ASST CIT 4(3), MUMBAI vs. KBII SECURITIES P.LTD, MUMBAI

ORDER अिमत शु�ला : �या. स.: PER AMIT SHUKLA, JM: The aforesaid appeal has been filed by the revenue against impugned order dated 15.07.2013, passed by Ld. CIT(A)-8 Mumbai, for the quantum proceedings completed under section 143(3) r.w.s. 147, for the assessment year 2008-09, on the following grounds of appeal:- “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to allow the assessee the rebate under section 88E when tax liability was determined under section 115JB of the Income Tax Act.

2. When the case was called upon, none appeared on behalf of the assessee nor any adjournment application was filed, केबी से�यू�रट�स �ाइवेट �ल�मटेड 2 KBII Securities P Ltd Ld. DR.

3. The sole issue involved is, whether rebate under section 88E should be allowed when the tax liability has been determined under book profit in accordance with the section 115JB. The assessee is engaged in the business of share broking, trading and dealing in shares and securities. As per section 88E, if the total income chargeable under the head “Profits and gains from the business or profession”, includes taxable income arising from security transaction, the assessee is entitled to deduction from the amount of income-tax on such income arising from such transaction for the amount equal to security transaction tax paid in respect of taxable securities transaction entered into during the previous year. In other words, if the taxable income includes income derived from share transaction, the assessee is entitled to deduction from the income-tax deduction of security transaction tax paid by him. The assessee’s case before the Assessing Officer in the course of the reassessment proceedings, which was initiated vide issuance of service of notice under section 148 dated 28.03.2012, was that, the comparison of tax payable under the normal provisions of the Act should be compared with the taxes computed as payable under section 115JB on gross basis, that is, before allowing rebate under section 88E. If a rebate under section 88E is allowable under normal provision then same is also allowable while computing the tax liability under section 115JB. In support of this contention, strong reliance was placed on the decision of Karnataka High Court in the case of CIT vs Horizon Capital Ltd. 2012 TIOL 67. The AO observed that, after allowing rebate / deduction under section 88E, the net tax payable was determined at Rs.82,09,792/- under the normal provisions of the Act, however, a tax liability of the assessee under section 115JB works out to Rs.94,80,287/-. Since the tax liability under the normal provision was less than the book profit, therefore, he held केबी से�यू�रट�स �ाइवेट �ल�मटेड 3 KBII Securities P Ltd 115JB. The Ld. CIT(A) relying upon the decision of Hon’ble Karnataka High Court in the case of CIT vs. Horizon Capital Ltd [2010] TIOL 67 held that rebate under section 88E is allowable to the assessee while computing the tax liability under section 115JB.

4. After considering the relevant finding given in the impugned orders as well as after hearing the Ld. DR, we find that AO’s main case is that, deduction / rebate under section 88E is not allowable under section 115JB and therefore the tax payable under section 115JB being more needs to be paid. The Ld. CIT(A) has relied upon various decisions of the Tribunal, (which has been noted by him in para 2.4) and also the decision of Karnataka High Court and decided this issue in favour of the assessee by holding that, rebate under section 88E should be allowed, even if the AO has computed the tax liability under section 115JB. The relevant observation of the Ld. CIT(A) is reproduced here under:-

“During the appellate proceedings, the appellant has filed exhaustive submission. In its exhaustive submission / argument, amongst other explanations, the appellant submitted that total income has the same meaning if the income is computed under the normal provisions of the Act or under the provisions of section 115JB of the Act. The appellant argued that the deduction u/s 88E of the Act is allowable both when the income tax is computed under the normal provisions of the Act and also when the tax liability is computed under the provisions of section 115JB of the Act. In its exhaustive submission, the appellant again relied upon the decision of Karnataka High Court in the case of CIT Bangalore vs Horizon Capital Ltd (supra). On this issue, the appellant has also relied on the decision of Kolkata ITAT in the case of Ganeshyam Securities (P) Ltd vs CIT (ITA No. 342/Kol/2012) and Nakamichi Securities Ltd Kolkata vs ITO (ITA No. केबी से�यू�रट�स �ाइवेट �ल�मटेड 4 KBII Securities P Ltd 1108/Kol/2011, Ahmedabad ITAT in the case of S K Stock Broking Pvt Ltd vs CIT iv (ITA No. 1074/Ahd/2011 and Mumbai ITAT in the case of Touchstone Capital Market vs Department of Income tax (ITA No. 6031/Mum/2011) wherein the Mumbai ITAT followed its own decision in the case of Shreepati Holdings & Finance Pvt Ltd, in and the decision of Karnataka High Court in the case of Horizon Capital Ltd the appellant requested that the tax liability u/s 115JB may be computed after allowing rebate u/s 88E of the Act.

I have considered the facts of the case. In the case under consideration the only dispute is as to whether the rebate u/s.88E of the Act is also allowable while computing the income and tax payable u/s. 115JB of the Act. The Hon’ble Karnataka High Court and various benches of ITAT as mentioned above, has held that rebate u/s 88E of the Act is allowable to appellant while computing the tax liability u/s.115JB of the Act is allowable to the appellant while computing the tax liability under section 115JB of the Act. Following the above decision, the AO is directed to allow deduction u/s. 88E of the Act to the appellant while computing the tax liability u/s 115JB of the Act. This ground of appeal is, thus, allowed”.

5. The aforesaid finding of the CIT(A) is based on various judicial decisions including that of the Karnataka High Court and in the absence of any contrary decision brought to our notice, we find that there is no error in the order of the CIT(A), accordingly, the same is confirmed and grounds raised by the revenue are thus treated as dismissed.

केबी से�यू�रट�स �ाइवेट �ल�मटेड 5 KBII Securities P Ltd