PALLAVI MANOJ DESAI, MUMBAI V. ADDL CIT 22(1), NAVI MUMBAI

ITA 5988/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88460 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PERMANAND J
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Question of law
• Section: 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - C BENCH. , ! , BEFORE S/SH.VIJAY PAL RAO, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.5988/MUM/2011, ' ' ' ' # # # # / ASSESSMENT YEAR-2008-09 SMT. PALLAVI MANOJ DESAI, 204/206, SAHYADRI, NEELKANTH VALLEY, 7TH ROAD, RAJAWADI, GHATKOPAR (E), MUMBAI-400077 PAN:AAGPD0846D VS ACIT 22(1), VASHI INCOME TAX OFFICE, TOWER NO.6, VASHI RAILWAY STATION, VASHI, NAVI MUMBAI. ( $% / APPELLANT) ( &'$% / RESPONDENT) '() '() '() '() * * * * / ASSESSEE BY : MR. M. SUBRAMANIAN + * / REVENUE BY : SHRI PERMANAND J. ' ' ' ' + ++ + ), ), ), ), / DATE OF HEARING : 03.03.2015 -.# + ), / DATE OF PRONOUNCEMENT : 03-03-2015 ' ' ' '1961 1961 1961 1961 + + + + 254 254 254 254( (( (1 11 1) )) ) )7) )7) )7) )7) 8 8 8 8 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DATED 29.07.2011 OF CIT-33,MU MBAI,THE ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: THE LEARNED CIT(A) ERRED IN LAW IN RESTRICTING THE CLAIM FOR REBATE UNDER S. 88E OF THE I.T.ACT, 1961 TO RS. 33,42,962/-. THE CLAIM FOR REBATE UNDER S.88E BE DIRECTED TO BE ALLOWED WITH RESPECT TO THE TOTAL SECURITIES TRANSACTIONS TAX PAID. ASSESSEE,AN INDIVIDUAL,FILED HER RETURN OF INCOME O N 29.09.2009 DECLARING INCOME OF RS. 1.61 CRORES.THE ASSESSING OFFICER(AO) COMPLETED THE ASSE SSMENT U/S. 143(3) OF THE ACT ON 24.12.2010 DETERMINING THE INCOME OF THE ASSESSEE AT RS.7.33 C RORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT RESTRICTING THE CLAIM FOR REBATE U/S. 88E OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE AS SESSEE HAD CLAIMED REBATE OF RS. 1.06 CRORES AS SECURITY TRANSACTION CHARGES.HE RESTRICTED IT AT RS. 80.27 LAKHS.AS PER THE AO REBATE WAS NOT AVAILABLE U/S.88E IN RESPECT OF SECURITY TRANSACTIO N TAX(STT) PAID ON F & O TRANSACTIONS.HE FURTHER HELD THAT THERE WAS LOSS IN SPECULATIVE TRA NSACTION AND F & O TRANSACTION,THAT NO CREDIT OF STT WERE AVAILABLE TO THE ASSESSEE WHICH HAD BEEN P AID ON THESE TWO SEGMENTS,AMOUNTING TO RS. 9.18 LAKHS AND RS. 63.76 LAKHS RESPECTIVELY,FOR SPE CULATIVE TRANSACTIONS AND F & O TRANSACTIONS, THAT STT WOULD BE AVAILABLE FOR TAX CREDIT OF SET O FF AGAINST THE INCOME-TAX LIABILITY. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER,THE FAA HELD THAT THE SPECULATIVE TRANSACTION AS WELL A S F & O TRANSACTIONS HAD RESULTED INTO LOSS,THAT THERE WAS LOSS IN F & O BUSINESS OF RS. 1.15 CRORES , THAT LOSS IN SPECULATIVE BUSINESS WAS AT RS. 65.23 LAKHS,THAT THE TRANSACTIONS IN BOTH THE SEGME NTS HAD NOT RESULTED INTO ANY TAXABLE INCOME. REFERRING TO THE CASE OF OASIS SECURITIES LTD.(7 TA XMANN.COM 131),THE FAA HELD THAT REBATE U/S. 88E WAS AVAILABLE TO THE EXTENT OF RS. 33.42 LAKHS ONLY, THAT THE EXTRA CLAIM MADE BY THE ASSESSEE HAD TO BE REJECTED. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR)CONTENDED TH AT SHARE TRANSACTIONS CARRIED OUT BY THE 2 ITA NO. 5988/M/2011 SMT. PALLAVI MANOJ DESAI. ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD RE SULTED IN NET TAXABLE INCOME,THAT THE AO AND FAA HAD NOT CONSIDERED THE OVERALL RESULT OF THE SH ARE TRANSACTIONS FOR THE YEAR UNDER CONSIDERATION, THAT ASSESSEE WAS ENTITLED TO REBATE ON WHOLE AMOUNT PAID BY IT. HE REFERRED TO THE CASE OF ASHIKA STOCK BROKING LTD. (44 SOT 556), SHR I MANISH D. IDNANI (ITA NO. 861/MUM/ 2012),PRIYASHA MEVEN (ITA NO. 6445/MUM/2009) AND OA SIS SEC. LTD.(ITA2534/MUM/2009). DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDE R OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.THE UNDISPUTED FACT OF THE CASE ARE THAT ASSESSEE HAD PAID STT OF RS.1,06, 37,717/- DURING THE YEAR UNDER CONSIDERATION FOR THE INCOME FROM SHARE BUSINESS INCLUDING THE SH ARES DEALT IN F & O SEGMENT AND THE SHARES OF SPECULATIVE NATURE,THAT STT OF RS.33,42,962/- ALONE WAS CONSIDERED FOR REBATE U/S.88E OF THE ACT, THAT THE ASSESSEE HAD EARNED NET PROFIT OF RS. 1.06 CRORES (2.73 CRORES 1.80 CRORES),THAT THE AO AND THE FAA HAD DISALLOWED THE STT PAID ON SPECULAT IVE AND F & O TRANSACTIONS.IN OUR OPINION, STT PAID BY THE ASSESSEE HAS TO BE ALLOWED,WHERE AN ASSESSE HAS OVERALL TAXABLE INCOME.IN THE INSTANT CASE THE FAA HAD UPHELD THE ORDER OF THE AO WITHOUT CONSIDERING THE OVERALL POSITION.THE PROVISIONS OF SECTION 88E OF THE ACT NOWHERE PROVIS IONS FOR SUCH DISALLOWANCE IN THE CASE OF MANISH D. INANI(SUPRA)TO WHICH ONE OF US WAS PARTY, IT WAS HELD THAT THE ASSESSEE IS ENTITLED TO THE REBATE IRRESPECTIVE OF THE LOSS SUFFERED OR PROFIT EARNED IN THE SHARE BUSINESS.THE MATTER TRAVELLED UP TO THE HON'BLE JURISDICTIONAL HIGH COURT AND WAS CONFIRMED BY IT (114 DTR 370).WE WOULD LIKE TO REPRODUCE THE ORDER OF THE HON'BLE BOMBAY H IGH COURT AND SAME READS AS UNDER: 9. TO OUR MIND, ALL THAT THE TRIBUNAL HAS DONE IS TO TAKE I NTO ACCOUNT THE VOLUME OF THE SECURITIES TRANSACTIONS AND WHICH WERE TAXABLE. THE TOTAL INCOME OF T HE ASSESSEE IN THE PREVIOUS YEAR INCLUDED THE INCOME FROM TAXABLE SECURITY TRANSACTIONS. THE REQUIREMENT UNDER SUB-SO (1) OF S. 88E ON THIS COUNT WAS FULLY SATISFIED. THE ONLY ISSUE WAS HOW THIS