MANISH D. INNANI, MUMBAI V. DCIT RG 4(1), MUMBAI

ITA 3932/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70615 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 05-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARESH JOHRI DR
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Rectification of order; Speculation loss
• Section: 234B

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENC H, MUMBAI !' , $ % BEFORE SHRI I.P. BANSAL, JM AND SHRI KARUNAKARA RAO , AM ./I.T.A. NO.3932/M/2012 ( & ' (' / ASSESSMENT YEAR : 2006-2007 ) MANISH D. INNANI, C-803, AVON MAJESTY DATTA PADA ROAD, OPP. TATA SSL, BORIVALI (E), MUMBAI 400 066. & / VS. DCIT - RANGE 4(1), 6 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. ) $ ./PAN : AABPI 4291 C ( )* /APPELLANT) .. ( +,)* / RESPONDENT) )* - . / APPELLANT BY : SHRI SANJIV M. SHAH +,)* - . / RESPONDENT BY : SHRI PARESH JOHRI, DR & - /$ /DATE OF HEARING : 2.7.2013 01( - /$ /DATE OF PRONOUNCEMENT : 2.8.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 5.6.2012 IS AG AINST THE ORDER OF CIT (A)- 8, MUMBAI DATED 27.3.2012 FOR THE ASSESSMENT YEAR 2 006-2007. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. CIT (A) ERRED IN CONFIRMING THE ORDER OF THE AO RESTRICTING THE DEDUCTION UNDER SECTION 88E OF THE ACT TO RS. 10,45,465/- INSTEAD O F RS. 14,18,476/- CLAIMED BY THE APPELLANT. 2. CIT (A) FURTHER ERRED IN THIS CONNECTION IN HOLD ING THAT SHORT TERM CAPITAL GAINS RS. 42,36,460/- CANNOT BE EXCLUDED WHILE COMPUTING THE REBATE UNDER SECTION 88E. 3. THE CIT (A) FURTHER ERRED IN THIS CONNECTION IN APPROVING THE WORKING OUT OF THE AVERAGE RATE OF TAX BY THE AO AT RS. 20.41% AS AGAI NST 28.92% CALCULATED BY THE APPELLANT. 4. CIT (A) ERRED IN APPROVING LEVY OF INTEREST UND ER SECTION 234B AND 220(2). 3. AT THE OUTSET, SRI SANJIV M SHAH, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO A RECTIFICATION ORDER PASSED BY THE AO IN CONNECTION WITH THE ASSESSMENT COMPLETED U/S 143 (1) OF THE ACT AND MEN TIONED THAT AO RESTRICTED THE 2 REBATE U/S 88E TO RS. 10,45,465/- AS AGAINST THE CL AIM OF RS. 14,18,476/-. HE MENTIONED THAT AO ERRED IN CALCULATING THE AVERAGE RATE OF TAX AT RS. 20.41% AS AGAINST 28.92%. ALL THE GROUNDS RAISED BY THE ASSE SSEE ARE RELATED AGAINST SUCH WORKING OF THE REBATE ALLOWABLE U/S 88E OF THE ACT. FURTHER, HE MENTIONED THAT THE SIMILAR ISSUE CAME UP FOR ADJUDICATION BEFORE THIS TRIBUNAL FOR THE AY 2008- 2009 IN THE ASSESSEES OWN CASE VIDE ITA NO.861/M/2012 DATED 1.8.2012 (GROUND NO.4) AND THE ISSUE WAS ADJUDICATED IN FAVOUR OF TH E ASSESSEE AND PARA 5 TO 7 OF THE SAID ORDER OF THE TRIBUNAL ARE RELEVANT IN THIS REG ARD. 