TMI Blog2011 (4) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... nt under normal provisions is ₹ 2,43,83,654/- whereas STT paid by the appellant is ₹ 3,37,07,299/-. Since the appellant is to be allowed credit for STT payment against any tax liability, the levy of tax on the disallowance of ₹ 10,566/- is not in order. The A.O. is directed to adjust STT already paid by the appellant. the issue involved in the grounds of appeal of the revenue is decided against the revenue and in favour of the assessee. - SHRI RAJPAL YADAV, JUDICIAL MEMBER and SHRI B.C. MEENA, ACCOUNTANT MEMBER For The Appellant : Shri Rakesh Gupta, Advocate For The Respondent : Shri Peeyush Sonkar, Senior DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : This is an appeal filed by the revenue against the order of CIT (Appeals)-IX, New Delhi dated 29.3.2010. The grounds of appeal read as under :- 1. The order of the learned CIT (Appeals) is erroneous contrary to facts and law. 2. On the facts and in the circumstances of the case and in law, the learned CIT (Appeals) has erred in allowing rebate u/s 88E before calculating the book profit u/s 115JB of the I.T. Act. 2.1 The Ld. CIT (A) ignored the fact that as per the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit of a company. It was basically introduced to recover a share of tax from distributable profits in case of companies not paying the tax as per normal provisions of the Act and yet distributing the dividends. Accordingly, for the purpose of this section what was targeted was to arrive at distributable profits. 'Book Profit' was defined in this section as profits available for distribution worked out as per the provisions of Companies Act, 1956. From this analysis it is clear that the provisions of section 115JB would be attracted if the company is not liable to pay tax as per the normal provisions of the Act or if its tax liability is less than ten percent of its Book Profits computed as prescribed in section 115JB. In such a situation, a corporate assessee will be liable to pay ten percent of its Book Profit as Income-tax. To arrive at the book profit for the purposes of section 115JB(1), the assessee company is mandated by section 115JB(2) to prepare its profit and loss account in accordance with the provisions of Companies Act, 1956. Explanation [1] of section 115JB lays down the manner in which the 'book profit' is to be worked out from the profit and lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,76,903/- and rebate u/s 88E on account of STT paid was not allowable against tax MAT. I am unable to appreciate the interpretation of the provisions taken by the AO to arrive at this understanding. While introducing the Finance (No.2) Act, 2004, in his speech to the Parliament, the Finance Minister proposed the levy of Securities Transactions Tax to address the problematic issue of tax on capital gains on securities transactions. He stated as below: 111. Capital gains tax is another vexed issue. When applied to capital market transactions, the issue becomes more complex. Questions have been raised about the definitions of long-term and short-term, and the differential tax treatment meted to the two kinds of gains. There are no easy answers, but I have decided to make a beginning by revamping taxes on securities transactions. Our founding fathers had wisely included entry 90 in the Union List in the Seventh Schedule of the Constitution of India. Taking a cue from that entry, I propose to abolish the tax on long-term capital gains from securities transactions altogether. Instead, I propose to levy a small tax on transactions in securities on stock exchanges. The rate will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intent of the Legislature in section 115JB and when it approved the provisions regarding Securities Transaction Tax. To put it in numbers, the AO's interpretation implies that the appellant company is liable to tax of ₹ 2,43,83,654/- as per normal provisions of the Act, however, simply because after rebate u/s 88E on account of STT payment, there is no tax due and payable by the company it should be subjected to MAT at 10% of its books profits amounting to ₹ 81,76,903/- in addition to the normal tax payable and paid by the company. Taken together the tax payment by the company under normal provisions and under MAT totals up-to ₹ 3,25,60,557/- (Rs.2,43,83,654 + ₹ 81,76,903). The implication of such an interpretation is that the appellant company is subjected to taxation at a rate higher than even the rate prescribed under normal provisions of the Act. It is my considered opinion that this was not the intent of the Legislature either with regard to provisions of section 115JB or with regard to imposition of STT. In light of the foregoing discussion, this ground of appeal is allowed and the AO is directed to delete the addition on account of MAT. 4.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961, we find that the rebate is to be granted from the amount of income tax chargeable on the total income of the assessee. The income tax is computed after arriving at the total income of the assessee and section 87 of the Income Tax Act, 1961 does not differentiate between the total income computed under the regular provisions of the Act or under section 115JB of the Income Tax Act, 1961. Even though the sub section (1) of section 115JB starts with the non-abstante clause, Not withstanding anything contained in any other provision of this Act , we find that it is only for the computation of the total income and the sub section (5) of section 115JB provides for a saving clause that the rest of the provisions of the income tax Act relating to deductions, rebate, etc the other provisions of the Income Tax Act shall apply. Therefore it is clear that the provision of sections 87 and 88A to 88E also apply after the total income is computed under section 115JB of the Income Tax Act, 1961 and since the assessee's total income includes the income from the taxable Securities Transactions, the assessee is entitled to a deduction of the amount equal to the STT paid by him in res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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