M/s. Horizon Capital Ltd., Bangalore V. ITO, Bangalore

ITA 592/BANG/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5167 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 26-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREETHI GARG
• Assessee Lawyers: K S RAVISHANKAR
• Keywords: Recovery proceedings; TDS
• Section: 115JB; 143(2); 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.592(BNG)/10 (ASSESSMENT YEAR : 2005-06) M/S. HORIZON CAPITAL LIMITED, 11/10, HAYS ROAD CROSS, RICHMOND TOWN, BANGALORE-25 VS. INCOME TAX OFFICER, WARD 11(2), BANGALORE. APPELLANT. RESPONDENT. APPELLANT BY : SHRI K.S. RAVISHANKAR, ADVOCATE. RESPONDENT BY : SMT. PREETHI GARG, CIT. O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THE ASSESSEE FILED THIS APPEAL FOR THE ASSESSMENT YEAR 2005-06. IN THIS APPEAL, THOUGH THE ASSESSEE HAS RAISED VOLUMINOUS G ROUNDS OF APPEAL, THE CRUX OF THE ISSUE IS NON-GRANTING OF THE REBATE UNDER SECTION 8 8E OF THE INCOME TAX ACT, 1961 WITH REGARD TO THE SECURITIES TRANSACTION TAX (STT) PAID BY THE ASSESSEE FROM THE INCOME TAX ON THE INCOME COMPUTED UNDER SECTION 115 JB OF THE INCOME TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES FOR MORE THAN A DECADE. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 ON 31.10.2005 DECLARING TAXABLE INCOME AS NIL. THE ASSESSEE HAD ALSO MADE A PAYME NT OF STT FOR THE ASSESSMENT YEAR 2005-06 OF RS.35,05,443. THE ASSESSING OFFICE R THEREAFTER ISSUED A NOTICE UNDER SECTION 148 DT.5.2.2008 STATING THAT CERTAIN INCOME IN RESPECT OF THE ASSESSMENT YEAR 2005-06 HAD ESCAPED ASSESSMENT. T HE ASSESSEE FILED ITS REPLY ITA NO.592(BNG)/10 - 2 - STATING THAT THE ASSESSEE HAD RETURNED INCOME OF RS .1,04,81,991 AND AFTER SET OFF OF THE CARRY FORWARD LOSSES FROM THE PREVIOUS YEARS TO THE EXTENT OF THE PROFIT IN THE YEAR, THE TAXABLE PROFIT WAS NIL AND THEREFORE ALTH OUGH THE CREDIT FOR THE AMOUNT PAID AS STT WAS AVAILABLE UNDER SECTION 88E, NO RE BATE HAS BEEN CLAIMED IN VIEW OF THE TOTAL TAXABLE INCOME RETURNED BEING NIL. THE ASSES SEE RECEIVED A NOTICE UNDER SECTION 143(2) DT.28.4.2008 SEEKING DETAILS, RELEVANT DOCUM ENTS AND OTHER PROOFS. THE ASSESSEE SUBMITTED ITS REPLY DT.18.6.2008 EMPHASISI NG THAT THE PAYMENT OF TAX OF BOTH TDS AND STT PUT TOGETHER EXCEEDED THE TAX LIABILITY NOT ONLY UNDER SECTION 115JB BUT EVEN THE LIABILITY UNDER REGULAR TAX, EVEN IF THERE WERE NO CARRIED FORWARD LOSS TO BE SET OFF. 3. THEREAFTER, THE ASSESSEE AGAIN RECEIVED A NOTI CE UNDER SECTION 154 DT.18.6.2009 TO WHICH ASSESSEE HAS SUBMITTED ITS RE PLY ALONG WITH THE STATEMENT OF TOTAL INCOME AND ALSO MAT COMPUTATION AND THEREFROM THE ASSESSEE CLAIMED A REBATE UNDER SECTION 88E OF THE INCOME TAX ACT, 1961 FOR T HE STT PAID BY IT. THE ASSESSING OFFICER, HOWEVER, REJECTED THE CLAIM OF THE ASSESSE E FOR REBATE OF STT PAID AND COMPUTED THE TAX LIABILITY AGAINST THE INCOME COMPU TED UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961. AGGRIEVED THE ASSESSEE APPEA LED BEFORE THE FIRST APPELLATE AUTHORITY I.E. CIT(A) WHO CONFIRMED THE ORDER OF TH E ASSESSING OFFICER AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AND ALSO TOOK US THROUGH THE LEGAL PROVISIONS RELATING TO THE ISSUE. HE SUBMITTED THAT THE TERM INCOME TAX HAS NOT BEEN DEFINED ITA NO.592(BNG)/10 - 3 - UNDER THE INCOME TAX ACT BUT THE TERM TAX HAS BEE N DEFINED UNDER CLAUSE 43 