THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 17.05.2013
+ ITA No.1181/2011
COMMISSIONER OF INCOME TAX - II .....Appellant
versus
M/S MBL & Co. LTD ......Respondent
AND
+ ITA No.573/2012
COMMISSIONER OF INCOME TAX - II .....Appellant
versus
M/S MULTIPLEX CAPITAL LTD. ......Respondent
Advocates who appeared in this case:
For the Appellant : Mr N.P. Sahni, Sr. Standing Counsel.
For the Respondent : Mr Salil Aggarwal, Mr Ajay Wadhwa and,
Mr P.C. Yadav, Advocates.
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. These are appeals filed by the revenue under Section 260A of the Income
Tax Act, 1961 (hereinafter referred to as the "said Act'') challenging the decisions
ITA Nos.1181/2011 & 573/2012 Page 1 of 11
of the Income Tax Appellate Tribunal. The Tribunal has held that rebate
available to an assessee under Section 88E of the Act was liable to be adjusted
from the tax as payable irrespective of whether the tax was computed under the
provisions of Section 115JB of the Act or under the normal provisions of the Act.
Both the appeals raise a common question of law, which has been framed as
under:-
"Whether the Income Tax Appellate Tribunal is correct in
holding that for the purpose of Section 115JB of the Act rebate
under Section 88E of the Act cannot be taken into consideration
or is not relevant/material?"
2. As the issue involved in both these appeals is similar they are being
disposed of together.
3. In ITA No.573/2012, the assessee company is a member of the National
Stock Exchange and the Bombay Stock Exchange and is, inter-alia, engaged in
the business of dealing in shares and securities listed on the two Stock
Exchanges. The assessee filed a return of income for the assessment year 2007-
2008 declaring an income of ` 3,66,77,400/- which was calculated as per normal
provisions of the Act. The tax payable on such income was calculated at
` 3,17,981/- under the Act. The assessee had during the year paid Security
Transaction Tax amounting of ` 1,07,19,814/- and hence claimed a rebate as per
the provisions of Section 88E of the Act on that count. Accordingly, the net tax
payable was claimed to be Nil. The profit and loss account of the assessee
disclosed an income of ` 3,55,71,182/- and under the Minimum Alternative Tax
scheme, the tax payable as per section 115JB of the Act was calculated at
` 35,57,118/-. The assessee claimed that even if tax was computed under the
provisions of Section 115JB of the Act, no tax was payable as the assessee was
ITA Nos.1181/2011 & 573/2012 Page 2 of 11
entitled to claim a credit of ` 1,07,19,814/- under Section 88E of the Act being
the Security Transaction Tax borne by the assessee.
4. The return filed by the assessee was taken up for scrutiny and the
Assessing Officer framed an assessment calculating the tax on book profits under
Section 115JB of the Act at ` 39,09,336/-. The Assessing Officer further declined
to admit any rebate under Section 88E of the Act as he was of the view that
rebate under Section 88E of the Act could only be claimed on the tax payable as
per normal computation under the Act and this rebate was not available on the tax
as computed under Section 115JB of the Act.
5. Aggrieved by the order of the Assessing Officer, the assessee filed an
appeal before CIT(Appeals). The CIT(Appeals) passed an order dated
25.06.2010, inter-alia, allowing the challenge preferred by the assessee with
regard to the rebate under Section 88E of the Act. The CIT(Appeals) held that a
taxing statute needs to be interpreted strictly and there was nothing in the
language of Section 88E of the Act that limited the availability of rebate only on
the tax as calculated under the normal provisions of the Act. The revenue
preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal also
did not accept the contention on behalf of the revenue that rebate under Section
88E of the Act would not be available against the tax as computed under Section
115JB of the Act. The Tribunal held that Section 87 of the Act did not
differentiate between the total income computed under the regular provisions or
as calculated under Section 115JB of the Act. Section 115JB only provides for
an alternative method of calculating taxable income and tax payable thereon, in
respect of those assessee's who although they disclosed a book profit but
nonetheless, either did not pay any tax or paid a low tax as their computation of
income under the normal provision was either a loss or significantly lower than
the disclosed book profits.
