SBI CAPITAL MARKETS LTD, MUMBAI V. CIT LTU, MUMBAI

ITA 3249/MUM/2012

• Counselvise Citation: 324919914 RSA 2012
• Duration Of Justice: 3 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 13-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Assessee Lawyers: NITESH JOSHI; N A PATADE
• Section: 263; 154; 143(3)

Judgement Text

1 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI E BENCH . . , , , BEFOR E S/SH. A.D. JAIN,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.3249/MUM/2012, / ASSESSMENT YEAR - 2007 - 08 SBI CAPITAL MARKETS LTD. 202, MAKER TOWER E, CUFF PARADE, MUMBAI 05. PAN: AAACS7914E VS CIT LTU MUMBAI . ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI NITESH JOSHI & N.A. PATADE - AR / REVENUE BY : SHRI MANJUNATHA S WAMY - DR / DATE OF HEARING : 21 07 2015 / DATE OF PRONOUNCEMENT : 29 07 2015 , 1961 263 ORDER U/S.263 OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM CHALLENGING THE ORDER DATED 07.03.2012OF THE CIT LTU ,MUMBAI,THE ASSESSEE HAD FILED APPEAL RAISING FOLLOWING GROUNDS OF APPEAL: 1.THE ORDER OF THE LEARNE D CIT IS CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE AND WITHOUT APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE IN THEIR RIGHT PERSPECTIVE. 2.THE LEARNED CIT ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE IT A AND HOLDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3.THE LEARNED CIT DID NOT APPRECIATE THE FACT THAT THE ISSUE WAS ALREADY BEEN EXAMINED AND DROPPED BY THE ASSESSING OFFICER DURING THE PROCEEDINGS INITI ATED UNDER SECTION 154 OF THE ITA PROPOSING TO WITHDRAW THE EXEMPTION UNDER SECTION 88E OF THE ITA. 4.THE LEARNED CIT ERRED IN HOLDING THAT THE ORDER PASSED BY THE ADDITIONAL CIT (LTU), MUMBAI ('ADD I. CIT') IS ERRONEOUS TO THE EXTENT OF REBATE UNDER SECTI ON 88E OF THE ITA AND ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. 5.THE LEARNED CIT ERRED IN SETTING ASIDE THE ORDER PASSED BY THE ADDL. CIT WITH A DIRECTION TO MODIFY THE ORDER UNDER SECTION 143(3) OF THE ITA BY DISALLOWING THE ASSESSEE'S CLAIM OF REBATE UNDER SECTION 88E OF THE ITA OF RS. 38,89,772. 6.THE LEARNED CIT ERRED IN HOLDING THAT AS THE APPELLANT HAD INCURRED A NET LOSS OF RS.1,46,84,000 FROM TAXABLE SECURITIES TRANSACTION, THE APPELLANT IS NOT ELIGIBLE FOR REBATE UNDER SECTION 88E OF THE ITA. 7 .THE LEARNED CIT ERRED IN NOT APPRECIATING THAT THE PROFIT EARNED ON EACH SECURITY IS A TAXABLE EVENT, ACCORDINGLY THE REBATE UNDER SECTION 88E SHOULD BE AT LEAST ALLOWED IN RESPECT OF SALE TRANSACTION ON WHICH PROFIT HAD BEING EARNED. ACCORDINGLY, AS THE SIT PAID ON TRANSACTIONS RESULTING IN PROFITS AMOUNTS TO RS. 25,20,772, REBATE UNDER SECTION 88E OF THE ITA SHOULD AT LEAST BE ALLOWED TO THAT EXTENT. 