DCIT 4(1), MUMBAI V. DHARAMSHI BROKING P.LTD, MUMBAI

ITA 5570/MUM/2013

• Counselvise Citation: 557019914 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 27-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Keywords: Depreciation
• Section: 143(3); 115JB; 147; 148

Judgement Text

, MH MHMH MH INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH , ! ' ' ' ' #$ , # ! BEFORE S/SH.JOGINDER SINGH, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.5570/MUM/2013, % % % % & & & & / ASSESSMENT YEAR-2007-08 DCIT, 4(1), R.NO.640, 6TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 % VS. M/S DHARAMSHI BROKING PVT. LTD. QUEST, 1073, RAJABHAU DESAI MARG, BEHIND BEAU MONDE TOWERS, PRABHADEVI, MUMBAI-400025 PAN: AAACD3928K ( '( / APPELLANT) ( )*'( / RESPONDENT) ! + , # / REVENUE BY : SHRI AKHILENDRA YADAV % -. % -. % -. % -. , , , , # ## # / ASSESSEE BY : SHRI MEHUL SHAH % % % % + ++ + . / . / . / . / / DATE OF HEARING : 02 -01-2015 0& + . / / DATE OF PRONOUNCEMENT : 09 -01-2015 % % % % , 1961 + ++ + 254(1) # ## # .. .. .. .. #1 #1 #1 #1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. # ! #$ # % : CHALLENGING THE ORDER DT. 27.06.2013 OF THE CIT(A)- 8,MUMBAI, ASSESSING OFFICER (AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF FACT AND IN LAW, THE LD.CIT(A) WAS ERRED IN ALLOWED REBATE U/S 88E FROM TAX COMPUTED U/S 115JB OF THE LT. ACT, 1961. 2.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF FACT AND IN LAW, THE LD. C1T(A) WAS FAILED TO JUSTIFY WHEN IT GAVE PRECEDENCE TO SECTION 88E,OVER CLEAR WORDS OF SECTION 115JB WHICH SPECIFICALLY DEALS WITH MINIMUM ALTERNATIVE TAX PAY ABLE ONLY IN CASES WHERE TAX OTHERWISE PAYABLE IS BELOW 10% DUE TO OPERATION OF ALL OTHER PROVISIO NS OF ACT, AND SUCH ALL OTHER PROVISIONS INCLUDES SECTION 88E OF THE I.T. ACT? 3.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF FACT AND IN LAW, THE LD. CIT(A) WAS ERRED IN DELETING THE ADDITION OF TAX LIABILITY U/S 115JB BY RELYING ON THE DECISION OF HONBLE KARNATAKA HIGH COURT WHICH IS NOT THE JURISDICTION ONE IN THE CASE OF M/S HORIZON CAPITAL LTD? 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF FACT AN D IN LAW, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SE T ASIDE THAT OF THE ASSESSING OFFICER BE RESTORED. 5.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. EFFECTIVE GROUND OF APPEAL RELATES TO REBATE AVAILA BLE U/S.88E OF THE ACT ON ACCOUNT OF SECURITIES TRANSACTION TAX(STT)AND TAX COMPUTED U/S. 115JB OF THE ACT.THE ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF SHARE BROKING,TRADING AND DEALING I N SHARES,FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.9,94,79,290/-.THE CASE WAS SELEC TED FOR SCRUTINY AND THE ASSESSMENT ORDER U/S. 143(3) OF THE ACT WAS PASSED BY THE AO ON 27/11/200 9 ASSESSING THE TOTAL INCOME