ITA Nos.1181/2011 & 573/2012 Page 3 of 11
6. The facts in the case of ITA No.1181/2011 are similar. In this case also,
the assessee is a member of the National Stock Exchange and the Bombay Stock
Exchange and carries on the business of dealing in securities listed on the said
Stock Exchanges. The assessee disclosed an income of ` 8,12,68,281/- as per the
normal computation provisions under the Act. The book profits of the assessee
were higher and the income liable to tax under the MAT scheme was disclosed as
` 8,17,58,465/-. The assessee had borne Security Transaction Tax of
` 3,37,07,299/- whereas the tax payable under the normal computational
provisions of the Act worked out to be ` 2,43,80,484/-. The tax payable in terms
of Section 115JB of the Act was computed as ` 81,75,847/-. Since the Security
Transaction Tax borne by the assessee exceeded the tax payable as computed
under the normal provisions of the Act as well as under Section 115JB of the Act,
the assessee declared that it was not liable to pay any tax. The Assessing Officer
passed an Assessment Order dated 22.12.2009 for the relevant assessment year,
2007-2008, holding that the rebate under Section 88E was not available to the
assessee while determining the tax payable as computed under the provisions of
Section 115JB. An appeal was preferred by the assessee before CIT (Appeals)
challenging the aforesaid view of the Assessing Officer, which was allowed by
the order dated 29.03.2010. The revenue preferred an appeal before the Income
Tax Appellate Tribunal. The Tribunal upheld the decision of the CIT (Appeals)
and found that there was no basis for declining the rebate under Section 88E to
the assessee with respect to the tax computed under Section 115JB.
7. Before proceeding to consider the rival contentions, it is appropriate to
quote the relevant provisions of the Act. Section 115JB, Section 87 and Section
88E of the Act are quoted below:-
''115JB Special provision for payment of tax certain
companies - (1) Notwithstanding anything contained in any
ITA Nos.1181/2011 & 573/2012 Page 4 of 11
other provision of this Act, where in the case of an assessee,
being a company, the income-tax, payable on the total income
as computed under this Act in respect of any previous year
relevant to the assessment year commencing on or after the 1st
day of April, 2007, is less than ten per cent of its book profit,
[such book profit shall be deemed to be the total income of the
assessee and the tax payable by the assessee on such total
income shall be the amount of income-tax at the rate of ten per
cent].''
xxxx xxxx xxxx xxxx xxxx
"87 - Rebate to be allowed in computing income-tax - (1) In
computing the amount of income-tax on the total income of an
assessee with which he is chargeable for any assessment year,
there shall be allowed from the amount of income-tax (as
computed before allowing the deductions under this Chapter),
in accordance with and subject to the provisions of sections 88,
88A, 88B, 88C, 88D and 88E, the deductions specified in those
sections.
(2) The aggregate amount of the deductions under section 88 or
section 88A or section 88B or section 88C or section 88D or
section 88E shall not, in any case, exceed the amount of
income-tax (as computed before allowing the deductions under
this Chapter) on the total income of the assessee with which he
is chargeable for any assessment year.''
xxxx xxxx xxxx xxxx xxxx
"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
ITA Nos.1181/2011 & 573/2012 Page 5 of 11
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 alongwith 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.
Explanation.--For the purposes of this section, the expressions,
"taxable securities transaction" and "securities transaction tax"
shall have the same meanings respectively assigned to them
under Chapter VII of the Finance (No. 2) Act, 2004.''