8.EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. BRIEF HISTORY: 2. THE ASSESS E E FILED ITS RETURN OF INCOME ON 30.10.2007. THE ASSESSING OFFICER(AO)FINALISED THE ITA/ 3249 /MUM/201 2 ,AY. 07 08 SBI. 2 ASSESSMENT ORDER U/S. 143(3) OF THE A CT ON 16.11.2009. THE CIT CALLED FOR THE RECORDS OF THE ASSESSEE . HE WAS OF THE OPINION THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS AN D PREJUDICIAL TO REVENUE. A CCORDINGLY,HE ISSUED A SHOW CAUSE NOTICE VIDE LETTER NO.CIT/LTU/263/SBI CAPITAL MARKET/ 2011 12/402 DATED 07.02.2012 TO THE ASSESSEE AND ASKED IT TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER MADE U/S .143(3) OF THE ACT SHOULD NOT BE CANCELLED AND FRESH ASSESSMENT BE DIRECTED .CIT OBSERVED THAT THE CLAIM MADE BY THE ASSESSEE FOR ALLOWING REBATE U/S. 88E OF THE ACT WAS WRONGLY ALLOWED ,THAT THE ASSESSEE HAD INCURRED NET LOSS OF RS. 1.46 CRORES IN THE BUSINESS OF TRADING IN SECURITIES ,T HAT THERE WAS NO LIABILITY OF INCOME TAX ON SUCH LOSS ON SECURITIES TRANSACTIONS. IN RESPONSE TO THE REVISIONARY NOTICE THE ASSESSEE ,VIDE ITS REPLY DATED 02/03/2012 AND STATED THAT TRADING IN SECURITIES WA S AN INTEGRAL PART OF THE BUSINESS OF THE COMPANY ,TH AT D URING THE YEAR THE COMPANY HA D ENTERED INTO VARIOUS TRANSACTIONS OF PURC HAD E AND SALE OF SECURITIES ,THAT IT HAD PAID STT ON THESE TAXABLE SECURITIES TRANSACTIONS ,THAT IT HAD OVERALL EARNED A BUSINESS PROFIT OF RS. 55,06,67, 905/ ,THAT THE SAME WA S OFFE RED AS INCOME FROM BUSINESS AND PROFESSION ,THAT IT WAS ENTITLED TO REBATE UNDER SECTION 88E OF THE ACT IN RESPECT OF THE STT PAID ON SALE AND PURC HAS E OF SHARES HELD AS STO CK IN TRADE,THAT THE THE PROVISIONS OF SECTION 36(1)(XV) OF THE ACT WHICH PROVIDED D EDUCTION OF THE ENTIRE STT PAID BY THE ASSESSEE DURING THE PREVIOUS YEAR IN RESPECT OF TAXABLE SECURITIES TRANSACTIONS DURING THE COURSE OF THE BUSINESS ,THAT DEDUCTION WA S ALLOWED IRRESPECTIVE OF THE FACT WHETHER PROFIT WA S MADE BY THE ASSESSEE IN RESPECT OF THE TAXABLE SECURITIES TRANSACTIONS,THAT THE INTENTION OF THE LEGISLATURE HAD ALWAYS BEEN TO ALLOW RELIEF FOR THE ENTIRE STT PAID BY THE ASSESSEE AND NOT TO RESTRICT THE SAME TO ONLY TRANSACTION ON WHICH PROFIT HAD BEEN EARNED ,THAT THAT THE REBATE U/ S. 88E OF THE ACT SHOULD BE ALLOW AVAILABLE IN RESPECT OF STT PAID ON TAXABLE SECURITIES TRANSACTIONS ,THAT THE AO, VIDE LETTER DATED 18. 06.2010,HAD PROPOSED TO WITHDRAW THE REBATE GRANTED U/S.88E BY INVOKING THE PRO VISIO NS S ECTION 154 OF THE ACT , THE HE DROPP ED THE RECTIFICATION PROCEEDINGS AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ,THAT THE ISSUE OF THE ALLOWABILITY OF REBATE U/ S. 88E HAD A LREADY BEEN CONSIDERED BY THE A O ,THAT AFTER APPLYING HIS MIND ,THE AO HAD CONCLUDED THAT REBATE U/S.88E OF THE ACT SHOULD NOT BE WITHDRAWN,THAT WHEN TWO VIEWS WE RE POSSIBLE AND ONE OF THE VIEWS HAD BEEN ADOPTED BY THE A O THE POWER OF REVISION U/S. 263 C OULD NOT BE EXERCISED .THE ASSESSEE PLACED RELIANCE ON THE DECISIONS OF MAX INDIA LTD.