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IN THE INCOME TAX APPELLATE TRIBUNAL
"G"BENCH, MUMBAI
. . , , ,
BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
. / ITA no. 707/Mum./2011
( / Assessment Year : 200708)
Dy. Commissioner of Income Tax (TDS)
................. /
Circle8(2), Aayakar Bhavan
101, M.K. Road, Mumbai 400 020 Appellant
v/s
M/s. Malhar Traders Pvt. Ltd.
B7, 4rd Floor, New Paradise Society
................... /
Behind Shoppers Stop
S.V. Road, Andheri (W) Respondent
Mumbai 400 058
.
/ Permanent Account Number AAACL2683D
/ Assessee by : Smt. Rachana Kanoi
/ Revenue by : souza
Shri R.N. D'
/
/
Date of Hearing 13.10.2014 Date of Order 21.10.2014
/ ORDER
,
/
PER AMIT SHUKLA, J.M.
The present appeal has been preferred by the Revenue,
challenging the impugned order dated 29th October 2010, passed by
the learned Commissioner (Appeals)XVII, Mumbai, for the quantum of
M/s. Malhar Traders Pvt. Ltd.
2
assessment passed under section 143(3), for the assessment year
200708, vide which, following grounds have been raised:
1. On the facts and in the circumstances of the case and in
law, the ld CIT (A) erred in directing to exclude short term
capital gains for the purpose of calculating "average rage of
tax" for determining rebate u/s. 88E of the I.T.Act, without
appreciating the fact that such method of computation is
contrary to legislative intent as in such a situation, the tax
rate would always be the rate applicable to the business
profit only. i.e. maximum marginal rate of taxation" not
appreciating the fact that for the purpose of Clause(iii) of
Explanation 1 to Section 115JB, eligibility for deduction is to
be considered on year to year basis"
2. On the facts and in the circumstances of the case and in
law, the CIT(A) erred in not appreciating that the A.O. had
rightly computed the rebate u/s. 88E at Rs.1,42,462/-
instead of Rs.8,42,413/- as claimed into return of income."
2. In the assessment order under section 143(3) dated 18th
December 2009, the rebate under section 88E has been worked out as
under:
Income from business 75,06,488
STCG 32,99,567
Total Income 1,08,06,015
Tax on total income
On STCG 3,29,957
On Income from other than 25,81,891
22,51,934
STCG
Average rate of tax 23.89%
(25,81,891*100/1,08,06,020)
Tax Rebate u/s 88E 8,42,413
STT paid
Income from securities 1,42,462
transactions subject to STT
(5,96,325,@ 23.89%
Lower of Two 1,42,462
M/s. Malhar Traders Pvt. Ltd.
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3. Before the learned Commissioner (Appeals), the assessee had
contended that the short term capital gain should be excluded for the
purpose of calculation of average rate of tax. The learned
s contention and
Commissioner (Appeals) accepted the assessee'
directed the Assessing Officer to exclude the short term capital gain
from the computation of average rate of tax. Accordingly, the rebate
under section 88E has been revised as under:(In Rs.)
Gross Total Income 1,05,06,771
Less: STCG 32,99,567
Income Other than STCG
Tax on income from other 72,07,204
than STCG
Average Rate of Tax 24,25,944
(2425944*100/7207204
Tax Rebate u/s 88E 33.65%
STT paid 8,42,413
Income from securities 2,00,663
transactions subject to STT
(596325/@ 33.65%)
Lower of Two 2,00,663
4. The learned Departmental Representative submitted that, if short
term capital gain is to be excluded for the purpose of average rate of
tax, then the tax rate would always be the rate applicable to the
business profit only, i.e., maximum marginal rate of taxation. He thus
M/s. Malhar Traders Pvt. Ltd.
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submitted that the short term capital gain cannot be excluded for the
purpose of calculation of average rate of tax as given in section 88E.
5. Before us, the learned counsel submitted that the security
transaction tax is a method of tax collection at the point of transaction.