8. Minimum Alternate Tax (MAT) scheme was introduced by inserting
section 115J in the Act by the Finance Act, 1987. The Finance Minister in his
speech indicated the object of introducing the said scheme as under:
''It is only fair and proper that the prosperous should pay at
least some tax. the phenomenon of so-called ''zero tax'' highly
profitable companies deserves attention. In 1983, a new section
80VVA was inserted in the Act so that all profitable companies
pay some tax. this does not seem to have helped and is being
withdrawn. I now propose to introduce a provision whereby
every company will have to pay a ''minimum corporate tax'' on
the profits declared by it in its own accounts. Under this new
provision, a company will pay tax on at least 30 percent of its
book profit. In other words, a domestic widely held company
will pay tax of at least 15 percent of its book profit. This
measure will yield a revenue gain of approximately Rs 75
crores.''
ITA Nos.1181/2011 & 573/2012 Page 6 of 11
The MAT scheme was improvised further and section 115JB was introduced in
the Act by the Finance Act, 2000 w.e.f. 01.04.2001. At the material time, the rate
of MAT was prescribed at 7.5%. The purpose of introducing the MAT scheme
was to tax profitable companies who otherwise were not liable to pay tax on
account of various deductions and higher depreciation available to them in
computing the taxable income under the normal provisions of the Act. The
import of Section 115JB of the Act is to provide an alternative method of
computation of tax by accepting the book profits as shown by the assessee, albeit
with certain adjustments as specified in Explanation 1 of Section 115JB (2) of the
Act and levying tax on the same as alternative to the tax computed under the
other provisions of the Act. Thus, in cases where assessee's taxable income, as
computed under various provisions of the Act, results in the tax payable thereon
being lower than the tax as computed under Section 115JB, the tax under the
minimum alternative tax scheme as contained in Section 115JB would be
payable. As held by the Supreme Court in the case of, Apollo Tyres Ltd. v.
CIT:(2002) 255 ITR 273 (SC), the Assessing Officer while computing the tax
payable under Section 115J of the Act was not required to make any assessment
as to the profits of the assessee but was required to accept the audited final
accounts and compute the tax at the rate specified.
9. It is also relevant to consider the scheme of the Act. Section 4 of the Act
provides for the basis of charge of Income Tax with respect to the total income
and is the charging section. Section 5 of the Act provides for the scope of total
income of a person. Chapter III of the Act provides for certain income and certain
entities whose incomes are not liable to be included in the total income which is
eligible to tax. Chapter IV of the Act provides for computation of income under
various heads of income. Chapter V of the Act provides for income of the
persons which are to be clubbed while computing the income of an assessee.
ITA Nos.1181/2011 & 573/2012 Page 7 of 11
Chapter VI of the Act provides for the aggregation set off and carry forward of
losses. Chapters IV, V and VI of the Act thus provide for the machinery
provision for computing the total income of an assessee. Chapter VI A of the Act
provides for deduction which are allowable from the total income of an assessee
as computed under the Chapters IV, V and VI of the Act. The resulting income is
taxable under the Act. The Act has other machinery provisions in aid for
computing, collection and recovery of tax. Chapter VIII of the Act provides for
rebate and reliefs in respect of tax payable by an assessee. It can be seen from the
scheme of the Act that there are extensive machinery provisions for computing of
total income of an assessee and the tax payable thereon. The tax as determined is
subject to rebate as may be available under the Chapter VIIIA of the Act. Section
87(1) of the Act provides that the rebate as available under Sections 88, 88A,
88B, 88C, 88D and 88E will be allowed to an assessee in computing the income
tax payable by him on the total income of the assessee. There is a clear
distinction in the scope of chapter VIIIA of the Act and other provisions which
specify deductions that are available to an assessee in computing his total
income. Whereas deductions allowed in computing the total income are a part of
the machinery section to determine the total income of the assesse, the rebates
under the Chapter VIIIA of the Act provide for certain deductions from the tax
payable as computed on the total income of an assessee.