(268 ITR 128 ) ,PATEL COTTON CO. L TD.( 64 ITD 273 ), JHULELAL LAND DEVELOPMENT CORP ORATIO N (56ITD 345 ),MANNESMANN DEMAG A.G.(53ITD533), SUPER CASSETTES INDUSTRIES (P) LTD. (41 ITD 530), MOOL RAJ SINGH & ORS. (63TTJ211 ) , RAJASTHAN FINANCIAL CORPORATION (229ITR246),MALABAR INDUSTRIAL CO. LTD.(243ITR8 3)AND GABRIEL INDIA LTD.(203 ITR 108).THE ASSESSEE TOOK AN ALTERNATIVE PLEA BY STATING THAT THE PROFIT E ARNED ON SALE OF EACH SECURITY WA S A TAXABLE EVENT, THEN THE REBATE U/S. 88E SHOULD AT LEAST BE ALLOWED IN RESPECT OF SUCH SALE TRANSACTION TO THE EXTEN T OF PROFITS EARNED ON THE SAME,THAT T HE STT PAID ON SECURITIES TRANSACTIONS RES ULTING IN PROFIT AMOUNTED TO RS. 25,20,772/ , THAT REBATE U/S. 88E SHOULD BE GRANTED AT LEAST TO THE EXTENT OF RS. 25,20,772/ . 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE ,THE CIT HELD THAT SECTION 88E OF THE ACT CLEARLY STATED THAT WHERE THE TOTAL INCOME OF THE ASSESSEE IN A PREVIOUS YEAR INCLUDES ANY INCOME CHARGEABLE UNDER THE HEAD PROFIT & GAINS OF BUSINESS ARISING FROM TAXABLE SECURITIES TRANSACTION WA S ELIGIBLE FOR A REBATE EQUAL TO STT PAID BY THE ASSESSEE IN PROPORTION TO THE INCOME ON WHICH STT HAD BEEN PAID ,THAT D URING THE YEAR, THE ASSESSEE HAD MADE PROFIT OF RS. 4 .14 CRORES ,ON SOME OF THE TRANSACTIONS AND IT HAD INCURRED LOSS OF RS. 5,61,59,800/ ON SOME OTHER TRAN SACTIONS THEREBY INCURRIN G A NET LOSS OF RS. 1,46,84,000/ ON THE TOTAL SECURITIES TRANSACTIONS ,THAT THERE WAS NO LIABILITY TO PAY ANY INCOME TAX IN THE CURRENT YEAR ON SUCH TRANSACTIONS ,THAT THERE WA S NO SCOPE ITA/ 3249 /MUM/201 2 ,AY. 07 08 SBI. 3 FOR GRANTING REBATE U/S. 88E IN RESPECT OF STT PAID BY THE ASSESSEE ,THAT R EBATE C OULD BE ALLOWED ONLY WHEN THERE WA S SOME LIABILITY TO PAY INCOME TAX ON THE INCOME OF SUCH SECURITIES TRANSACTIONS ,THAT IF THERE WA S NO SUCH LIABILITY REBATE WOULD NOT BE A VAILABLE. HE SET ASIDE THE ORDER PASSED BY THE AO WITH A DIRECTION TO MODIFY THE ORDER U/S. 143(3) OF THE ACT BY DISALLOWING THE ASSESSEE'S CLAIM MADE BY IT FOR THE REBATE U/S . 88E OF THE ACT . 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)SUBMITTED THAT . DEPARTMENTAL REPRESEN TATIVE(DR)STATED THAT THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE,THAT THE AO NOT APPLIED HIS MIND,THAT THE AO HAD ALLOWED THE REBATE THAT WAS NOT ALLOWABLE AS PER THE PROVISIONS OF THE ACT,THAT ACTION OF THE AO HAD TO BE R ECTIFIED, THAT THERE WERE NO TWO POSSIBLE VIEWS ABOUT THE ALLOWABILITY OF THE REBATE,THAT ISSUANCE OF RECTIFICATION NOTICE U/S.154 OF THE ACT WAS NO BAR FOR INITIATING REVISIONARY PROCEEDINGS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE SOLITARY ISSUE TO BE DECIDED BY US IS AS TO WHETHER THE CIT WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 IN DISALLOWING THE REBATE U/S.88E OF THE ACT.WE FIND