reduced or eliminated, and (b) financial disclosures of company information normally provided and available to shareholders need not be provided to SAR holders, and this holds true even on the retirement of SARs;
- From an employee's perspective, there is no need to pay an exercise price. Further, ESOPs may have no value in the absence of a buyer for the stock options, however, in the case of 'Cash Settled SARs', which we elaborate on below, value is offered by the company itself.
Cash Settled SARs are effectively viewed as cash bonus plans for employees by the issuing company. While they may offer the benefit of appreciation in the company's equity, they do not represent actual equity, and the employees (in cases where the settlement is by cash) never hold the shares of the company. However, even in such cases, SARs, akin to ESOPs, achieve the objective of giving the value and appreciation of share ownership to the employees.
4. Operation of SARs
SARs operate in a manner largely similar to stock options. The SARs essentially pass through the same life cycle as stock options, i.e., (i) grant, (ii) earning or vesting, and (iii) retirement of SARs and their settlement (akin to the exercise of stock options). The issuing company makes an award or grant of SARs (the "SARs Grant"), which provides the employees of the said company (or any of its group companies) who have been granted SARs, the ability to profit from the increase in the value of a set number of shares of the issuing company, over and above the price set in the SARs Grant (such price mentioned in the SARs Grant being the "SAR Price").
The SARs Grant, similar to ESOPs, is subject to vesting conditions determined by the issuing company, which set out the manner (including time period and conditions for vesting) in which the SARs shall be earned by an employee. However, an employee will not be required to pay the SAR Price to realise the benefit of the earned SARs. Upon satisfaction of the conditions set out in the SARs Grant that entitle the employee to the benefit of SARs, the issuing company shall deliver to the employee, the value equivalent to the difference between the fair market value of the shares underlying the SARs at the time of their settlement, and the SAR Price. This value can be settled either wholly in shares ("Equity Settled SARs") or wholly in cash ("Cash Settled SARs") or a combination of the two. Once the SARs are settled by the issuing company, they are considered retired.
Typically, as in the case of ESOPs, the employees can choose to exercise/retire their earned SARs at any time post vesting of such SARs, within the exercise period stipulated under the SARs scheme (the "SARs Scheme"). However, unlisted companies may, through the terms of the SARs Scheme, control the time and manner of the retirement of SARs. The primary purpose for this, particularly in the case of Cash Settled SARs, is that there would be a cash outflow from the issuing company, at the time of settlement of SARs. The vesting and exercise/retirement of earned SARs have been set out below, through an illustrative example:
A company grants 100 SARs today to an employee, having a SAR Price of INR 10 each, with an equal annual vesting schedule over a period of 4 years with a 1-year cliff (i.e., the period after which the first vesting will take place). The appreciation at the end of each year can be calculated as follows:
|SAR Price of each SAR (in INR)
|Vested SARs (in no. of SARs)
|% of SARs Vested
|Market value per SAR (in INR)
|Appreciation per SAR (No. 4 – No. 1) (in INR)
|If Cash Settled SARs (No. 2 * No. 5) (in INR)
|If Equity Settled SARs (No. 6/ No. 4) (in no. of shares)
The amounts and the number of shares set out against Nos. 6 and 7 respectively, indicate the money or shares (as the case may be) to be received by the employee, based on the years of vesting of SARs completed, post which the SARs are being exercised/retired (i.e., at the end of Year 1/ Year 2/ Year 3/ Year 4). As explained above, a combination of Cash Settled SARs and Equity Settled SARs is also possible, in which case, the relevant percentage of such combination shall be applied to Nos. 6 and 7 respectively, to determine the payout and the no. of shares to be issued to the employee.