DEDUCTION AND IN TERMS OF THE PROVISION HAS TO BE COMPUTED. THE AO HAS IGNORED COMPLETELY THE QUANTUM OF INCOME FROM TAXABLE SECUR ITIES TRANSACTIONS, THE TAX THAT IS LEVIABLE THEREON AND WHICH HAS TO BE DEDUCTED IN TERMS OF SUB-S. (2) OF S. 88E. SO LONG AS THE STIPULATION UNDER SUB-SO (2) IS ADHERED TO AND FOLLOWED, NAMELY THE AMOUNT OF INCOME-TAX ON THE INCOME ARISING FROM THE TAXABLE SECURITIES TRANSACTIONS REFERRED TO IN SUB-SO (1 ), SHALL BE EQUAL TO THE AMOUNT CALCULATED BY APPLYING THE AVERAGE RATE OF INCOME ON SUCH INCOME, THE DEDUCTI ON DESERVES TO BE GRANTED. THEREFORE, THE CLEAR LANGUAGE OF THE SECTION HAS BEEN TAKEN INTO CONSIDERATION. THE TOTAL INCOME IN A PREVIOUS YEAR IF INCLUDES ANY INCOME ARISING FROM TAXABLE SECURITY TRANSACTIONS, THEN, THE ASSESSEE IS ENTITLED TO DEDUCTION FROM THE AMOUNT OF INCOME-TAX ON SUCH INCOME ARISING FROM SUCH TRANSACTIONS. THAT IS BECAUSE THE INCOME FROM TAXABLE SECURITIES TRANSACTIONS HAS ALREADY BEEN SUBJE CTED TO TAX. THE SECURITY TRANSACTIONS ARE TAXABLE. THEREFORE, FROM THE AMOUNT OF INCOME-TAX ON SUCH INCOME ARISI NG FROM SUCH TRANSACTIONS, THE DEDUCTION HAS TO BE COMPUTED AND THAT IS AN AMOUNT EQUAL TO THE SECURITIES TRANSACTION TAX PAID BY THE ASSESSEE IN RESPECT OF THE TAXABLE SECURITIES TRANSACTIONS ENTERED INTO IN THE CO URSE OF HIS BUSINESS DURING THAT PREVIOUS YEAR. THE PROVISO CONTEMPLATES THAT DEDUCTION CAN BE ALLOWED ONLY IF THE ASSESSEE FURNISHES, ALONG WITH THE RETURN OF INCOME, EVIDENCE OF PAYMENT OF SECURITIES TRANSACTION TAX IN THE PRESCRIBED FORM. THERE IS NO DISPUTE BEFORE US THAT THE ASSESSEE HAS COMPLIED WITH THE PROVISO AND THE SECOND PROVISO AS WELL NAMELY THAT THE AMOUNT OF DEDUCTION UNDER THIS SUB-SECTION SHALL NOT EXCEED THE AMOUNT OF INCOME-TAX ON TAXABLE SECURITIES TRANSACTIONS COMPUTED IN THE MANNER PROVIDED IN SUB-SO (2). TO OUR MIND, THE TRIBUNAL COMMITTED NO ERROR WHEN IT CORRECTED THE COMPUTATION OR CALCULATION OF DEDUCTION. THE RE WAS NO WARRANT IN THE LIGHT OF THE CLEAR LANGUAGE OF THIS PROVISION THEN TO TAKE INTO CONSIDERATION THE B ROUGHT FORWARD LOSSES. IT IS THE TAXABLE SECURITIES TRANSACTION, THE INCOME DERIVED FROM SUCH TAXABLE SECURITIES TRANSACTIONS AND THEY BEING TAXABLE THE TAX PAID THEREON, WHICH HAS TO BE DEDUCTED. THAT IS HOW TH E SECTION HAS BEEN UNDERSTOOD AND APPLIED TO THE GIVEN FACTS AND CIRCUMSTANCES. WE DO NOT THINK THAT ANY LARGER CONTROVERSY ARISES FOR DETERMINATION AND CONSIDERATION IN THIS APPEAL. WE ARE NOT IN AGREEMENT WITH MR. MALHOTRA THAT THE DECISION OF THE TRIBUNAL'S CO-ORDINATE BENCH IN OASIS SECURITIES LTD. (SUPRA) HAS BEEN DISTINGUISHED BUT STILL THE DEDUCTION HAS BEEN GRANTED. IN PARA 6.1, THE TRIBUNAL CONCLUDED THAT THE ASSESSEE IS ENTITLED TO REBATE OF RS. 1.01 CRORES UNDER S. 88E OF THE IT ACT, 1961 AS AGAINST THE REBATE OF RS. 75.07 LA KHS ALLOWED BY THE AO. THE TRIBUNAL MAY HAVE DISTINGUISHED ITS ORDER AND DECISION OF THE COORDINATE BENCH REN DERED IN THE CASE OF OASIS SECURITIES LTD. (SUPRA), BUT, PERTINENTLY, IT WAS HELD THAT THE SURPLUS FRO M SHARE DEALING OF MARKET/FUTURE AND OPTION SEGMENT MAY NOT BE THERE, BUT THERE IS NET INCOME AFTER SETTING OFF OF LOSSES. THERE WAS AN OVERALL PROFIT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE REBATE HAD TO BE ALLOWED. BEFORE THE AO OR THE CIT(A) AS WELL, THE ISSUE WAS NOT AS MUCH OF ADMISSIBILITY OF REBATE IN TERMS OF S. 88E, BUT THE MANNER OF ITS COMPUTATION. THE DEDUCTION HAS TO BE COMPUTED IN THE MANNER SPECIFIED IN SUB S. ( 2) OF S. 88E. WE DO NOT THINK THAT THERE IS ANY BASIS FOR THE ARGUMENT AND IN THE GIVEN FACTS AND CIRCUMSTANCES THAT THE AVERAGE RATE WAS APPLIED ON INCOME BEFORE SETTING OFF BUSINESS LOSS OF EARLIER YEAR. 3 ITA NO. 5988/M/2011 SMT. PALLAVI MANOJ DESAI. 10. IN THESE CIRCUMSTANCES AND WHEN THE INCOME FROM THE SECU RITIES TRANSACTIONS IS TAXABLE AND OFFERED TO TAX, THE DEDUCTION INSOFAR AS THAT SUM IS CONCERNED OR QUANTUM HAS BEEN GRANTED. WE DO NOT THINK THAT THE TRIBUNAL'S ORDER CAN BE INTERFERED WITH. THE TRIBUNAL'S V IEW IS IMMINENTLY POSSIBLE IN THE BACKDROP OF THE FACTS AND CIRCUMSTANCES PECULIAR TO THE ASSESSEE. IN ANY E VENT BY SUB-S. (3) OF S. 88E IT HAS BEEN CLARIFIED THAT NO DEDUCTION UNDER S. 88E SHALL BE ALLOWABLE IN, OR AFTER, THE ASSESSMENT YEAR BEGINNING ON THE 1ST APRIL, 2009 I.E. BECAUSE A DEDUCTION WHICH IS CONTEMPLATED BY THIS PROVISION HAS BEEN NOW MADE ADMISSIBLE ELSEWHERE. IN THESE CIRCUMSTANCES, THE APPEAL RAISES NO SU BSTANTIAL QUESTION OF LAW. IT IS DISMISSED. MORE SO WHEN THE TRIBUNAL'S ORDER HAS BEEN GIVEN EFFECT TO BY THE AO. HE HAS FOLLOWED HIS VIEW TAKEN IN THE ASST. YR. 2006-07, WHICH IS ALSO FOLLOWING THE TRIBUNAL'S ORDER. RESPECTFULLY,FOLLOWING THE ABOVE JUDGMENTS OF THE H ON'BLE HIGH COURT,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ( 9 '() + : + ) ;<. ORDER PRONOUNCED IN TH E OPEN COURT ON 3 RD ,MARCH,2015 . 8 + -.# > ?' 3 A , 201 5 . + 7 B SD/- SD/- ( / VIJAY PAL RAO) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER , / MUMBAI, ?' /DATE: 03.03 . 2015. SK 8 8 8 8 + ++ + &) &) &) &) C #) C #) C #) C #) / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ D E , 4. THE CONCERNED CIT / D E 5. DR C BENCH, ITAT, MUMBAI / F7 &)' , . . . 6. GUARD FILE/ 7 G ') ') ') ') &) &)&) &) //TRUE COPY// 8' / BY ORDER, H / ; DY./ASST. REGISTRAR , /ITAT, MUMBAI