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The ACIT 2 (1) , Mumbai Versus Chokhani Securities Ltd.

2016 (9) TMI 763 - ITAT MUMBAI

Reopening of assessment - allowing rebate for Securities Transaction Tax (STT) under section 88E in a case where an assessee is also exigible to tax under section 115JB of the Act - Held that:- The CIT(A) has clearly brought out the error on the part of the Assessing Officer while forming a belief about the escapement of income. Section 88E of the Act provides for a rebate in respect of STT paid. Ostensibly, such rebate is available against the income-tax payable by an assessee subject to other .....

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en at the time of formation of belief for issuance of notice under section 147/148 of the Act was not borne out of the bare provisions of the Act. Of course, the stand of the Assessing Officer is also contrary to the judgment of the Hon’ble Karnataka High Court in the case of M/s. Horizon Capital Ltd. (2011 (10) TMI 489 - KARNATAKA HIGH COURT ), but that decision is of a date later than the date on which the Assessing Officer initiated the proceedings under section 147/148 of the Act. Be that as .....

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ated:- 10-9-2016 - SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER For The Appellant : Shri B.S.Bist For The Respondent : Shri Jayesh Dedhia ORDER PER G.S.PANNU,A.M: The captioned two appeals by the Revenue relate to the same assessee and involve a common issue and, therefore, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 2. The common dispute in both the appeals relates to the validity of the p .....

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Mum/12:- 3. In this appeal, Revenue has raised the following Grounds of appeal:- On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below:- 1. The order of the CIT(A) is opposed to law and facts of the case. 2(a) "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in quashing the proceedings of re-assessment u/s 148 holding that no new f .....

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; 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in granting rebate under section.88E of the IT Act thereby, overlooking the crucial fact that Securities Transaction Tax is an indirect tax and if cannot be equated with prepaid taxes like Advance tax and hence, its rebate cannot be provided u/s 115JB, which is self contained taxation statute". 4. "For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) .....

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88E of the Act. The return of income filed by the assessee was subject to scrutiny assessment under section 143(3) of the Act dated 11/9/2009, wherein the only additions made were on account of section 14A of ₹ 817530/- and under section 94(7) of the Act of ₹ 10,848/-. Subsequently, the Assessing Officer issued notice under section 148 of the Act and reopened the assessment on the ground that assessee was liable to pay tax as per the provisions of section 115JB of the Act as the boo .....

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Act before allowance of rebate under section 88E of the Act. It was pointed out that once the matter was considered in that perspective, there would be no escapement of income so as to justify the initiation of reassessment proceedings. The Assessing Officer however, disagreed with the assessee and proceeded to compute the tax liability of the assessee in terms of section 115JB of the Act. In this manner, the book profit was determined at ₹ 3,14,98,344/- and the tax liability has been dete .....

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e notice of the Assessing Officer and nor any escapement of income was established in law, and therefore, the notice issued under section 148 of the Act was liable to be quashed. According to the CIT(A) the initiation of proceedings was based on a wrong interpretation of the provisions of section 115JB of the Act and accordingly he has quashed the assessment. Even on merits, the claim of the assessee has been upheld. In this manner, the Revenue is in appeal before us. 5. At the outset, the Ld. R .....

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e Act has to be compared with the tax liability under section 115JB of the Act on gross basis i.e. before allowing the rebate under section 88E of the Act. According to him, the controversy in the present appeal is fully covered by the said precedent. In this context, we find that in the case of M/s. R.R.Chokhani Stock Brokers Private Limited (supra) one of the Grounds of appeal raised read as under:- 2. (a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in al .....

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nder Normal Provisions of the Act and Rebate u/s. 88E would also be available to the assessee against the tax payable u/s.115JB of the Act. The said controversy was addressed by the Tribunal in the following words:- 7. Next Ground of Appeal raised by the AO is about allowing rebate u/s. 88E of the Act,while computing tax liability under the Minimum Alternate Tax (MAT) provisions.During the assessment proceedings, AO found that assessee had paid tax under the normal provisions of the Act and same .....