5. Analogy: SARs in listed and unlisted companies
5.1. Issuance of SARs in listed companies:
Issuance of SARs in listed companies, whose shares are listed on a recognised stock exchange in India, would require compliance with the relevant provisions of the SEBI (SBEB) Regulations. Some of the key requirements in this regard, as set forth in the SEBI (SBEB) Regulations, are as follows:
- The SEBI (SBEB) Regulations permit grant of SARs to only permanent employees and directors of the issuing company or its holding company or subsidiaries in India or outside, except for (i) independent directors; (ii) directors holding, directly or indirectly, more than 10% of the outstanding equity shares in the issuing company; and (iii) promoters2 and persons belonging to the promoter group.3
- Approval of shareholders in a general meeting is required for (i) issue of a SARs Scheme; (ii) grant of SARs to employees of subsidiary or holding company; and (iii) grant of SARs to identified employees during any one year, equal to or exceeding 1% of the issued capital of the company at the time of grant of the SARs;
- The terms of the SARs Scheme may be amended by way of a special resolution of shareholders at a general meeting, provided that (i) the SARs have not yet been exercised; and (ii) the amendment(s) of the scheme shall not, in any manner, be detrimental to the interests of the employees, except to the extent the amendments are required to comply with regulatory requirements;
- The issuing company is required to constitute a compensation committee to administer the SARs Scheme. If the SARs Scheme is rendered unattractive due to a fall in the price of the underlying shares in the stock market, the company may reprice the SARs, provided that the SARs have not been exercised. Further, such repricing (i) can be effected only with the approval of the shareholders in a general meeting; and (ii) shall not be detrimental to the interests of the employees;
- The SARs shall be non-transferable, and shall not be pledged, hypothecated, mortgaged, or otherwise alienated in any manner. However, in the event of the employee's death while in employment, the SARs granted to the employee will fully vest in such employee's legal heirs or nominees. In case the employee suffers permanent incapacity while in employment, all the SARs granted to the employee shall fully vest on that day;
- In case of termination of the employment of, or resignation by, the employee, unvested SARs shall compulsorily expire;
- A company shall have the freedom to implement a SARs Scheme with Cash Settled SARs ("Cash Settled SARs Scheme") or a SARs Scheme with Equity Settled SARs ("Equity Settled SARs Scheme"), provided that in case of an Equity Settled SARs Scheme, if the settlement results in fractional shares, then the consideration for fractional shares shall be settled in cash.
- In case new shares are issued under the SARs Scheme (typically, in the case of Equity Settled SARs Schemes), the shares so issued shall be listed immediately in any recognised stock exchange where the existing shares are listed, subject to the conditions prescribed under Regulation 10 of the SEBI (SBEB) Regulations;
- There shall be a cliff or minimum vesting period of at least 1 year for SARs granted to employees; and
- In case of Cash Settled SARs, a SAR holder shall not be entitled to any rights or benefits granted to a shareholder of the issuing company.
5.2. Issuance of SARs in unlisted companies:
Issuance of SARs in unlisted companies is largely unregulated. The Companies Act, 2013 does not prescribe any procedure for grant of SARs or settlement of SARs. The restrictions on ESOP of unlisted companies under the Companies Act, 2013 do not extend to SARs. To surmount the practical challenges as a result of the restrictions and limitations that the Companies Act, 2013 imposes on ESOP, unlisted companies have sometimes resorted to the issuance of SARs instead of ESOPs. It is, however, recommended as a matter of good governance, that the basic compliances under the Companies Act, 2013 governing ESOPs by unlisted companies, such as the requirement of procuring approval by the board of directors, followed by approval of shareholders of the company vide a special resolution for (i) issuance of a SARs Scheme; and (ii) varying the terms of the scheme (provided that such variation is not prejudicial to the interest of the SAR holders), are followed by unlisted companies even in the case of SARs. At the same time, the lack of a legal framework regulating SARs in unlisted companies offers a significant degree of flexibility to companies in operating SARs Schemes. For instance:
- Unlike ESOP, the benefit of SARs may be extended to third parties including advisors and consultants of the unlisted company and its group companies. Earlier, in view of the spirit of the regulatory restriction imposed by the erstwhile Section 194 of the Companies Act, 2013,4 it was not advisable for unlisted companies to issue SARs to independent directors or promoters. However, with effect from February 9, 2018, Section 194 of the Companies Act, 2013 was omitted in its entirety pursuant to the introduction of the Companies (Amendment) Act, 2017.
- Since there is no legally mandated minimum vesting period for SARs issued by unlisted companies, certain employees may be granted SARs upfront (i.e., with no vesting requirement) while certain other employees may be granted SARs which shall be earned in accordance with a vesting schedule. Hence, the vesting schedule and conditions linked to payment can be varied from one employee to another.
- The SAR Price may vary from one employee to another and can be any amount fixed by the issuing company.