OF SECTION 2 OF THE INCOME TAX ACT, 1961 TO MEAN INCO ME TAX CHARGEABLE UNDER THE PROVISIONS OF THE ACT AND ALSO SUPER TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT AND IN RELATION TO THE ASSESSMENT YEAR COMMENCING F ROM 1.4.2006 AND ANY SUBSEQUENT ASSESSMENT YEAR INCLUDES THE FRINGE BENEFIT TAX PAY ABLE UNDER SECTION 115WA OF THE INCOME TAX ACT, 1961. HE ALSO DREW OUR ATTENTION TO SECTION 87 OF THE INCOME TAX ACT, 1961 WHEREIN IT IS PROVIDED THAT IN COMPUTING THE AMOUNT OF INCOME TAX ON THE TOTAL INCOME OF AN ASSESSEE WITH WHICH HE IS CHARGE ABLE FOR ANY ASSESSMENT YEAR, THERE SHALL BE ALLOWED FROM THE AMOUNT OF INCOME TAX (AS COMPUTED BEFORE ALLOWING THE DEDUCTIONS UNDER THE CHAPTER VIII), IN ACCORDANCE W ITH AND SUBJECT TO THE PROVISIONS OF [SECTIONS 88, 88A, 88B, 88C, 88D AND 88E], THE D EDUCTIONS SPECIFIED IN THOSE SECTIONS. HE ALSO DREW OUR ATTENTION TO SECTION 8 8E OF THE INCOME TAX ACT, 1961 WHEREIN IT IS PROVIDED THAT WHERE THE TOTAL INCOM E OF AN ASSESSEE IN A PREVIOUS YEAR INCLUDES ANY INCOME, CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION, ARISING FROM TAXABLE SECURITIES TRANSA CTIONS, HE SHALL BE ENTITLED TO A DEDUCTION, FROM THE AMOUNT OF INCOME TAX ON SUCH IN COME ARISING FROM SUCH TRANSACTIONS, COMPUTED IN THE MANNER PROVIDED IN SU B-SECTION (2), OF AN AMOUNT EQUAL TO THE STT PAID BY HIM IN RESPECT OF THE TAXABLE SECUR ITIES TRANSACTIONS ENTERED INTO IN THE COURSE OF HIS BUSINESS DURING THAT PREVIOUS YEA R. HE ALSO DREW OUR ATTENTION TO THE SUB SECTION (5) OF SECTION 115JB OF THE INCOME TAX ACT, 1961 WHICH PROVIDES THAT SAVE OR OTHERWISE PROVIDED IN THIS SECTION, ALL OT HER PROVISIONS OF THIS ACT SHALL APPLY TO EVERY ASSESSEE, BEING A COMPANY, MENTIONED IN TH IS SECTION. THUS ACCORDING TO HIM, ITA NO.592(BNG)/10 - 4 - THE TOTAL INCOME IS TO BE COMPUTED UNDER THE REGULA R PROVISIONS OF THE INCOME TAX ACT, 1961 AND ALSO UNDER THE COMPANIES ACT AND IF THE INCOME TAX PAYABLE IS LESS THAN 7 % OF ITS BOOK PROFIT THEN THE BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY IT ON SUCH TOTA L INCOME SHALL BE THE INCOME TAX @ 7 %. HE SUBMITTED THAT SUB SECTION (5) OF SECTION 115JB PROVIDES THAT SAVE OR OTHERWISE PROVIDED IN THIS SECTION, ALL OTHER PROVI SIONS SHALL APPLY AFTER COMPUTING THE INCOME UNDER SECTION 115JB OF THE INCOME TAX ACT, 1 961. THUS ACCORDING TO HIM AS PROVIDED UNDER SECTION 87 OF THE INCOME TAX ACT, 19 61, THE ASSESSEE IS ENTITLED TO REBATE OF THE STT PAID BY HIM UNDER SECTION 88E OF THE INCOME TAX ACT, 1961. HE ALSO DREW OUR ATTENTION TO THE FORM 6 I.E. THE FORM AT OF THE INCOME TAX RETURN PROVIDED BY THE DEPARTMENT OF INCOME TAX WHEREIN TH E REBATE UNDER SECTION 88E IS PROVIDED FOR AFTER COMPUTATION OF THE INCOME TAX UN DER THE REGULAR PROVISIONS OF THE ACT AND ALSO UNDER SECTION 115JB OF THE ACT. THUS ACCORDING TO HIM, THE ASSESSING OFFICER AND CIT(A) HAVE ERRED IN REFUSING TO GIVE A REBATE OF THE STT PAID BY THE ASSESSEE FROM THE COMPUTATION OF INCOME TAX UNDER S ECTION 115JB OF THE ACT. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AND SUBMITTED THAT S ECTION 115JB IS A SELF-CONTAINED SECTION AND AS LONG AS IT IS NOT PROVIDED THEREIN T O GIVE REBATE TO STT PAID UNDER THE ACT, IT IS NOT PERMISSIBLE TO GIVE SUCH REBATE. SH E SUBMITTED THAT THE STT IS NOT THE MODE OF RECOVERY OF TAX LIKE ADVANCE TAX OR TDS BUT IT IS A SPECIAL TYPE OF TAX SUCH AS FRINGE BENEFIT TAX AND THEREFORE THE REBATE FOR PAY MENT OF SUCH TAX CANNOT BE GIVEN WHEN INCOME TAX IS COMPUTED UNDER SECTION 115JB OF THE ACT. ITA NO.592(BNG)/10 - 5 - 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS, WE FIND THAT THE ONLY DISPUTE IS WHETHER THE REBATE OF STT PAID BY THE ASSESSEE IS ALLOWABLE FROM THE INCOME TAX COMPUTED AGAINST THE TOTAL INCOME COMPUTED UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961. THE TER M TOTAL INCOME HAS BEEN DEFINED UNDER THE INCOME TAX ACT, 1961 AS THE TOTAL AMOUN T OF INCOME REFERRED TO IN SECTION 5, COMPUTED IN THE MANNER LAID DOWN IN THIS ACT. SECTION 5 OF THE INCOME TAX ACT, 1961 DEFINES THE SCOPE OF THE TOTAL INCOME OF A RES IDENT OR A NON-RESIDENT PERSON. THE TOTAL INCOME OF THE ASSESSEE HAS TO BE COMPUTED UND ER THE REGULAR PROVISIONS OF THE INCOME TAX ACT, 1961 AND IN THE CASE OF A COMPANY I T CAN BE ARRIVED AT BOTH UNDER THE REGULAR PROVISIONS OF THE INCOME TAX ACT AND UNDER THE DEEMING PROVISION UNDER SECTION 115JB OF THE ACT. IT HAS BEEN PROVIDED THA T WHERE THE INCOME TAX PAYABLE BY THE ASSESSEE ON THE TOTAL INCOME COMPUTED UNDER REG ULAR PROVISIONS OF THE ACT IS LESS THAN 7 % OF THE BOOK PROFIT PREPARED IN ACCORDANCE WITH THE COMPANIES ACT, THE HIGHER OF THE TAX I.E. THE BOOK PROFIT SHALL BE DEE MED TO BE THE TOTAL INCOME OF THE ASSESSEE AND TAX PAYABLE BY THE ASSESSEE SHALL BE T HE AMOUNT OF INCOME TAX AT THE SPECIFIED RATE. WHEN WE LOOK AT THE PROVISIONS OF SECTION 87 OF THE INCOME TAX ACT, 1961, WE FIND THAT THE REBATE IS TO BE GRANTED FROM THE AMOUNT OF INCOME TAX CHARGEABLE ON THE TOTAL INCOME OF THE ASSESSEE. TH E INCOME TAX IS COMPUTED AFTER ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE AND SE CTION 87 OF THE INCOME TAX ACT, 1961 DOES NOT DIFFERENTIATE BETWEEN THE TOTAL INCOM E COMPUTED UNDER THE REGULAR PROVISIONS OF THE ACT OR UNDER SECTION 115JB OF THE INCOME TAX ACT, 1961. EVEN THOUGH THE SUB SECTION (1) OF SECTION 115JB STARTS WITH THE NON-ABSTANTE CLAUSE, NOT ITA NO.592(BNG)/10 - 6 - WITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVIS ION OF THIS ACT, WE FIND THAT IT IS ONLY FOR THE COMPUTATION OF THE TOTAL INCOME AND TH E SUB SECTION (5) OF SECTION 115JB PROVIDES FOR A SAVING CLAUSE THAT THE REST OF THE P ROVISIONS OF THE INCOME TAX ACT RELATING TO DEDUCTIONS, REBATE, ETC THE OTHER PROVI SIONS OF THE INCOME TAX ACT SHALL APPLY. THEREFORE IT IS CLEAR THAT THE PROVISION OF SECTIONS 87 AND 88A TO 88E ALSO APPLY AFTER THE TOTAL INCOME IS COMPUTED UNDER SECT ION 115JB OF THE INCOME TAX ACT, 1961 AND SINCE THE ASSESSEES TOTAL INCOME INCLUDE S THE INCOME FROM THE TAXABLE SECURITIES TRANSACTIONS, THE ASSESSEE IS ENTITLED T O A DEDUCTION OF THE AMOUNT EQUAL TO THE STT PAID BY HIM IN RESPECT OF THE TAXABLE SECUR ITIES TRANSACTIONS ENTERED INTO IN THE COURSE OF BUSINESS DURING THE PREVIOUS YEAR. T HE ASSESSEES APPEAL IS THUS ALLOWED AND THE ASSESSING OFFICER IS DIRECTED TO GIVE REBAT E UNDER SECTION 88E FOR THE STT PAID BY THE ASSESSEE. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 16 TH JULY, 2010. SD/- SD/- (A. MOHAN ALANKAMONY) (P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DT.16-07-2010. COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, BANGALORE. 6. GUARD FILE, ITAT, BANGALORE. * GPR ITA NO.592(BNG)/10 - 7 - BY OR DER ASSISTANT R EGISTRAR