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Corporate Tax targets year over year from the corporate assessees having earned profit as per book results but the tax liability. Under the normal provisions of Act was much less, that the provisions of Section 115JB dealt with payment of Income Tax in contrast to computation of Income Tax chargeable u/s. 87(1), that the provisions of Section 87 allowed rebate u/s. 88 in respect of L.I.P. and P.F. etc., that payment of STT qualify for tax by way of rebate of similar footing as for payment of L. .....

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d an appeal before the FAA. After considering the submissions, he held that from ITR 6 (where taxable worked out under normal provisions of the Act or under the MAT) entries of far ITR 6 had to be considered while calculating, income u/s. 115JB of the Act, that there was no prohibition in claiming rebate in respect of STT paid against Income Tax payable under MAT under the provisions of Section 115JB. He finally held that comparison between tax determined under normal provisions of the Act and t .....

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Securities & Finance Pvt. Ltd., 7.3.Before us, Departmental Representative (DR) relied upon the order of the AO.AR submitted that tax rebate was a step which would arise after determining income tax payable on total income computed as per applicable provisions including MAT, that comparison u/s. 115JB was between Income tax payable on total income and 10% on Book Profit had to be carried out, that same view emerged from the Income Tax return (ITR 6) prescribed by the Central Board of Direct .....

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order of the Hon ble High Court of Karnataka. In the said judgment Hon ble High Court has observed as under: Section 115JB provides that if the tax payable on the total income is less than 7.5 per cent of the book profit, the tax payable under this provision shall be the amount of income tax at the rate of 7.5 per cent of book profit. In other words, if computation of income is done under the provisions of the Act and if the tax payable is less than 7.5 per cent of the book profit and the asses .....

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come tax payable on the total income of the assessee under the Act, if such an assessee has paid tax under the aforesaid provisions mentioned in the said section to the extent of the tax paid under that section is deductible as rebate. Under section 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 amo .....

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e benefit of tax deductions of the amount, which he has paid under section 88E by virtue of section 87. When under section 82A, the assessee is made liable to pay tax with an assurance that it will be deducted and section 87 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 avoided. Therefore, the contention that this benefit is not availab .....

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e order passed by the Tribunal is strictly in accordance with law and does not suffer from any legal infirmity, which called for interference. No substantial question of law is involved in this appeal, which merits admission. The appeal is dismissed. Respectfully following the above decision of the Hon ble Karnataka High Court and the orders of the coordinating benches we decide Ground no.2 against the AO. 6. Quite clearly, the aforesaid decision of the Tribunal is based on the judgment of the H .....

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rounds, firstly that no new facts came to the notice of the Assessing Officer so as to justify initiation of proceedings under section 147/148 of the Act; and, secondly, that there was no escapement of income as the belief of the Assessing Officer was based on a wrong interpretation of the provisions of Section 115JB of the Act. The CIT(A) has reached to the above conclusion on the basis of the following discussion :- 5. I have considered the facts of the case and submissions of the assessee. Se .....

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ayable after reduction of STT with 10% of book-profit, but such a comparison is not warranted u/s. 115JB because STT is like any other tax paid and it is not to be reduced from the tax liability before comparison with 10% of book-profit. STT is allowed deduction from income-tax payable whether it is calculated and payable under the normal provisions of the Act or payable u/s.115JB and, therefore, the tax liability is to be considered under the normal provisions of the Act before deduction of STT .....

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in earlier years (if 1 is more than 2c) (7 of Schedule MATC) 5 Tax payable after credit under section 115JAA [(3-4)] 6 Rebate under section 88E (4 of Schedule-STTC) 7 Balance tax payable (5-6) 8 Surcharge on 7 9 Education Cess on (7+8) 10 Gross tax liability (7+8+9) 11 Tax relief a. Section 90 b. Section 91 c. (11a + 11b) It is clear in the above mentioned part B of the return of income that at Point No. 3 the tax payable under the normal provisions of law and the deemed income u/s. 115JB i.e. 1 .....

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ent made pursuant to notice u/s. 148 is quashed and the grounds of appeal of the assessee are allowed. 8. In the course of hearing, the Ld. DR defended the action of the Assessing Officer by pointing out that at the stage of initiation of proceedings under section 147/148 of the Act what is required is to form only a prima facie view and, therefore, the CIT(A) ought not to have invalidated the initiation of reassessment proceedings. 9. On the other hand, the learned representative for the assess .....

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