- The SARs may be retired at such time and in such manner as determined under the SARs Scheme.
- The SARs need not necessarily be administered by a compensation committee, and may also be administered directly by the issuing company's board of directors.
6. Applicability of SEBI (SBEB) Regulations to SARs Schemes
In two separate letters issued pursuant to requests for informal guidance, the Securities and Exchange Board of India ("SEBI") had stated that the SEBI (SBEB) Regulations are not applicable to Cash Settled SARs Schemes. SEBI issued the informal guidance in response to requests from Mindtree Limited ("Mindtree"), Saregama India Limited ("Saregama") and JSW Steel Limited ("JSW Steel"). In this regard, it is pertinent to note that Regulation 1(3)(iii) of the SEBI (SBEB) Regulations covers SARs Schemes. SARs under the SEBI (SBEB) Regulations are defined to include both Cash Settled and Equity Settled SARs.
However, Regulation 1(4) of the SEBI (SBEB) Regulations, states as follows: "The provisions of these regulations shall apply to any company whose shares are listed on a recognised stock exchange in India, and has a scheme: (i) for direct or indirect benefit of employees; and (ii) involving dealing in or subscribing to or purchasing securities of the company, directly or indirectly; and (iii) satisfying, directly or indirectly, any one of the following conditions....."
6.1. Informal guidance to Saregama:
Saregama's request letter to SEBI sought clarity regarding the applicability of the SEBI (SBEB) Regulations to a scheme whereby Cash Settled SARs were being offered to the Managing Director of Saregama. In its response, SEBI stated that since no fresh equity shares would be issued pursuant to the exercise of the SARs, it cannot be said that the scheme involves dealing in securities of the company directly or indirectly. It further stated that for this reason, the necessary pre-condition specified in Regulation 1(4)(ii) for applicability of the SEBI (SBEB) Regulations is not met. Accordingly, the SEBI (SBEB) Regulations would not be applicable to the SARs Scheme floated by Saregama.5
6.2. Informal guidance to Mindtree:
Similar to Saregama's request letter, Mindtree's request letter to SEBI relates to the nature of an employee benefit scheme under which SARs were issued to certain employees who also happened to be promoters, and to the applicability of the SEBI (SBEB) Regulations to such scheme. As per the provisions of the said scheme, only notional SAR units were issued at a pre-determined grant price and the promoters were entitled to receive cash payment for appreciation in the share price over the grant price for the awarded units, based on the company achieving the specified revenue targets. Therefore, while the cash pay-outs pursuant to the said scheme were linked to the share price of the company's equity shares, the implementation of the scheme did not involve any employee actually receiving any equity shares of the company. SEBI's response was similar to that provided to Saregama. It was stated that one of the applicability criteria for an employee benefit scheme to be covered under the SEBI (SBEB) Regulations is that the scheme should actually involve "dealing in or subscribing to or purchasing securities of the company directly or indirectly." Since, in the scheme in question, no actual purchase or sale of equity shares of Mindtree was involved, the SEBI (SBEB) Regulations would be inapplicable to the said scheme.6
6.3. Informal guidance to JSW Steel:
JSW Steel's request letter to SEBI, dated August 19, 2019, relates to certain joint ventures and promoter-controlled entities of the JSW group (hereinafter referred to as the "JSW JVs" and the "JSW Promoter Entities" respectively, and collectively as the "JSW Entities"), granting Cash Settled SARs linked to the shares of JSW Steel, to some of their identified employees, through a trust established by the JSW Entities, and managed by professional trustees appointed by the JSW Entities. It is pertinent to note that the JSW JVs and JSW Promoter Entities were not companies listed in a recognized stock exchange. While providing informal guidance to JSW Steel on the said request through its letter dated November 5, 2019, the SEBI separately analyzed the request with respect to the JSW JVs and JSW Promoter Entities, in light of the SEBI (SBEB) Regulations, and ruled that SARs Schemes proposed by the JSW JVs and the JSW Promoter Entities did not fall within the ambit of the SEBI (SBEB) Regulations, pursuant to SEBI's analysis of the definitions of "employee" (in Regulation 2(1)(f)) and "group" (in Regulation 2(1)(o)), and the applicability of Regulation 1(4) of the SEBI (SBEB) Regulations.7
With respect to the JSW JVs, SEBI referred to the definition of "group" under Regulation 2(1)(o) of the SEBI (SBEB) Regulations, which states as follows: "group means two or more companies which, directly or indirectly, are in a position to (i) exercise twenty six percent or more of the voting rights in the other company; or (ii) appoint more than fifty percent of the members of the board of directors in the other company; or (iii) control the management or affairs of the other company". Since the JSW JVs, which held less than 50% shareholding in JSW Steel, were neither the holding nor the subsidiary company of JSW Steel; and (b) the SARs Schemes proposed by the said entities were for the benefit of JSW JVs employees, and not for the benefit of employees of the listed company, i.e., JSW Steel or its subsidiaries or holding company, SEBI responded that the proposed SARs Scheme of the JSW JVs did not fall within the ambit of the SEBI (SBEB) Regulations.