THAT THE AO HAD WHILE CALCULATING THE TAX LIABILITY OF THE ASSESSEE HAD ALLOWED THE REBATE AVAILABLE U/S.88E OF THE ACT, THAT LATER ON HE HAD ISSUED A NOTICE U/S.154 OF THE ACT WHEREIN HE HAD MENTIONED THAT THE REBATE ALLOWED TO THE ASSESSEE WAS NOT AS PER LAW AND SAME HAD TO BE WITHDRAWN,THAT THE ASSESSEE HAD SUF FERED LOSS IN STT RELATED TRANSACTIONS,THAT FROM OVERALL BUSINESS AND PROFESSION IT HAD SHOWN PROFITS,THAT IT HAD MADE AN ALTERNATE ARGUMENT BEFORE THE CIT ALSO . PROCEEDINGS UNDER SECTION 263 OF THE ACT CAN BE INITIATED IF THE CIT,ON GOING THROUGH THE REC ORDS,FIND THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE.THE COURTS HAVE DEFINED THE BOTH THE TERMS I.E. ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE.AN INCORRECT ASSUMPTION OF FACTS OR IMPROPER APPLICATI ON OF LAW WOULD STATISFY THE REQUIREMENT OF ORDER BEING ERRONEOUS.IT IS SAID THAT AN ORDER CAN BE BROUGHT WITHIN THE PERVIEW OF ERRONEOUS ORDER IF IT INVOLVES AN ERROR BY DEVIATING FROM LAW OR UPON THE ERRONEOUS APPLICATION OF LAW. FROM THE SC HEME OF T HE ACT, IT BECOMES CLEAR 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) O F 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 OF CHAP TER 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.THE PURPOSE OF SECTION 88E OF T HE 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.IN OTHER WORDS SECTION 88E PROVIDES FOR REMISSION OF TAX TO THE EXTENT OF SECURITIES TRANSACTION TAX AS PAID BY THE ASSESSE E PROVIDED THE CONDITION SPECIFIED THEREIN IS SATISFIED, NAMELY, THE INCOME OF THE ASSESSEE INCLUDES INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', ARISING FROM TAXABLE SECURITIES TRANSACTIONS, ITA/ 3249 /MUM/201 2 ,AY. 07 08 SBI. 4 AN ASSESSEE IS 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. SO,THE ASSESSEE WOULD NOT BE ENTITLED TO REBATE IF THE INCOME IS ARISING UNDER THE HEAD INCOME FROM CAPITAL GAINS.IN THE CASE BEFORE US THERE WAS LOSS UNDER THE HEAD CAPITAL GAINS,THEREFORE,THE ASSESSEE WAS NOT ENTITLED TO CLAIM REBATE U/S. 88 OF THE ACT.AS THE AO HAD NOT MADE ANY INQUIRY IN THAT REGARD,SO,IN OUR OPINION THE CIT HAD RIGHTLY INVOKED THE PROVISIONS OF SECTION 263 AND HAD ISSUED THE REVISIONARY NOTICE.BUT,AS FAR AS QUANTUM OF REBATE IS CONCERNED WE HOLD THAT THE ALTERNATE CLAIM MADE BY THE ASSESSEE NEEDS TO BE CONSIDERED.THEREFORE,ALLOWING THE APPEAL FILED BY THE ASSESSEE IN PART,WE DIRECT THE AO TO CALCULATE THE 88 E REBAT E FOR THE BUSINESS TRANSACTIONS I.E.THE ALTERNATE GROUND RAISED BY THE ASSESEE HAS TO BE GIVEN EFFECT. AS A RESULT,APPEAL FILED BY THE ASSESSEE STAND PARTLY ALLOWED . . ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY,2015. 29 TH , 2015 SD/ SD/ ( . . /A.D. JAIN) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 29 .0 7 .2015 . . .PATEL. P S. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.