10. Section 115JB of the Act provides for computation method for
determining the total income of an assessee as an alternative to the total income
as computed under Chapters IV, V, VI, VIA of the Act and under other
provisions of the Act. Section 115JB also specifies the rate at which tax is
payable on the income as determined under the said section. Section 88E
provides for remission of tax to the extent of Securities Transaction Tax as paid
by the assesse provided the condition specified therein is satisfied, namely, the
ITA Nos.1181/2011 & 573/2012 Page 8 of 11
income of the assessee includes income chargeable under the head "Profits and
gains of business or profession", arising from taxable securities transactions, and
the assessee furnishes alongwith the return of income, evidence of payment of
securities transaction tax in the prescribed form. We find that there is no reason
why the remission in tax which is available under Section 88E of the Act to an
assessee be not available on the tax as computed under the Minimum Alternative
Tax scheme as both Section 115JB of the Act as well as the other provisions of
the Act referred above have been enacted to provide the machinery for computing
total income of an assessee which is exigible to income tax. The rebate under
Section 88E of the Act provides for certain rebates available on the tax payable
by an assessee. In our view, there would be no rationale to limit the plain words
of Section 88E of the Act and hold that the rebate in payment of the tax is only
applicable to tax as determined under the normal provisions of the Act and not
available with respect to minimum alternative tax as computed under Section
115JB of the Act. The purpose of Section 88E of the Act is to grant an assessee,
to a limited extent, credit in tax on account of Security Transaction Tax already
borne by him in respect of the business carried out by him in dealing in securities.
This rebate would be equally applicable to tax as computed under Section 115JB
of the Act as under the normal provisions of the Act. A division bench of the
High Court of Karnataka has, in the case of Commissioner of Income Tax v. M/s
Horizon Capital Ltd.: ITA No.434/2010 decided on 24.10.2011, held that the
rebate under Section 88E of the Act would be available to tax as payable under
Section 115JB of the Act. The relevant extract from the said judgment is quoted
below:-
15. Under Section 88E, where the total income of an
assessee in a previous year includes any income chargeable
under the head "Profits and gains of business of profession",
arising from taxable securities transactions, he shall be entitled to
a deduction, from the amount of income-tax on such income
ITA Nos.1181/2011 & 573/2012 Page 9 of 11
arising from such transactions. Section also provides the limit to
which deductions shall be given.
16. Therefore, it is clear that the assessee is liable to pay
Securities Transaction Tax when he enters into securities
transaction. Tax is payable simultaneously after realizing the
consideration. However, if that transaction is included in the
total income of the assessee where the total income is assessed
either under the provisions of the Act or under Section 115JB
when tax chargeable on such income is arrived at, he is given the
benefit of tax deductions of the amount, which he has paid under
section 88E by virtue of Section 87. When under Section 82A,
the assessee is made liable to pay tax with an assurance that it
will be deducted and 87 of the Act gives effect to such promise
made under the statute. That is the reason why the word used to
rebate. The amount paid is handed back to the assessee. In other
words, payment of tax twice on the same income is avoided.
17. Therefore, the contention that this benefit is not
available to the assessee whose total income is assessed under
Section 115JB has no substance. In other words, when the total
income is assessed and the tax chargeable is computed, it is from
that tax which is chargeable, the tax paid under Section 88E is
given deduction, by way of rebate, under Section 87 of the Act.
This is the legislative intent. That is a promise to give deduction
of the tax already paid. This is the mode in which tax already
paid is handed back at the time of final computation. Therefore,
the judgment referred by the Tribunal is strictly in accordance
with law and does not suffer from any legal infirmity, which
called for interference. We do not see any substantial question
of law involved in this appeal, which merits admission. The
appeal is dismissed.''
11. We are also of the view, and accordingly hold, that the Income Tax
Appellate Tribunal was correct in holding that the provisions of Sections 87 and
88E of the Act apply to the total income computed under Section 115JB of the
Act and the assessee would be entitled to a deduction to the extent of the Security
Transaction Tax borne by him during the course of business in the relevant
previous year.
ITA Nos.1181/2011 & 573/2012 Page 10 of 11
12. The question framed in the present appeals is answered against the
revenue and appeals are dismissed. No order as to cost.
VIBHU BAKHRU, J
BADAR DURREZ AHMED, J
MAY 17, 2013
MK
ITA Nos.1181/2011 & 573/2012 Page 11 of 11
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