With respect to the JSW Promoter Entities, SEBI noted that the said entities were promoter controlled companies of JSW Steel, but not "group" entities, as per the definition set out under Regulation 2(1)(o) of the SEBI (SBEB) Regulations. Since the SARs Scheme proposed by the JSW Promoter Entities were for the benefit of its own employees, and were not being issued by JSW Steel or its "group" entities for the benefit of the employees of the listed company or its subsidiary or holding companies, SEBI responded that the proposed SARs Scheme of the JSW Promoter Entities did not fall within the ambit of the SEBI (SBEB) Regulations.
Further, Regulation 1(4) of the SEBI (SBEB) Regulations, states as follows: "The provisions of these regulations shall apply to any company whose shares are listed on a recognised stock exchange in India, and has a scheme: (i) for direct or indirect benefit of employees...". Since the SARs Scheme proposed by both the JSW JVs and the JSW Promoter Entities were for the benefit of its own employees, and not a scheme for the benefit of employees of a company listed in a recognized stock exchange or any other company in such listed company's "group", SEBI opined that the SARs Schemes of both the JSW JVs and the JSW Promoter Entities would not fall under the ambit of the SEBI (SBEB) Regulations.
6.4. Analysis of SEBI's informal guidance to Saregama and Mindtree:
It is pertinent to note that SEBI's conclusion that the SEBI (SBEB) Regulations would be inapplicable to the SARs Schemes floated by Saregama and Mindtree was premised on the fact that no actual issuance of shares would take place at any time pursuant to the scheme (since the SARs in question were Cash Settled SARs). Therefore, it flows from the same that if the schemes in question were to issue Equity Settled SARs, the SEBI (SBEB) Regulations would continue to be applicable to them, owing to Regulation 1(4)(ii) of the SEBI (SBEB) Regulations, which requires dealing in securities of the company to be a necessary pre-condition for the applicability of the said regulations.
SEBI's clarification appears to provide greater flexibility to listed companies to design their Cash Settled SARs Schemes. However, ambiguity remains in that there is an evident conflict between Regulations 1(3), which expressly makes the SEBI (SBEB) Regulations applicable to all SARs (defined to include both Cash Settled and Equity Settled SARs), and Regulation 1(4) of the SEBI (SBEB) Regulations, which requires subscription or purchase of shares by the employees pursuant to the SARs Scheme for the SEBI (SBEB) Regulations to be applicable to such scheme (which would never occur in a scheme where Cash Settled SARs are being issued).
6.5. Analysis of SEBI's informal guidance to JSW Steel:
It is pertinent to note that SEBI's conclusion of the SEBI (SBEB) Regulations being inapplicable to the SARs Schemes floated by the JSW JVs and JSW Promoter Entities was hinged on the fact that the said schemes were not made for the benefit of the "employees" of the listed company, i.e., JSW Steel, or its holding company or its subsidiaries. Accordingly, the applicability of the SEBI (SBEB) Regulations was considered to be limited only to SARs Schemes which are made for the benefit of employees of the "group", which by definition under the SEBI (SBEB) Regulations, is restricted only to the listed company, its holding and subsidiary companies.