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AND THE CITED DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE AY 2008-09 (SUPRA). IT IS NOTICED FROM THE SAID OR DER THAT THE ISSUE RAISED BEFORE US IS IDENTICAL TO THE ONE ADJUDICATED BY THE TRIBUNAL . RELEVANT PARAS 5 TO 7 ARE REPRODUCED HERE UNDER: 5. NEXT GROUND IS RELATED WITH REBATE AVAILABLE U /S. 88E OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED BY THE AO TO SUBMIT THE WORKING OF REBATE CLAIMED IN RESPECT OF SECURITIES TRANSACTION TAX AMOUNTING TO RS.1,01,87,300/-. HE FOUND THAT THOUGH THE ASSESSEE HAD APPLIED AVERAGE RATE ON INCOME, BUT THE AVERAGE RATE WAS ADOPTED BEFORE SET TING OFF BUSINESS LOSS OF EARLIER YEARS. WITH REGARD TO REBATE CLAIMED U/S.88E OF THE ACT, THE AO HELD AS UNDER : IN THE INSTANT CASE, THE ASSESSEES TOTAL INCOME O F RS.5,94,71,620/- INCLUDES ONLY RS.3,34, 49,474/- (AFTER SETTING OF B USINESS LOSS OF RS.1,62,36,858/- B/F FROM A.Y. 2007-08) WHICH IS CH ARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSIO N ARISING FROM TAXABLE SECURITIES TRANSACTIONS. THEREFORE, THE ASS ESSEE IS ENTITLED TO GET REBATE U/S.88E ON THE INCOME OF RS.3,34,49,474/ - BUT NOT ON RS.4,95,93,132/-. ADOPTING AN AVERAGE RATE OF 21.31%, HE HELD THAT TH E ASSESSEE WAS ENTITLED TO TAX REBATE OF RS.75.07 LAKHS AS AGAINST THE REBATE CLAI MED BY THE ASSESSEE AMOUNTING TO RS.1.01 CRORES. IN THE APPELLATE PROCEEDING, THE FAA HELD THAT AO HAD RIGHTLY WORKED THE AVERAGE RATE OF TAX AS PER THE PROVISION S OF SECTION 88E OF THE ACT. 6. BEFORE US, AR SUBMITTED THAT RELIEF U/S. 88E WA S AVAILABLE ON THE INCOME BEFORE SETTING OFF OF LOSSES, THAT CALCULATION MADE BY THE ASSESSEE WAS AS PER LAW. HE RELIED UPON THE CASE OF ASHIKA STOCK BROKING LTD .(44 SOT556).DR SUBMITTED THAT 88E-RELEIF WAS AVAILABLE AFTER SET OFF OF LOSS OF E ARLIER YEARS. HE RELIED UPON THE DECISION OF OASIS SECURITIES LTD. DELIVERED BY THE C BENCH OF MUMBAI ITAT(ITA NO.2534/MUM/2009 AY 2006-07 DTD.30.09.2010). 6.1. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND P ERUSING THE MATERIAL BEFORE US WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED TO REBATE RS.1.01 CRORES U/S. 88E OF THE ACT, AS AGAINST THE REBATE OF RS.75.07 LAKHS -ALLOWED BY THE AO. AMOUNT TO BE 3 ALLOWED UNDER THIS SECTION HAS TO BE CALCULATED IN BACKGROUND OF THE PROVISIONS OF SEC. 87(2) OF THE ACT AS DISCUSSED IN NEXT PARAGRAP H. WE HAVE CONSIDERED THE CASE LAWS CITED BEFORE US. I N THE CASE OF OASIS SECURITIES FACTS WERE AS UNDER : DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTE D THAT THE ASSESSEE HAD INCOME OF RS.1.92 CRORES FROM SPECULATION BUSIN ESS IN RESPECT OF WHICH STT WAS PAID, THAT SAID INCOME WAS SET OFF AGAINST BROU GHT FORWARD SPECULATION LOSSES LEAVING NO TAXABLE INCOME FROM SECURITY TRANSACTION S. CONSIDERING THESE FACTS HE HELD THAT REBATE U/S. 88E WAS NOT ALLOWABLE. FAA UP HELD THE ORDER OF THE AO. HIS ORDER WAS CHALLENGED BEFORE THE TRIBUNAL. AFTER CON SIDERING THE ISSUE AT LENGTH ITAT HELD: 14.IT IS SIMPLE AND PLAIN THAT REBATE CAN BE ALLOW ED ONLY WHEN THERE IS SOME LIABILITY TO INCOME TAX. IF THERE IS NO SUC H LIABILITY, ACCORDING TO THE RELEVANT PROVISIONS, THE OTHERWISE ELIGIBLE REBATE BECOMES UNAVAILABLE. THIS POSITION CAN BE VIEWED FROM ANOTH ER ANGLE ALSO. SECTION 88,WHICH ALSO FALLS UNDER PART A OF THE SAM E CHAPTER PROVIDES FOR REBATE ON LIFE INSURANCE PREMIUM AND CONTRIBUTI ON TO PROVIDENT FUND ETC. UNDER THIS SECTION AN ASSESSEE IS ENTITLE D TO DEDUCTION OF AN AMOUNT EQUAL TO 20% OF THE PAYMENT OF ELIGIBLE S UMS SUBJECT TO