Deduction claimed of securities transaction tax under section 88E cannot be rejected if fulfill the condition of rule 20AB

IN THE INCOME TAX APPELLATE TRIBUNAL

KOLKATA BENCH “A” KOLKATA

Before Shri Mahavir Singh, Judicial, Member and

Shri Sanjay Arora, Accountant Member

ITA No.573/Kol /2012

Assessment Year:2007-08

Dy. CIT, Circle-9,

Ayakar Bhawan, 5t h

Floor, P7,

Chowringhee Square,

Kolkata-69

(Appellant)

V/s.

Surya Shakti Advisory

Pvt. Ltd. , 25/97, Prince

Golam Mohhammad Saha

Road, Kolkata-700 045

[PAN No.AADCS 5838C]

 (Respondent)

By Appellant Shri A.K.Paramanik, DR

By Respondent Shri Subash Agarwal, AR

Date of Hearing 23-08-2012

Date of Pronouncement 23-08-2012

O R D E R

PER Sanjay Arora, AM:-

This is an Appeal by the Revenue directed against the Order by the Commissioner of Income-Tax (Appeals)-VIII, Kolkata (‘CIT(A)’ for short) dated 13-01-2012, allowing the assessee’s appeal contesting the order u/s. 154 of the Income-tax Act, 1961 (‘the Act’ hereinafter) dated 17-03-2009 in its case for the assessment year (A.Y.) 2007-08.

2. The brief facts of the case are that the assessee filed its return of income for the relevant year on 31-10-2007, admitting a tax liability of Rs.8,95,556/-  under the Minimum Alternate Tax (MAT) provisions, per section 115JB of the Act. A tax credit of Rs.5,54,356/- in respect of Security Transactions Tax (STT) was claimed u/s. 88E of the Act by the assessee per its return, which however stood not allowed on processing thereof vide Intimation u/s. 143(1) of the Act dated 19-08-2008. The assessee agitated the same before the Assessing Officer (AO) vide its rectification letter dated 06-03-2009, which though stood rejected vide order there-under dated 17-03-2009. The assessee appealed there-against, and found favour with the first appellate authority. The assessee, it was found by the ld. CIT(A), had fulfilled the conditions laid down and prescribed under rule 20AB inasmuch as Form 10DB for payment of tax on transactions entered on the Stock Exchange, and Form 10DC (for payment of tax on transactions of sale of units of equity oriented mutual funds, i.e., in terms of STT Rules, 2004 (‘Rules hereinafter) (S.O. 1059E dated 28-09-2004), stood duly furnished by the assessee. Its claim was thus valid it law, so that its application u/s. 154 could not have been rejected. The AO was accordingly directed to allow appropriate relief to the assessee, i.e., as per the Rules. Aggrieved, the Revenue is in appeal.

3. Before us both the parties relied on the order of the authorities below, i.e., as favourable to it. Further, while the ld. DR relied on the decision in the case of Oasis Securities Ltd. v. Dy. CIT (2010) 134 TTJ 649 (Mum), the ld. AR took us through the relevant pages of the assessee’s return, viz. as appearing at pages 2, 17 and 37 of the assessee’s paper-book (PB). The assessee furnished its return for the year under the electronic [E] format, so that there were no accompanying annexures. The AO declined relief to the assessee on the basis that the assessee did not have any income chargeable under the head ‘profit and gains of business or profession’. The same was patently incorrect, and for which reference was made by him to the relevant part of the assessee’s return, declaring business income at Rs.90.09 lakhs, even as observed by the ld. CIT(A). So however, he continued, there was no tax liability arising under the regular provisions of the Act in view of the set off of brought forward business losses. In fact, the issue under reference is squarely covered in assessee’s favour, and for which reference was made to the decision by the Tribunal (Kolkata ‘D’) in the case of Dy. CIT v. Micro Management Ltd. (in ITA No.1399/Kol/2011 dated 21-05-2012 / copy on record). The decision by the tribunal enquired by the Bench in the case of Horizon Capital Ltd. v. ITO (in ITA No.592/Bang/2010 dated 16-07-2010) relied upon by the tribunal in the case of Micro Management Ltd. (supra) has, in fact, being upheld by the hon’ble High Court in the case of CIT v. Horizon Capital Ltd. (in ITA No.434 of 2010 dated 24-10-2011), placing a copy thereof on record.