7. Taxability of SARs
7.1. Cash Settled SARs:
Since SARs do not satisfy the legal requirements to qualify as ESOPs, they are not entitled to the same tax treatment as ESOPs. As pay-out of the appreciation in the value of the underlying shares under a SARs Scheme may be equated to a bonus payment, it is subject to withholding taxes at appropriate rates. Additionally, Section 36 of the Income Tax Act, 1961 provides that payment of bonus is tax deductible from the income of the company upon actual payment and not on an accrual basis. Therefore, the issuing company may be eligible to claim deduction upon actual payment.
Unlike in respect of ESOPs, employees will not be eligible to purchase or subscribe and hold shares and avail the benefit of long-term capital gains in respect of SARs. The expression "salary", though not specifically defined under the Income Tax Act, 1961, is the reward or consideration for services rendered by a person in employment. The receipts of whatever nature, in connection with a person's employment, are, therefore, to be treated as "salaries".8 This means that the cash pay-out that an employee receives on settlement of SARs will be treated as salary income and will be subject to tax at the applicable slab rates. However, for this principle to apply and to tax the cash pay-out on settlement of SARs under the head "income from salaries", it is a condition precedent that the benefit must flow from the employer to the employee. In cases where the cash pay-out is received from a person other than the employer of the beneficiary (as in the case of a consultant or advisor), the amount received by the beneficiary on settlement of SARs will still be taxable—though as income from other sources.
7.2. Equity Settled SARs:
Section 17(2)(vi) of the Income Tax Act, 1961, provides that the value of any security allotted or transferred directly or indirectly by the employer or former employer free of cost or at a concessional rate to the employee will be considered as perquisite and will be taxable in the hands of the employee as "salary". This tax shall be payable on the value of the shares underlying the SARs as on the date of settlement, less the SAR price.
For this purpose, in the case of listed companies as on the date of exercise, the "value" of the share shall be the average of the opening price and closing price of shares on the relevant stock exchange.9
However, in the case of unlisted companies, the "value" of the share shall mean the fair market value as determined by a SEBI-registered category-I merchant banker.10
At the time of sale of the allotted shares, the employee will have to pay tax on the capital gains arising out of such sale. The capital gains will be calculated as being the difference between the sale consideration and the cost of acquisition (being the value of the shares as on the date of settlement of SARs)11. Based on the period for which the shares were held prior to transfer, the capital gains will be classified as long term capital gains or short term capital gains.
The company shall be liable for tax deduction at source in respect of the SARs to be settled to the employees.12
SARs are implemented globally as a means of incentivizing employees. Although the use of SARs has not become prominent in India thus far, SARs are steadily being recognized in India as an effective mechanism of stock-based compensation and, more notably, as a viable alternative to ESOPs. SARs have also gained prominence in India on account of SEBI's intention to regulate SARs under the SEBI (SBEB) Regulations. While ESOPs may have been embedded in the ethos of companies in India hitherto, it may soon become more common to see that SARs are widely adopted by Indian companies as the modus operandi for employee incentivization due to their empirically evident benefits.
1. Regulation 2(1)(ze) of the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014.
2. According to Regulation 2(1)(oo) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("SEBI (ICDR) Regulations, 2018"), a "Promoter" includes a person:
(i) who has been named as such in a draft offer document or offer document or is identified by the issuer in the annual return referred to in section 92 of the Companies Act, 2013; or
(ii) who has control over the affairs of the issuer, directly or indirectly whether as a shareholder, director or otherwise; or
(iii) in accordance with whose advice, directions or instructions the board of directors of the issuer is accustomed to act:
Provided that nothing in sub-clause (iii) shall apply to a person who is acting merely in a professional capacity;
Provided further that a financial institution, scheduled commercial bank, foreign portfolio investor (other than individuals), corporate bodies and family offices, mutual fund, venture capital fund, alternative investment fund, foreign venture capital investor, insurance company registered with the Insurance Regulatory and Development Authority of India ("IRDAI") or any other category as specified by the Board from time to time, shall not be deemed to be a promoter merely by virtue of the fact that twenty per cent. or more of the equity share capital of the issuer is held by such person unless such person satisfy other requirements prescribed under these regulations;
