Rebate under section 88E is to be allowed from tax computed under section 115JB

IN THE INCOME TAX APPELLATE TRIBUNAL,

KOLKATA ‘A’ BENCH, KOLKATA

Before Shri C.D. Rao (Accountant Member),

and Shri George Mathan (Judicial Member)

I .T.A. No. : 342/ Kol . / 2012

Assessment year: 2007-08

,

Nakamichi Securities Limited,………………….………….Appellant

Mercanti le Bui lding, ‘A’ Block, 1s t f loor,

12, Lal Bazar Street , Kolkata-700 001

[PAN : AABCN 0733 D]

Vs.

Commissioner of Income Tax,………………………. .……Respondent

Kolkata- II, Kolkata

Appearances by:

Shri J.M. Thard & Shri D. Sikaria, for the appellant

Shri A.K. Mahapatra, D.R., for the respondent

Date of concluding the hearing: June 28, 2012

Date of pronouncing the order: June 28, 2012

O R D E R

Per George Mathan:

1. This is an appeal filed by the assessee against the order of ld. Commissioner of Income Tax, Kolkata-I I, Kolkata passed under section 263 dated 14t h February,2012 in M. No. CIT, Kol-I I /U/s.263/C/1/11- 12/9471 for the assessment year 2007-08.

2. 2. In assesse’s appeal, the assessee has raised the following grounds: -

(1) That the ld. Commissioner of Income Tax erred in assuming jurisdiction under section 263 of the Income Tax Act , 1961 in as much as the order dated 29t h December, 2009 passed by the Asses sing Of f ice r under s ect ion 143(3) of the Income Tax Act , 1961 for the assessment year 2007-08 is neither erroneous nor prejudicial to the interest of the revenue.

(2) That without prejudice to Ground No. 1 above , the l earned Commissioner of Income Tax erred in holding that the Assessing Of f ice r failed to consider the applicability of provisions of sect ion 115JB of the Income Tax Act , 1961 when the tax payable on normal computation of income was apparently higher than the tax payable on “Book Prof its”.

(3) That the impugned order dated 14.02.2012 pass ed by the learned Commissioner of Income Tax under sect ion 263 of the Income Tax Act , 1961 i s without jurisdiction, i l legal and void ab initio.

(4) That the appellant c raves l eave to alter, amend, modify any of the grounds and/or take additional grounds before or at the time of hearing of this appeal.

3. Shri J.M. Third, ld. counsel appeared on behalf of the assessee and Shri A.K. Mahapatra, ld. D.R. represented on behalf of the Revenue.

4. I t was submit ted by the ld. A.R. that the issue in the appeal was against the action of ld. CIT in invoking his powers under sect ion 263 to set aside the assessment order passed by the Assessing Officer under sect ion 143(3) and 115WE(3) dated 29.12.2009 on the ground that the Assessing Officer had not considered the fact that the assessee had paid lesser tax than it was obliged to do under MAT. I t was the submission that the issue was squarely covered by the decision of the coordinate Bench of this Tribunal in the case of Ganeshyam Securities (Pvt. ) Ltd. , Kolkata-vs. - I.T.O. in ITA No. 1108/Kol. /2011 dated 30.12.2011. It was further submission that the ld. CIT has recognized the fact that the issue in respect of the applicability of MAT has been considered by the coordinate Benches of this Tribunal It was the submission that the ld. CIT was of the view that as the issue was before the higher appellate authority and the orders of the Tribunal had not become final, the Assessing Officer was bound to charge tax on income of the assessee by applying the provisions of MAT. I t was the submission that the issue as to whether the rebate under sect ion 88E was liable to be given to assessee when comput ing the book profits under section 115JB was considered and decided in favour of the assessee by the Hon’ble Karnataka High Court in the case of Horizon Capital Limited reported in (2011) 042(I ) ITCL 0542. It was the further submission that the ld. CIT has also not ment ioned that the assessment order was erroneous and prejudicial to the interest of Revenue nor demonstrated how it was erroneous or prejudicial to the interest of revenue. It was the submission that the order passed under section 263 was liable to be annulled.

5. In reply, ld. D.R. vehemently supported the order of the ld. CIT passed under sect ion 263. It was the submission that the issue as to  hither the assessee was eligible to claim the rebate under sect ion 88E when considering the book profits for levy of tax under section 115JB was stil l subjudice. It was the submission that as long as the issue was sub judice, it was the duty of the Assessing Officer to keep the issue alive in the assessment order. I t was the submission that as the Assessing Officer had not considered this issue when passing the assessment order under sect ion 143(3) and 115WE(3) dated 29.12.2009, the ld. CIT was right in law in invoking his powers under section 263. I t was the submission that though it has not been specifically mentioned that the order of the Assessing Officer was erroneous and prejudicial to the interest of revenue, the reading of the order of ld. CIT clearly indicated that the order under sect ion 263 was being passed because the assessment order passed in the case of the assessee was erroneous and prejudicial to the interest of revenue. I t was the submission that the order passed under section 263 was liable to be upheld.

