One-time voluntary Payment by Flipkart, Singapore to Option Holders on Disinvestment of PhonePe business: Delhi HC quashes Order passed u/s 197 of Income Tax Act

The Delhi High Court quashed an order under Section 197 of the Income Tax Act, 1961, concerning a one-time voluntary payment by Flipkart Pvt. Ltd., Singapore (FPS) to option holders following the disinvestment of PhonePe. FPS compensated option holders with USD 43.67 per option for the loss in value, which the tax authorities misconstrued as taxable perquisites under Section 17(2)(vi). \r

The petitioner argued that ESOPs are taxable only when exercised or sold, neither of which occurred. The court ruled that the payment was a voluntary one-time compensation not tied to employment or business, and therefore not taxable under the cited section. The court found the reasoning of the impugned order flawed and quashed it.