ICICI SECURITIES PRIMARY DEALERSHIP LTD,MUMBAI vs. DCIT RG 3(2), MUMBAI

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ITA 4502/MUM/2014Status: DisposedITAT Mumbai06 May 2016AY 2007-085 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the Assessing Officer incorrectly added the disallowed rebate amount to the assessed income instead of recalculating the income tax payable. The matter was set aside for recomputation.

What were the facts?

The assessee claimed a rebate under Section 88E of the Income Tax Act on Securities Transaction Tax (STT). The Assessing Officer disallowed a portion of this rebate due to non-compliance with furnishing STT payment evidence with the return.

What were the issues?

Whether the disallowance of rebate under Section 88E should be added to total income or adjusted against tax payable. Whether proceedings under Section 147 were valid (though not adjudicated).

Which sections of the Income-tax Act were involved?

Section 88E,Section 147,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI

Before: SHRI G.S.PANNU & SHRI AMARJIT SINGH

For Appellant: Ms. Ritu Punjabi
For Respondent: Shri Bhanwar Singh Ratnoo
Hearing: 18/03/2016Pronounced: 06/05/2016

The captioned appeal filed by the assessee pertaining to the A.Y. 2007-08 is directed against an order passed by Ld. CIT(A)-4, Mumbai dated 22/04/2014, which in turn arises out of an order passed by Assessing Officer under section 147 r.w.s. 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 29/11/2012.

2.

In this appeal, although assessee has raised multiple Grounds of appeal, but the substantive grievance arises from an addition of (Assessment Year : 2007-08) Rs.2,33,32,727/- made by the Assessing Officer to the returned income on account of disallowance under section 88E of the Act.

3. In brief, the relevant facts are that the assessee company is engaged in the business of trading in securities and investment banking. During the year under consideration, assessee company had declared income on account of trading in securities under the head ‘profits and gains from business and profession’. Assessee company claimed a rebate under section 88E of the Act of Rs.6,87,55,959/-. In the impugned assessment finalized by the Assessing Officer by invoking section 147/148 of the Act, the total claim of rebate under section of the Act of Rs.6,87,55,959/- was scaled down and was disallowed to the extent of Rs.2,33,32,727/-. The said disallowance was determined by the Assessing Officer on the ground that there was non-compliance with the condition prescribed in the proviso to section 88E (1) of the Act. As per the discussion in para 5.8 of the assessment order, the Assessing Officer has observed that the requirement contained in the proviso to section 88E(1) of the Act to the effect that the evidence of payment of Securities Transaction Tax (STT) shall be furnished in the prescribed form alongwith the return of income has not been fully complied by the assessee. It is further noticed that out of the total claim of rebate under section 88E of the Act of Rs.6,87,55,959/-, assessee company did not furnish the evidence of payment of STT for a sum of Rs.2,33,32,727/- and, therefore the disallowance.

4.

Before us, a pertinent point which has been raised by the assessee is the manner in which the scaling down of the rebate under (Assessment Year : 2007-08) section 88E of the Act of Rs.2,33,32,727/- has been effectuated by the Assessing Officer.

5.

In order to appreciate the controversy, a brief reference is necessary to the provisions of section 88E of the Act. Section 88E of the Act prescribes a rebate in respect of STT, which is paid by the assessee in respect of taxable securities transactions entered into in the course of business during a particular year. Shorn of other details, it would suffice for the present to notice that the rebate in section 88E of the Act is by way of a deduction from the amount of income-tax payable on such income, i.e., income arising from the taxable securities transactions entered into in the course of the business. Section 88E of the Act prescribes deduction “from the amount of income-tax on such income arising from such transactions”. Quite clearly, the deduction envisaged under section 88E of the Act does not impinge the determination of the total income but it is relevant to determine the amount of income tax payable by an assessee. So however, in the instant case, while effectuating the disallowance of Rs.2,33,32,727/- under section88E of the Act, the Assessing Officer added the aforesaid amount to the assessed income instead of reworking the amount of income-tax payable by the assessee. The aforesaid aspect of the controvery was put across to the Ld. Departmental Representative for the Revenue at the time of hearing and quite clearly the position of law, adverted by us above, was not controverted.

6.

In this view of the matter, we deem it fit and proper to set-aside the order of the CIT(Appeals) and direct the Assessing Officer to (Assessment Year : 2007-08) recompute the total income as also the rebate under section 88E of the Act afresh in accordance with law. Needless to say, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard in support of the claim.

7.

Before parting, we may refer to a preliminary ground raised

in the Memo of appeal with respect to the validity of the proceedings initiated by Assessing Officer by invoking section 147/148 of the Act. The said Ground has neither been argued and nor is being adjudicated and it is kept open primarily for the reason that if the assessee were to succeed on the issue of the rebate allowable under section 88E of the Act, no grievance would survive in substantives terms. In such a situation, the objection to the initiation of proceedings under section 147/148 of the \Act would be merely academic. So however, assessee would be at liberty to raise such issue in the ensuing remand proceedings, if it is so advised.

8. In the result, appeal of the assessee is partly allowed, as above.

Order pronounced in the open court on 06/05/ 2016.

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