AT RS.10,01, 43,560/-.IN THE SAID ASSESSMENT ORDER, THE ONLY DIS ALLOWANCE MADE WAS IN RESPECT OF DISALLOWANCE U/S.14A AT RS.6,64,270/-.ON SHARE AND SECURITY TRAN SACTION,THE ASSESSEE HAD PAID STT.THE DEDUCTION OF SUCH STT WAS CLAIMED BY THE ASSESSEE U /S. 88E OF THE ACT.AFTER ALLOWING THE REBATE U/S. 88E,THE NET TAX PAYABLE WAS DETERMINED AT RS.9 2,54,213/-UNDER THE NORMAL PROVISIONS OF THE ACT.BUT,TAX LIABILITY OF THE ASSESSEE U/S.115JB OF THE ACT WORKED OUT TO RS. 1, 11,57,374/-.SINCE THE TAX LIABILITY AS DETERMINED MAT PROVISIONS WAS MORE THAN THE TAX PAYABLE UNDER NORMAL PROVISIONS OF THE ACT,THEREFORE, THE ASSESSEE WAS R EQUIRED TO BE ASSESSED AND PAY THE TAX THEREON 2 ITA NO. 5570/M/2013 M/S DHARAMSHI BROKING PVT. LTD. U/S.115JB OF THE ACT.AS PER THE ASSESSEE THE NET TA X PAYABLE(AFTER ALLOWING REBATE U/S. 88E OF THE ACT)WAS AT RS.92,54,213/-, WHEREAS THE TAX PAYABLE U/S. 115JB OF THE ACT WAS RS.1, 11,57,374/-.IT CLAIMED THAT THE REBATE U/S. 88E OF THE ACT WAS ALL OWABLE WHILE COMPUTING THE TAX LIABILITY U/S.115JB OF THE ACT.WHEN THE AO NOTICED THAT THE A SSESSEE HAD OFFERED AND PAID INCOME TAX UNDER THE NORMAL PROVISIONS INSTEAD OF U/S.115JB OF THE ACT,HE HELD THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HE REOPENED THE ASSESSM ENT U/S. 147 OF THE ACT AND ISSUED NOTICED U/S. 148 OF THE ACT ON 27/3/ 2012. 2.1. DURING THE COURSE OF RE-ASSESSMENT SCRUTINY PROCEED INGS,THE ASSESSEE,VIDE ITS LETTER DATED 23/ 10/2012,ARGUED BEFORE THE AO THAT THE REBATE/DEDUCT ION U/S.88E OF THE ACT WAS ALSO ALLOWABLE WHILE COMPUTING THE TAX LIABILITY U/S. 115JB OF THE ACT.IT RELIED ON THE DECISIONS OF BANGALORE ITAT IN THE CASE OF HORIZON CAPITAL LTD. TIOL 605 A ND ALSO KARNATAKA HIGH COURTS DECISION IN THE CASE OF HORIZON CAPITAL LTD. THE AO HELD THAT THE PROVISIONS OF SECTION 115JB OF THE ACT WERE SUBSTANTIAL PROVISIONS AND TAX LIABILITY WAS TO BE DETERMINED 10% OF THE BOOK PROF IT COMPUTED AS PER PROVISIONS OF COMPANY ACT AFTER ALLOWING DEDUCTION SPECIFICALLY ALLOWED U/S. 115JB OF THE ACT. TO SUM UP, THE AO HELD THAT THE DEDUCTION/REBATE U/S. 88E OF THE ACT WAS NOT AL LOWABLE WHILE COMPUTING THE TAX LIABILITY UNDER MAT PROVISIONS.HE HELD,BY INVOKING THE PROVISIONS O F SECTION 115JB OF THE ACT,THAT THE BOOK PROFIT AT RS.9,94,41,843 WAS DEEMED TO BE TOTAL INC OME OF THE ASSESSEE.THE TAX PAYABLE THEREON WAS RS.1,11,57,374/-BEING 10% OF THE BOOK PROFIT.FI NALLY,HE RAISED TAX DEMAND AT RS.1, 11,57,374/- U/S. 115JB OF THE ACT. 2.2. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).DURING THE APPELLATE PROCEEDINGS,THE ASSESSEE SUBMITTED THAT TOTAL INCOME HAD THE SAME MEANING IF THE INCOME WAS COMPUTED UNDER T HE NORMAL PROVISIONS OF THE ACT OR UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT,THAT THE DEDUCTION U/S. 88E OF THE ACT IS ALLOWABLE BOTH WHEN THE INCOME TAX WAS COMPUTED UNDER THE NORMAL P ROVISIONS OF THE ACT AND ALSO WHEN THE TAX LIABILITY IS COMPUTED UNDER THE MAT PROVISIONS.THE ASSESSEE RELIED UPON THE DECISIONS OF THE KOLKATA ITAT IN THE CASE OF GANESHVAJN SECURITY (P) LTD.