3. Regulation 2(1)(pp) of the SEBI (ICDR) Regulations, 2018 defines a "Promoter Group" to include:
(i) the promoter;
(ii) an immediate relative of the promoter (i.e., any spouse of that person, or any parent, brother, sister, or child of the person or of the spouse); and
(iii) in case promoter is a body corporate:
(A) a subsidiary or holding company of such body corporate;
(B) any body corporate in which the promoter holds twenty per cent. or more of the equity share capital and/or any body corporate which holds twenty per cent. or more of the equity share capital of the promoter;
(C) any body corporate in which a group of individuals or companies or combinations thereof acting in concert, which hold twenty per cent. or more of the equity share capital in that body corporate and such group of individuals or companies or combinations thereof also holds twenty per cent. or more of the equity share capital of the issuer and are also acting in concert; and
(iv) in case the promoter is an individual:
(A) any body corporate in which twenty per cent. or more of the equity share capital is held by the promoter or an immediate relative of the promoter or a firm or Hindu Undivided Family in which the promoter or any one or more of their relative is a member;
(B) any body corporate in which a body corporate as provided in (A) above holds twenty per cent. or more, of the equity share capital;
(C) any Hindu Undivided Family or firm in which the aggregate shareholding of the promoter and their relatives is equal to or more than twenty per cent. of the total capital;
(v) all persons whose shareholding is aggregated under the heading "shareholding of the promoter group":
Provided that a financial institution, scheduled bank, foreign portfolio investor other than individuals, corporate bodies and family offices, mutual fund, venture capital fund, alternative investment fund, foreign venture capital investor, insurance company registered with the IRDAI or any other category as specified by the Board from time to time, shall not be deemed to be promoter group merely by virtue of the fact that twenty per cent. or more of the equity share capital of the issuer is held by such person or entity:
Provided further that such financial institution, scheduled bank foreign portfolio investor (other than individuals), corporate bodies and family offices, mutual fund, venture capital fund, alternative investment fund, foreign venture capital investor, insurance company registered with the IRDAI or any other category as specified by the Board from time to time, shall be treated as promoter group for the subsidiaries or companies promoted by them or for the mutual fund sponsored by them.
4. The erstwhile Section 194 of the Companies Act, 2013, which was omitted with effect from February 9, 2018, originally provided that: "(1) No director of a company or any of its key managerial personnel shall buy in the company, or in its holding, subsidiary or associate company—
(a) a right to call for delivery or a right to make delivery at a specified price and within a specified time, of a specified number of relevant shares or a specified amount of relevant debentures; or
(b) a right, as he may elect, to call for delivery or to make delivery at a specified price and within a specified time, of a specified number of relevant shares or a specified amount of relevant debentures..."
5. Informal Guidance Letter dated July 24, 2015 issued by SEBI to Saregama India Ltd, Available from: [http://www.sebi.gov.in/sebiweb/home/detail/31638/yes/In-the-matter-of-Saregama-India-Limited-regarding-SEBI-Share-Based-Employee-Benefits-Regulations-2014].
6. Informal Guidance Letter dated July 27, 2015 issued by SEBI to Mindtree Ltd, Available from: [http://www.sebi.gov.in/cms/sebi_data/commondocs/sebimindtree_p.pdf].
7. Informal Guidance Letter dated November 5, 2019 issued by SEBI to JSW Steel Ltd, available from: [https://www.sebi.gov.in/sebi_data/commondocs/feb-2020/SEBI%20Informal%20Guidance%20Letter%20JSW%20Steel%20Ltd_p.pdf]
8. Sumit Bhattacharya v. Asstt. Commissioner of Income Tax, decided on 03 January 2008.
9. Rule 3(8)(ii), Income Tax Rules, 1962, which further provides that: "Provided that where, on the date of exercising of the option, the share is listed on more than one recognized stock exchanges, the fair market value shall be the average of opening price and closing price of the share on the recognised stock exchange which records the highest volume of trading in the share :
Provided further that where, on the date of exercising of the option, there is no trading in the share on any recognized stock exchange, the fair market value shall be—
(a) the closing price of the share on any recognised stock exchange on a date closest to the date of exercising of the option and immediately preceding such date; or
(b) the closing price of the share on a recognised stock exchange, which records the highest volume of trading in such share, if the closing price, as on the date closest to the date of exercising of the option and immediately preceding such date, is recorded on more than one recognized stock exchange."
10. Rule 3(8)(iii), Income Tax Rules, 1962.
11. Section 49(2AA), Income Tax Act, 1961.
12. Section 192 of the Income Tax Act, 1961.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.