4. We have heard the parties and perused the materials on record.

4.1 Our first observation in the matter is that the ‘adjustment’ as sought to be made by the Revenue to the assessee’s returned income is not permissible under the extant law with effect from 1-6-1999, i.e., on or after the said date, so that even prima facie adjustments cannot be made u/s. 143(1). Though this aspect of the matter has not been touched or considered by the assessee, we do not think that we are bound by the arguments adopted by either of the parties before us inasmuch as the purview of the tribunal is to apply the law – against which there is no estoppel - to the facts of the case. As such, the reasons cited by the Revenue, or even the assessee for that matter, whatever be their merit, are of little relevance. In fact, the Revenue, in seeking to bring out or fortify its stand that the matter of allowing rebate u/s. 88E of the Act in respect of tax u/s. 115JB is not a clear, straight forward matter, but requires an examination of the relevant provisions, being the non obstante clause of section 115JB, as well as section 88E(2), itself oust its case inasmuch as the same establishes that the issue/s involved is not free from debate, precluding an adjustment u/s. 143(1) of the Act, the scope of which is co-terminus with that u/s. 154. As such, therefore, even on that basis, i.e., considering that an adjustment could be made u/s. 143(1), the order u/s. 154, denying the assessee the rectification sought, is not maintainable on facts. That is, the order u/s. 154 is not maintainable, not for the reason of its merits, but on account of the legal position that the adjustment as made u/s. 143(1) could not have been made thereunder, on which position in law there is no doubt, so that the same ought to have been restored u/s. 154 of the Act.

4.2 As regards the decisions cited by the assessee as well as by the Revenue, we find the same to be taking opposite views in the matter. That relied upon by the assessee emphasize that sec. 87 draws no distinction between the income-tax – on which rebate u/c. VIII is to be allowed, i.e., whether payable under the regular provisions of the Act or under MAT provisions, and that the non obstante character of the provision of s. 115JB is only with regard to the computation of total income, with sec. 115JB(5) itself making a saving in respect of the other provisions of the Act, so that both s. 87 and s. 88E would apply where the tax liability arises by virtue u/s. 115JB of the Act. The premise of the said decisions, as we understand, is that the rebate is toward relief against double tax on income arising from the same set of transactions, so that its rationale would apply irrespective whether the tax liability arises under the regular provisions or under special provisions of the Act. The decision relied by the Revenue, on the other hand, draws a clear distinction between the tax liability as arising under the regular provisions of the Act and that under MAT provisions. This is as the rebate u/s. 87 is subject to and in accordance with, inter alia, s. 88E of the Act. Sec. 88E(1) clearly makes the same applicable only in respect of income chargeable under the head ‘profits and gains of business or profession’, which is clearly nil in the instant case in view of set off of brought forward business losses, with it being impermissible and impossible to ascribe any head of income to that assessable by way of forming part of ‘book profit’, which is the basis of tax (or the tax base) under Chapter XII-B of the Act, a separate and a complete code by itself, so that it would in any case, hold. Secondly, sec. 88E(1) further restricts the extent of the rebate exigible thereunder, per s. 88E(2), to the average amount of income-tax arising on the taxable securities transactions, so that the same has a quantification aspect as well, and could not be allowed, if at all, independent and without reference to the said limitation.

However, irrespective and independent of the individual merits of the two schools or lines of (legal) arguments, both support the assessee’s case inasmuch there clarify, without any doubt, if at all there was one, that the matter at large is a debatable one, falling outside the scope of section 143(1), which in fact proscribes any prima facie adjustment on or after 01/6/1999.

4.3 Under the circumstances, and for the reasons afore-stated, we confirm the impugned order. We decide accordingly.

5. In the result, Revenue’s appeal is dismissed.

Order pronounced in Open Court on the date mentioned hereinabove at caption page.

                                                       Sd/-               Sd/-

                                           (Mahavir Singh) (Sanjay Arora)

                                        Judicial Member Accountant Member

Kolkata,

*Dkp

23/08/2012

Copy of Order Forwarded to:-

1. Appellant

2. Respondent

3. Concerned CIT

4. CIT (A)

5. DR, ITAT, Kolkata

6. Guard file.

/True Copy/

By order

Astt. Registrar,

Kolkata Benches

Strengthen preparation & delivery of orders in the ITAT

1) date of taking dictation 24/08

2) direct dictation by Member straight on computer/laptop/dragon dictate No

3) date of typing & draft order place before Member 27/08

4) date of correction 28/08

5) date of further correction -

6) date of initial sign by Members 28/08

7) order uploaded on /08

8) short-hand note attached to file Yes

9) final order and 2nd copy send to Bench Clerk on /08