6. We have considered the rival submissions. A perusal of the fact in the present case clearly shows that it is ident ical to the fact as is available and on the basis of which the coordinate Bench of this Tribunal has quashed the order under section 263 in the case of  Ganeshyam Securities (Pvt. ) Ltd. , Kolkata referred to supra. In the said decision, the coordinate Bench of this Tribunal has held as follows : -

“6. After perusing the records of the case, we find that jurisdictional Tribunal in the case of M/s. Lotus Capital Financial Services Ltd. –vs.- ITO in ITA No. 479/Kol./2011 for assessment year 2006-07, held at para 5 as under :-

“5. We find that the issue of rebate/deduction u/s. 88E of the Act in respect to credit for Security Transaction Tax while computing income being MAT provisions of section 115JB of the Act, the issue is squarely covered in favour of assessee and against revenue by the decision of Bangalore Bench in the case of M/s. Horizon Capital Limited (supra), wherein the Tribunal vide para 6 has held as under:

“6. Having heard both the parties and having considered 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 term ‘total income’ has been defined under the Income Tax Act, 1961 as “the total amount 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 resident or a non-resident person. The total income of the assessee has to be computed under the regular provisions of the Income Tax Act, 1961 and in the case of a company it 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 that where the income tax payable by the assessee on the total income computed under regular provisions of the Act is less than 7 1/2% of the book profit prepared in accordance with the Companies Act, the higher of the tax i.e. the book profit shall be deemed to be the total income of the assessee and tax payable by the assessee shall be the 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. The income tax is computed after arriving at the total income of the

assessee and section 87 of the Income Tax Act, 1961 does not differentiate between the total income 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, “Notwithstanding anything contained in any other provision of this Act”, we find that it is only for the computation of the total income and the sub section (5) of section 115JB provides for a saving clause that the rest of the provisions of the Income Tax Act relating to deductions, rebate, etc the other provisions 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 section 115JB of the Income Tax Act, 1961 and since the assessee’s total income includes the income from the taxable Securities Transactions, the assessee is entitled to a deduction of the amount equal to the STT paid by him in respect of the taxable Securities Transactions entered into in the course of business during the previous year. The assessee’s appeal is thus allowed and the Assessing Officer is directed to give rebate under section 88E for the STT paid by the assessee.” Since this issue is squarely covered in favour of the assessee on merits, there is no question of any revision on this aspect by CIT of the assessment order. Once the assessment order is neither erroneous nor prejudicial to the interest of revenue, CIT has wrongly invoked the revision proceeding u/s. 263 of the Act. It is well settled law that ld. CIT can revise an assessment order only when it is both erroneous and prejudicial to the interest of revenue. The decision in the case of M/s. Lotus Capital Financial Services Ltd. was rendered following the decision of Bangalore Bench in the case of M/s. Horizon Capital Ltd. –vs.- ITO, Ward-11(2), Bangalore delivered on 16.07.2010. Therefore, effect of this decision should have been considered by ld. CIT while passing order under section 263 in order to find out whether the assessment order was erroneous as well as prejudicial to the interest of revenue.

7. In view of above decision, rebate under section 88E was to be allowed from the tax computed as per provisions of section 115JB to find out whether after set off of rebate under section 88E, any tax liability remained or not. Admittedly the tax liability as per MAT provisions was Rs.7,56,694/- and rebate admissible under section 88E was Rs.26,98,260/-. Therefore, in any view of the matter, no prejudice was caused to the revenue by non-consideration of provisions of section 115JB by Assessing Officer. Therefore, ld. CIT’s order cannot be sustained. Resultantly, the grounds of appeal taken by assessee are allowed”.

6.1. In these circumstances, respect fully following the decision of the coordinate Bench of this Tribunal in the case of Ganeshyam Securities (Pvt. ) Ltd. referred to supra, the order passed by the ld. CIT under sect ion 263 stands quashed. As we have already quashed the order passed under sect ion 263, we are not going into the issue raised by the assessee that the ld. CIT has not recorded that the assessment order is erroneous and prejudicial to the interest of revenue. In the circumstances, the appeal of the assessee is allowed.

7. In the result, the appeal of the assessee is allowed. The order is dictated and pronounced in the open court immediately upon conclusion of hearing today on 28th day of June, 2012.

                                                             Sd/-                        Sd/-

                                                        C.D. Rao          George Mathan

                                             (Accountant Member) (Judicial Member)

Kolkata, the 28th day of June, 2012

Copies to:

(1) The appellant

(2) The respondent

(3) CIT

(4) CIT(A)

(5) The Departmental Repres entat ive

(6) Guard Fi le

By order etc

Assis tant Registrar

Income Tax Appe llate Tribunal

Kolkata benches, Kolkata

Laha/Sr. P.S.