(ITANO.1074/AHD/2011 AND MUMBAI ITAT IN THE CASE OF TOUCHSTONE CAPITAL MARKET(ITA NO. 6031/ MUM/2011)WHEREIN THE MUMBAI ITAT FOLLOWED ITS OWN DECISION IN THE CASE OF SHREE ATI HOLDINGS & FINANCE PVT. LTD.,(ITA NO. 6046/MUM/2011)AND THE DECISION OF KARNATAKA HIGH CO URT IN THE CASE OF HORIZON CAPITAL LTD. 2.3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE RE-ASSESSMENT ORDER THE FAA HELD THAT THE ONLY DISPUTE BEFORE HIM WAS AS TO WHETHER THE REBATE U/S. 88E OF THE ACT WAS ALSO ALLOWABLE WHILE COMPUTING THE INCOME AND TAX PAYABL E U/S.115JB OF THE ACT,THAT THE HONBLE KARNATAKA HIGH COURT AND VARIOUS BENCHES OF ITAT HA D HELD THAT REBATE U/S. 88E OF THE ACT WAS ALLOWABLE TO THE ASSESSEE,WHILE COMPUTING THE TAX L IABILITY U/S.115JB OF THE ACT.FOLLOWING THE DECISIONS OF THE HONBLE HIGH COURT AND THE VARIOUS TRIBUNALS,HE DIRECTED THE AO TO ALLOW DEDUCTION U/S. 88E OF THE ACT TO THE ASSESSEE WHILE COMPUTING THE TAX LIABILITY U/S.115JB OF THE ACT. 2.4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPOR TED THE ORDER OF THE AO,WHERERAS THE AUTHORISED REPRESENTATIVE(AR)SUPPORTED THE ORDER OF THE FAA.HE STATED THAT ASSESSEE WAS ENTITLED TO CLAIM RELIEF U/S 88E OF THE ACT,EVEN WH EN COMPUTATION WAS MADE UNDER THE MAT PROVISIONS. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD.TH E SOLITARY ISSUE TO BE DECIDED IS WHETHER THE REBATE U/S.88E IS AVAILABLE WHILE COMPUTING INCOME AS PER THE MAT PROVISIONS.WE FIND THAT THE HONBLE DELHI HIGH COURT HAS IN THE MATTER OF MBL AND CO. LTD.(358ITR1)HAS,WHILE DISCUSSING THE PROVISIONS OF THE RELEVANT SECTIONS,HELD AS UND ER: 3 ITA NO. 5570/M/2013 M/S DHARAMSHI BROKING PVT. LTD. THE MINIMUM ALTERNATE TAX SCHEME WAS INTRODUCED BY INSERTING SECTION 115J OF THE INCOME-TAX ACT,1961,BY THE FINANCE ACT, 1987.THE PURPOSE OF IN TRODUCING THE SCHEME WAS TO TAX PROFITABLE COMPANIES WHICH OTHERWISE WERE NOT LIABLE TO PAY TA X ON ACCOUNT OF VARIOUS DEDUCTIONS AND HIGHER DEPRECIATION AVAILABLE TO THEM IN COMPUTING THE TAX ABLE INCOME UNDER THE NORMAL PROVISIONS OF THE ACT. THE IMPORT OF SECTION 115JB OF THE ACT IS TO P ROVIDE AN ALTERNATIVE METHOD OF COMPUTATION OF TAX BY ACCEPTING THE BOOK PROFITS AS SHOWN BY THE A SSESSEE, ALBEIT WITH CERTAIN ADJUSTMENTS AS SPECIFIED IN EXPLANATION 1 TO SECTION 115JB(2) OF T HE ACT AND LEVYING TAX THEREON AS ALTERNATIVE TO THE TAX COMPUTED UNDER THE OTHER PROVISIONS OF THE ACT. IT CAN BE SEEN FROM THE SCHEME OF THE ACT THAT THERE ARE EXTENSIVE MACHINERY PROVISIONS FOR C OMPUTING THE TOTAL INCOME OF AN ASSESSEE AND THE TAX PAYABLE THEREON. THE