RS. 1 LAKH. THIS REBATE IS ALLOWABLE AGAINST THE AM OUNT OF INCOME TAX ON THE TOTAL INCOME OF THE ASSESSEE. THIS PROVISION IS SIMILAR TO SECTION 88E, TO THE EXTENT OF PROVIDING REBATE AGAI NST THE AMOUNT OF INCOME TAX. TAKE A SITUATION IN WHICH ALBEIT THE AS SESSEE HAS PAID LIFE INSURANCE PREMIUM ETC., WHICH OTHERWISE ENTITLE HIM TO REBATE UNDER SECTION 88E,BUT THERE IS NO INCOME CHARGEABLE TO TA X. IN SUCH A CASE, THERE IS NO POSSIBILITY TO ALLOW ANY REBATE NOTWITH STANDING THE FACT THAT LIFE INSURANCE PREMIUM WAS PAID BY THE ASSESSE E ON WHICH REBATE IS OTHERWISE AVAILABLE UNDER SECTION 88E OF THE INCOME TAX ACT. 15.IN THE FINAL ANALYSIS, WE APPROVE THE VIEW TAKEN BY THE LEARNED CIT(A) THAT THE AMOUNT OF STT IS NOT ELIGIBLE FOR R EBATE UNDER SECTION 88E FOR THE REASON THAT THERE IS NIL INCOME FROM TH E TRANSACTIONS WHICH SUFFERED STT.AS NO AMOUNT OF INCOME TAX IS PA YABLE IN RESPECT OF SUCH TRANSACTIONS, THE QUESTION OF GRANTING ANY DEBATE UNDER SECTION 88E DOES NOT ARISE. THE GROUND FAILS. CLEARLY, THE FACTS OF THE CASE UNDER CONSIDERATION ARE DIFFERENT FROM THE FACTS OF OASIS SECURITIES LTD (SUPRA). 7. IN THE CASE OF ASHIKA STOCK BROKING LTD. (SUPRA ) IT WAS HELD THAT ONCE THERE WAS A NET SURPLUS FROM SHARE DEALING OF MARKET SEGM ENT AND FUTURE AND OPTION SEGMENTS TOGETHER AND IF THERE WAS A NET PROFIT THE REFROM THE ASSESSEE WAS ENTITLED FOR REBATE OF ENTIRE STT. IN THE CASE UNDER CONSIDE RATION SURPLUS FROM SHARE DEALING FROM MARKET SEGMENT/ FUTURE AND OPTION SEGMENT IS N OT THERE, BUT THERE IS NET INCOME AFTER SETTING OFF OF LOSSES. WE ARE OF THE O PINION THAT ONCE THERE WAS OVERALL PROFIT FOR THE AY UNDER CONSIDERATION, REBATE UNDER SECTION 88E OF THE ACT HAD TO BE ALLOWED. FOLLOWING THE ORDER OF ASHIKA (SUPRA) WE H OLD THAT SECTION 88E DOES NOT ENVISAGE ANY RESTRICTION FOR ALLOWING REBATE U/S.88 E TILL POSITIVE INCOME IS FILED BY THE AN ASSESSEE. WE FIND THAT WHILE PASSING THE ASSESSM ENT ORDER THE AO HAS NOT GIVEN ANY FINDING ABOUT APPLICABILITY OR OTHERWISE OF SEC TION 87(2) OF THE ACT. WE ARE OF THE OPINION THAT IF THE PROVISION OF SAID SECTION A RE NOT COMING IN WAY TO ALLOW THE REBATE TO THE ASSESSEE, SAME SHOULD BE ALLOWED AT T HE RATE CALCULATED BY THE ASSESSEE. FOR THIS LIMITED PURPOSE WE REMIT THE MATTER BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH. 4 5.1. IT IS EVIDENT FROM THAT THE FACTS AND ISSUE ARE IDENTICAL BUT FOR THE FIGURES INVOLVED IN THE CALCULATIONS. THE MATTER WA S SET ASIDE FOR FRESH LOOK. WITH IDENTICAL DIRECTIONS, WE REMIT THE MATTER TO T HE FILES OF THE AO TO DECIDE THE ISSUE AFRESH IN THE SAME LINES AFTER GRANTING R EASONABLE OPPORTUNITY. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE SET ASIDE. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2.8.2013 SD/- SD/- ( I.P. BANSAL) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 2& 2.8.2013 . & . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 2. +,)* / THE RESPONDENT. 3. 3/ ( ) / THE CIT(A)- 4. 3/ / CIT 5. 4 56 +/& , , / DR, ITAT, MUMBAI 6. 6!' 7 / GUARD FILE. ,4/ +/ //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI