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Income Tax Appellate Tribunal, MUMBAI BENCHES “F”, MUMBAI
Before: Shri Joginder Singh, & Shri Ramit Kochar
Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 15/07/2013 of the ld. First Appellate Authority, Mumbai. The only ground raised in this appeal pertains to directing the Assessing Officer to allow rebate u/s 88E of the Act from income computation u/s 115JB of the Income Tax Act, 1961 (hereinafter the Act).
2 M/s Vikabh Securities Pvt. Ltd.
During hearing of this appeal, at the outset, the ld. counsel for the assessee claimed that the impugned issue is covered by the decision from Hon’ble Karnataka High Court in CIT vs Horizon Capital Ltd. (2011) 245 CTR (Kar.) 601, in CIT vs MBL & Company Ltd. 358 ITR 1 (Del.) and CIT vs CNB Finwiz Ltd. (ITA No.412/2014) (Del.). This factual matrix was not controverted by ld. DR. 2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid orders for ready reference:-
245 CTR (Kar) 601 “Held: Under s. 88E, where the total income of an assessee in a previous year includes any income chargeable under the head "Profits and gains of business or profession", arising from taxable securities transactions, he shall be entitled to a deduction, from the amount of income-tax on such income arising from such transactions section also provides the limit to which deductions shall be given. Therefore, it is clear that the assessee is liable to pay STT when be enters into securities transaction. Tax is payable simultaneously after realizing the consideration. However, if that transaction is included in the total income of the assessee where the total income is assessed either under the provisions of the Act or under s. 115JB when tax chargeable on such income is arrived at, he is given the benefit of tax deductions of the amount, which he has paid under s. 88E by virtue of s.
When under s. 82A (sic), the assessee is made liable to pay tax with an assurance that it will be deducted and s. 87 of the Act gives effect to such promise made under the statute. That is the reason why the word used is rebate. The amount paid is handed back to the assessee. In other words, payment of tax twice on the same income is 3 M/s Vikabh Securities Pvt. Ltd. avoided. Therefore, the contention that this benefit is not available to the assessee whose total income is assessed under s. 115JB has no substance. In other words, when the total income is assessed and the tax chargeable is computed, it is from that tax which is chargeable, the tax paid under s. 88E is given deduction, by way of rebate, under s. 87 of the Act. This is the legislative intent. That is a promise to give deduction of the tax already paid. This is the mode in which tax already paid is handed back at the time of final computation. Therefore, the judgment referred (sic-rendered) by the Tribunal is strictly in accordance with law and does not suffer from any legal infirmity, which called for interference. We do not see any substantial question of law involved in this appeal. Conclusion: Assessee Company is entitled to rebate under section 88E in respect of STT paid where the total income is assessed u/s 115JB of the Act.” (2013) 358 ITR 1 (Delhi) “The minimum alternate tax scheme was introduced by inserting section 115J of the Income-tax Act, 1961, by the Finance Act, 1987. The purpose of introducing the scheme was to tax profitable companies which otherwise were not liable to pay tax on account of various deductions and higher depreciation available to them in computing the taxable income under the normal provisions of the Act. The import of section 115JB of the Act is to provide an alternative method of computation of tax by accepting the book profits as shown by the assessee, albeit with certain adjustments as specified in Explanation 1 to section 115JB(2) of the Act and levying tax thereon as alternative to the tax computed under the other provisions of the Act. It can be seen from the scheme of the Act that there are extensive machinery provisions for computing the total income of an assessee and the tax payable thereon. The tax as determined is subject to rebate as may be available under Chapter VIII-A of the Act. Section 87(1) of the Act provides that the rebate as available under sections 88 , 88A , 88B , 88C , 88D and 88E will be allowed to an assessee in computing the Income-tax payable by him on the total income of the assessee. There is a clear distinction between the scope 4 M/s Vikabh Securities Pvt. Ltd. Chapter VIII-A of the Act and that of other provisions which specify deductions that are available to an assessee in computing his total income. Whereas deductions allowed in computing the total income are a part of the machinery to determine the total income of the assessee, the rebates under Chapter VIII-A of the Act provide for certain deductions from the tax payable as computed on the total income of an assessee. There is no reason why the remission in tax which is available