New Delhi, Aug. 17 -- A UK-based employee who sold shares acquired through an employee stock option plan (ESOP) for nearly Rs.26 lakh has won a tax dispute after the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) ruled that the fair market value (FMV) of the shares at the time of exercising the options should be treated as their cost of acquisition.

The case involved Rajesh R. Hemrajani, a non-resident and UK tax resident who was employed with the UK branch of L&T Infotech Ltd. He had exercised 1,540 ESOPs at Rs.1 per share and later sold the shares for about Rs.25.99 lakh.

While filing his capital-gains computation, Hemrajani treated the FMV of the shares on the exercise date, about Rs.1,754 per share, as the cost of acquisit...