TAX AS DETERMINED IS S UBJECT TO REBATE AS MAY BE AVAILABLE UNDER CHAPTER VIII-A OF THE ACT. SECTION 87(1) OF THE ACT PROVIDES THAT THE REBATE AS AVAILABLE UNDER SECTIONS 88, 88A, 88B, 88C, 88D AND 88E WILL BE ALL OWED TO AN ASSESSEE IN COMPUTING THE INCOME- TAX PAYABLE BY HIM ON THE TOTAL INCOME OF THE ASSES SEE. THERE IS A CLEAR DISTINCTION BETWEEN THE SCOPE OF CHAPTER VIII-A OF THE ACT AND THAT OF OTHE R PROVISIONS WHICH SPECIFY DEDUCTIONS THAT ARE AVAILABLE TO AN ASSESSEE IN COMPUTING HIS TOTAL INC OME. WHEREAS DEDUCTIONS ALLOWED IN COMPUTING THE TOTAL INCOME ARE A PART OF THE MACHINERY TO DET ERMINE 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. THERE IS NO REASON WHY THE REMISSION IN TAX WHICH IS AVAILABLE UNDER SECTION 88E OF THE ACT TO AN ASSESS EE SHOULD NOT BE AVAILABLE ON THE TAX AS COMPUTED UNDER THE MINIMUM ALTERNATE TAX SCHEME AS BOTH SECTION 115JB OF THE ACT AS WELL AS THE OTHER PROVISIONS OF THE ACT HAVE BEEN ENACTED TO PR OVIDE THE MACHINERY FOR COMPUTING THE TOTAL INCOME OF AN ASSESSEE WHICH IS EXIGIBLE TO INCOME-T AX. THE REBATE UNDER SECTION 88E OF THE ACT PROVIDES FOR CERTAIN REBATES AVAILABLE ON THE TAX P AYABLE BY AN ASSESSEE.THERE WOULD BE NO RATIONALE TO LIMIT THE PLAIN WORDS OF SECTION 88E O F THE ACT AND HOLD THAT THE REBATE IN PAYMENT OF THE TAX IS ONLY APPLICABLE TO TAX AS DETERMINED UND ER THE NORMAL PROVISIONS OF THE ACT AND NOT WITH RESPECT TO THE MINIMUM ALTERNATE TAX AS COMPUTED UN DER SECTION 115JB.THE PURPOSE OF SECTION 88E OF THE ACT IS TO GRANT AN ASSESSEE, TO A LIMITED EX TENT, 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. THIS REBATE WOULD BE EQUALLY APPLICABLE TO TAX AS COMPUTED UNDER SECTION 115JB OF THE ACT AS UNDER THE NORMAL PROVISIONS OF THE ACT. THE PROVISIONS OF SECTIONS 87 AND 88E APPLY TO THE TOTAL INCOME COMPUTED UNDER SECTION 115JB OF THE AC T AND THE ASSESSEE WOULD BE ENTITLED TO A DEDUCTION TO THE EXTENT OF THE SECURITIES TRANSACTI ON TAX BORNE BY IT DURING THE COURSE OF BUSINESS IN THE RELEVANT PREVIOUS YEAR. RESPECFULLY,FOLLOWING THE ABOVE,WE DECIDE THE EFFEC TIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISM ISSED. 2.3 % -. VF/KDKJH 4 5 + UK 6 + . 7 . ORDER PRONOUNCED IN THE OPEN COURT ON 9TH,JANU ARY,2015. #1 + 0& # 8 9% 9 %/ , ,, , 201 5 + = SD/- SD/- ( / JOGINDER SINGH) ( #$ / RAJENDRA) ! ! ! ! / JUDICIAL MEMBER # # # # ! ! ! ! / ACCOUNTANT MEMBER / MUMBAI, 9% /DATE: 09.01.2015 SK #1 #1 #1 #1 + ++ + ).> ).> ).> ).> ?#>&. ?#>&. ?#>&. ?#>&. / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '( 2. RESPONDENT / )*'( 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR D BENCH, ITAT, MUMBAI / >B ).% MH MHMH MH , . . . 4 ITA NO. 5570/M/2013 M/S DHARAMSHI BROKING PVT. LTD. 6. GUARD FILE/ 2 * >. ). //TRUE COPY// #1 % / BY ORDER, C / DY./ASST. REGISTRAR , /ITAT, MUMBAI