under section 88E of the Act to an assessee should not be available on the tax as computed under the minimum alternate tax scheme as both section 115JB of the Act as well as the other provisions of the Act have been enacted to provide the machinery for computing the total income of an assessee which is exigible to Income-tax. The rebate under section 88E of the Act provides for certain rebates available on the tax payable by an assessee. There would be no rationale to limit the plain words of section 88E of the Act and hold that the rebate in payment of the tax is only applicable to tax as determined under the normal provisions of the Act and not with respect to the minimum alternate tax as computed under section 115JB . The purpose of section 88E of the Act is to grant an assessee, to a limited extent, credit in tax on account of securities transaction tax already borne by him in respect of the business carried out by him in dealing in securities. This rebate would be equally applicable to tax as computed under section 115JB of the Act as under the normal provisions of the Act. The provisions of sections 87 and 88E apply to the total income computed under section 115JB of the Act and the assessee would be entitled to a deduction to the extent of the securities transaction tax borne by it during the course of business in the relevant previous year.” (2015) 54 Taxman.com 337 (Delhi)
Therefore, the contention that this benefit is not available to the assessee whose total income assessed under section 115JB has no substance. In other words, when the total income is assessed and the tax chargeable is computed, it is from that tax which is chargeable, the tax paid under section 88E is given deduction, by way of rebate, under section 87 of the Act. This is 5 M/s Vikabh Securities Pvt. Ltd. the legislative intent. That is a promise to give deduction of the tax already paid. This is the mode in which tax already paid is handed back at the time of final computation. Therefore, the judgment referred by the Tribunal is strictly in accordance with law and does not suffer from any legal infirmity, which called for interference. We do not see any substantial question of law involved in this appeal, which merits admission. The appeal is dismissed.
2.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel and the conclusion drawn in the aforesaid orders (reproduced supra), if kept in juxtaposition and analyzed, the facts, in brief, are that the assessee is a registered stock broker of BSE, engaged in the business of dealing in shares and securities. The assessee had substantial gross income of Rs.12,16,03,597/- from Arbitrage business segment, which entails very large, frequent and continuous purchase and sale transaction of shares. The book profit was worked out by the Assessing Officer at Rs.6,29,69,264/- and compared the 10% of the book profit u/s 115JB of the Act to the tax payable under the normal provisions of the Act after allowing rebate u/s 88E and recomputed the tax payable on the basis to 10% of the book profit. On appeal, the issue was decided in favour of the assessee by following the decision from Hon’ble Karnataka High Court and the Tribunal by holding that rebate u/s 88E of the Act is allowable to the assessee while computing the tax liability 6 M/s Vikabh Securities Pvt. Ltd. 115JB of the Act. The Revenue is aggrieved and is in appeal before this Tribunal.
2.3. If the totality of facts are analyzed, so far as, allowability of rebate u/s 88E of the Act, while framing assessment of the company u/s 115JB of the Act is concerned, where the total income of assessee, in a previous year, includes any income chargeable under the head ‘profit & gains of business’, the assessee is given the benefit of tax deduction of the amount, which he has paid u/s 88E of the Act by virtue of section 87 of the Act. When the assessee is made liable to pay tax within assurance that it will be deducted u/s 87 of the Act, gives effect to such promise made under the statute, that is the reason why the word used is rebate. The amount handed back to the assessee, in other words, the payment of tax twice on the same income is avoided, therefore, the contention of the ld. DR, that this benefit is not available to the assessee, whose total income is assessed u/s 115JB of the Act, has no substance. It can be said that the tax paid u/s 88E is given deduction, by way of rebate u/s 87 of the Act as per the legislative intent. In view of these facts, it is concluded that the assessee is entitled to rebate u/s 88E in respect of STT paid where the total income is assessed u/s 115JB of the Act. Our view is fortified by the aforesaid decisions (reproduced hereinabove), therefore, we affirm the stand of the ld. Commissioner of Income Tax (Appeals), resulting into, dismissal of the ground, raised by the Revenue.
7 M/s Vikabh Securities Pvt. Ltd. Finally, the appeal of the Revenue is dismissed.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 30/09/2015.