TMI Blog2015 (12) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... se which is in context to Section 88E. Therefore, we do not find any reason to interfere with the order of Ld. CIT(A) in holding that business loss occurred on arbitrage and job which were STT paid transactions could not be adjusted against the non-STT transaction belonging to clients. It had to be deducted from STT paid transactions only on assessee’s own account. There is one more reason. The rebate u/s. 88E is allowable from the tax paid. However, in case of arbitrage loss assessee had admittedly not paid any income tax. Therefore, if assessee’s plea is accepted then it would lead to double relief to assessee – firstly, by allowing set off u/s 70 against STT income and then allowing rebate from income-tax. This is definitely not the intention of legislature. We accordingly do not find any reason to interfere with the order of Ld. CIT(A) and ground taken by assessee is dismissed. - ITA No.670/Kol /2011, ITA No.677/Kol /2011, ITA No. 676/Kol /2011 - - - Dated:- 29-9-2015 - Shri, S.V. Mehrotra, Accountant Member and Shri Mahavir Singh, Judicial Member For The Assessee : Shri J.P.Khaitan, Senior Advocate Shri Anirban Ghosh, Advocate For The Revenue : Shri Pinaki Mukherj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B] Expenses 27,892/- 29,392/- 5,03,18,061 Less: Dividend [Exempt] 29,974/- Depreciation [As per I.T. Rules] 5,02,003/- 5,31,977/- Total Income 4,97,86,084/- R.O. Rs.4,97,86,080/- CALCULATIN OF TAX Income Tax thereon 1,49,35,824/- Less: Rebate u/s. 8E @ 30% of ₹ 4,91,73,037/- 1,47,51,911/- [Actual paid ₹ 1,80,13,120/-] Tax on Non-STT Income of ₹ 6,13,047/- @ 30% 1,83,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant returned income is as below: Business Amount Share Trading 4605962 Jobbing, arbitrage dealings 2856925 F/O profit 53939839 Brokerage/others 10731720 Expenses as per Returned of Income (16663904) Returned income 49756692 The expenses were bifurcated on overall business and actual in the under mentioned basis Particulars Own Client Total Remarks Transactions charges 7464182 2488061 99522443 75:25 Terminal operating chgs. 1095649 365216 1460865 75:25 Depository charges 184060 61353 245413 75:25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tationary, stamp expenses on brokerage, bank charges, Salary Bonus etc., Books Periodicals, Rent Maintenance charges, rates taxes, insurance, telephone, Misc. expenses, audit fees etc., are very much part and parcel of carrying on brokerage business. The same have to be incurred irrespective of the business generated on account of brokerage and is directly attributable to brokerage business. The clients can be catered in the aforesaid environment only who conducts business through us as well as who seeks regular advice / meeting with us. The same is on going process which lasts through out the financial year. We categorically state that substantial expenditures under various aforesaid heads are to be incurred for maintaining the structure of stock broking business as well as carrying of brokerage business and the aforesaid facts cannot be disputed in the scenario of technological ad systemic development in stock markets. In a nutshell maintaining of structure of business as well as carrying of brokerage business thus entails substantial expenditures. Expenses are allocate done the basis of overall business and actual for rebate u/s. 88E. 4. The second dispute was in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,19,78,531 Net STT Income Rs.4,37,10,343 Non STT Income Rs.1,07,31,720 Less: Related Exp. Rs.24,53,434 Direct Non STT Exp. Rs.22,31,939 Net Non STT Income Rs.60,46,347 4.3 Thus, Ld. CIT(A) computed the rebate u/s 88E at ₹ 1,31,13,103/- as against ₹ 1,18,26,751/- allowed by AO in reassessment proceedings. 5. Being aggrieved, assessee is in appeal before us against the order of Ld. CIT(A) not allowing set off of arbitrage / jobbing loss of ₹ 28,56,925/- against non-STT income and Revenue is in appeal before us as Ld. CIT(A) allowed excess rebate of ₹ 12,86,352/- u/s.88E of the Act. 6. First we take up assessee s appeal raising the following grounds of appeal:- 1) That on the facts and circumstances of the case the CIT(A) erred in concluding that proceedings u/s. 147 initiated by the AO, recorded reason as well as completing the assessment was as per la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout examining the relevant details whether any income comes under STT income or non STT income and, further, details regarding allocation of expense between STT and non-STT, were not available before the AO. He had only accepted the computation without examining the correct legal position u/s. 88E. If a claim is not legally sustainable and reassessment proceedings have been initiated in ordered to arrive at the correct taxable income on which the rebate is admissible, then it cannot be said to a case of change of opinion because if the law has not correctly been applied then the same cannot be equated with a situation where two views are possible. For allowing proper rebate u/s 88E, total income arising from taxable security transaction had to be computed. The AO recorded these reasons after arriving at a conclusion that STT related income was calculated excessively with regard to allocation of expenses leading to excessive rebate u/s.8E. We are of the opinion that it is not a case of change of opinion but a case where legal position with regard to rebate u/s. 88E had not correctly been applied to the acts of the case, which resulted in granting excessive rebate of income tax. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e loss from jobbing / arbitrage transaction against the non-STT transaction for computing rebate u/s 88E. In this regard, Ld. Counsel for assessee relied on the case law in the case of CIT v. K.L. Varadarajan 75 ITR 23 (Mad) and in the case of CIT v. B.K. Birla 174 ITR 361 (Cal). 12. We have considered the submissions of both the parties at length. The contention of Ld. DR is that section 88E is a specific provision and, therefore, it has to be given preference over other provisions and the computation had to be made as contemplated under that section. In order to appreciate the controversy, we reproduce section 88E: [Rebate in respect of securities transaction tax. 88E.(1) 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 table securities transactions, he shall be entitled to a deduction, from the amount of income-tax on such income arising from such transactions, computed in the manner provided in sub-section (2), of an amount equal to the securities transaction tax paid by him in respect of the taxable securities transactions entered into in the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext to Section 88E. Therefore, we do not find any reason to interfere with the order of Ld. CIT(A) in holding that business loss occurred on arbitrage and job which were STT paid transactions could not be adjusted against the non-STT transaction belonging to clients. It had to be deducted from STT paid transactions only on assessee s own account. There is one more reason. The rebate u/s. 88E is allowable from the tax paid. However, in case of arbitrage loss assessee had admittedly not paid any income tax. Therefore, if assessee s plea is accepted then it would lead to double relief to assessee firstly, by allowing set off u/s 70 against STT income and then allowing rebate from income-tax. This is definitely not the intention of legislature. We accordingly do not find any reason to interfere with the order of Ld. CIT(A) and ground taken by assessee is dismissed. Coming to Revenue s appeal in ITA No. 677/Kol/2011 13. The Revenue has taken following ground of appeal:- 1. That on the facts and circumstances of the case, Ld. CIT(A)-VI, Kolkata has erred in law as well as on the facts by allowing excess rebate of ₹ 12,86,352/- u/s.88E of the Act to the assessee thou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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