The purpose of providing rebate under section 88E is to give credit of
such taxes which has already been paid on the income declared under
the head business income. Hence, if the company is liable to pay higher
taxes at maximum marginal rate on such income, then it should be
entitled for credit of taxes paid at the maximum marginal rate only.
Thus, the learned Commissioner (Appeals) has rightly directed the
Assessing Officer to exclude the short term capital gain for the purpose
of calculating average tax rate for determining the rebate under section
88E.
6. We have heard the rival contentions and perused the material
available on record. Section 88E provides rebate in respect of security
transaction tax paid, which envisages that where the total income of
the assessee in a previous year includes any income chargeable under
the head profit and gains of business or profession arising from taxable
security transactions, he shall be entitled to deduction from the amount
of income tax on such income arising from such transactions which is
computed in the manner provided in subsection (2). Sub Sections (1)
and (2) reads as under:-
M/s. Malhar Traders Pvt. Ltd.
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"88E. Rebate in respect of securities transaction tax.--(1)
Where the total income of an assessee in a previous year
includes any income, chargeable under the head " Profits
and gains of business or profession" , arising from taxable
securities transactions, he shall be entitled to a deduction,
from the amount of income-tax on such income arising from
such transactions, computed in the manner provided in
sub-section (2), of an amount equal to the securities
transaction tax paid by him in respect of the taxable
securities transactions entered into in the course of his
business during that previous year :
Provided that no deduction under this sub-section shall be
allowed unless the assessee furnishes along with the return
of income, evidence of payment of securities transaction tax
in the prescribed form :
Provided further that the amount of deduction under this
sub-section shall not exceed the amount of income-tax on
such income computed in the manner provided in sub-
section (2).
(2) For the purposes of sub-section (1), the amount of
income-tax on the income arising from the taxable
securities transactions, referred to in that sub-section, shall
be equal to the amount calculated by applying the average
rate of income-tax on such income.
(3) No deduction under this section shall be allowed in, or
after, the assessment year beginning on the first day of
April, 2009. "
7. Subsection (1) clearly provides that the deduction of security
transaction paid would be entitled, if the total income of the assessee
profits and gains of
includes income chargeable under the head "
. The second proviso provides that the amount
business or profession"
of deduction shall not exceed the amount of income tax on such
income. Subsection (2) provides that the amount of income tax on the
M/s. Malhar Traders Pvt. Ltd.
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income arising from taxable security transaction shall be equal to the
amount of calculation by applying the average rate of income tax on
such income. Thus, the average rate of income tax is to be applied on
the income which is computed under the head profits and gains of
business or profession. Such income has to be referred only in the
context of meaning given in subsection (1). If the business income of
the assessee company is taxed at maximum marginal rate, then rebate
is to be allowed for the security transaction tax paid on such income
only under section 88E. The short term capital gain is taxed at lower
rate under section 111A, but at the same time, no security transaction
tax credit is allowed against the same. The tax rate of business income
is governed by altogether different provisions of the Act which could
amount
not be imported or read into section 88E. The phrase "
calculated by applying the average rate of income tax"as used in sub
section (2) has to be reckoned as average rate of income tax on
business income only. Thus, we do not find any merit in the ground
raised by the Department as the directions given by the learned
Commissioner (Appeals) is in accordance with the provisions of the law.
Thus, the grounds raised by the Revenue are dismissed.
8.
8. s appeal is dismissed.
In the result, Revenue'
M/s. Malhar Traders Pvt. Ltd.
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st
Order pronounced in the open Court on 21 October, 2014.
Sd/- Sd/- Sd/- Sd/-
.
.
B.R. BASKARAN AMIT SHUKLA
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 21.10.2014.
/ Copy of the order forwarded to:
(1) / The Assessee;
(2) / The Revenue;
(3) ( ) / The CIT(A);
(4) / The CIT, Mumbai City concerned;
(5) ,
, / The DR, ITAT, Mumbai;
(6) / Guard file.
/ True Copy
/ By Order
.
/ Pradeep J. Chowdhury
/ Sr. Private Secretary
/
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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