SBI Capital Markets Ltd. 202, Maker Tower E, Cuff Parade, Mumbai 05. Vs. CIT LTU Mumbai.
July, 31st 2015
INCOME TAX APPELLATE TRIBUNAL,MUMBAI "E" BENCH
. . , , ,
Before S/Sh. A.D. Jain,Judicial Member & Rajendra,Accountant Member
/.ITA No.3249/Mum/2012, /Assessment Year-2007-08
SBI Capital Markets Ltd. CIT LTU
202, Maker Tower E,
Cuff Parade, Mumbai 05. Vs Mumbai.
( /Appellant) ( / Respondent)
/Assessee by : Shri Nitesh Joshi & N.A. Patade -AR
/ Revenue by : Shri Manjunatha Swamy-DR
/ Date of Hearing
: 21 072015
/ Date of Pronouncement : 29 072015
Order u/s.263 of the Income-tax Act,1961(Act)
PER RAJENDRA, AM
Challenging the order dated 07.03.2012of the CITLTU,Mumbai,the assessee had filed appeal
raising following Grounds of Appeal:
"1.The order of the learned CIT is contrary to the provisions of law and facts of the case and
without appreciation of the facts and circumstances of the case in their right perspective.
2.The learned CIT erred in invoking the provisions of section 263 of the IT A and holding that the
order passed by the assessing officer was erroneous and prejudicial to the interest of the revenue.
3.The learned CIT did not appreciate the fact that the issue was already been examined and
dropped by the assessing officer during the proceedings initiated under section 154 of the ITA
proposing to withdraw the exemption under section 88E of the ITA.
4.The learned CIT erred in holding that the order passed by the Additional CIT (LTU), Mumbai
("Add I. CIT") is erroneous to the extent of rebate under section 88E of the ITA and also
prejudicial to the interest of revenue.
5.The learned CIT erred in setting aside the order passed by the Addl. CIT with a direction to
modify the order under section 143(3) of the ITA by disallowing the assessee's claim of rebate
under section 88E of the ITA of Rs. 38,89,772.
6.The learned CIT erred in holding that as the appellant had incurred a net loss of
Rs.1,46,84,000 from taxable securities transaction, the appellant is not eligible for rebate under
section 88E of the ITA.
7.The learned CIT erred in not appreciating that the profit earned on each security is a taxable
event, accordingly the rebate under section 88E should be at least allowed in respect of sale
transaction on which profit had being earned. Accordingly, as the SIT paid on transactions
resulting in profits amounts to Rs. 25,20,772, rebate under section 88E of the ITA should at least
be allowed to that extent.
8.Each one of the above grounds of appeal is without prejudice to the other."
2.The assessee filed its Return of Income on 30.10.2007.The Assessing Officer(AO)finalised the
assessment order u/s.143(3) of the Act on 16.11.2009.The CIT called for the records of the
assessee. He was of the opinion that the order passed by the AO was erroneous and prejudicial to
Revenue. Accordingly,he issued a show cause notice vide letter No.CIT/LTU/263/SBI Capital
Market/ 201112/402 dated 07.02.2012 to the assessee and asked it to show cause as to why the
assessment order made u/s.143(3) of the Act should not be cancelled and fresh assessment be
directed.CIT observed that the claim made by the assessee for allowing rebate u/s. 88E of the Act
was wrongly allowed,that the assessee had incurred net loss of Rs. 1.46 crores in the business of
trading in securities,that there was no liability of income tax on such loss on securities
transactions.In response to the revisionary notice the assessee,vide its reply dated 02/03/2012 and
stated that trading in securities was an integral part of the business of the company,that during
the year the company had entered into various transactions of purchade and sale of securities,that
it had paid STT on these taxable securities transactions,that it had overall earned a business profit
of Rs. 55,06,67, 905/,that the same was offered as income from business and profession,that it
was entitled to rebate under section 88E of the Act in respect of the STT paid on sale and
purchase of shares held as stock in trade,that the the provisions of Section 36(1)(xv) of the Act
which provided deduction of the entire STT paid by the assessee during the previous year in
respect of taxable securities transactions during the course of the business,that deduction was
allowed irrespective of the fact whether profit was made by the assessee in respect of the taxable
securities transactions,that the intention of the legislature had always been to allow relief for the
entire STT paid by the assessee and not to restrict the same to only transaction on which profit
had been earned,that that the rebate u/ s. 88E of the Act should be allow available in respect of
STT paid on taxable securities transactions,that the AO,vide letter dated 18.06.2010,had
proposed to withdraw the rebate granted u/s.88E by invoking the provisions section 154 of the
Act,the he dropped the rectification proceedings after considering the submissions of the
assessee,that the issue of the allowability of rebate u/ s. 88E had already been considered by the
AO,that after applying his mind,the AO had concluded that rebate u/s.88E of the Act should not
be withdrawn,that when two views were possible and one of the views had been adopted by the
AO the power of revision u/s. 263 could not be exercised.The assessee placed reliance on the
decisions of Max India Ltd.(268 ITR 128),Patel Cotton Co. Ltd.(64 ITD 273),Jhulelal Land
Development Corporation (56ITD345),Mannesmann Demag A.G.(53ITD533),Super Cassettes
Industries (P) Ltd.(41 ITD 530),Mool Raj Singh & Ors.(63TTJ211),Rajasthan Financial
Corporation (229ITR246),Malabar Industrial Co. Ltd.(243ITR83)and Gabriel India Ltd.(203 ITR
108).The assessee took an alternative plea by stating that the profit earned on sale of each
security was a taxable event,then the rebate u/s. 88E should at least be allowed in respect of such
sale transaction to the extent of profits earned on the same,that the STT paid on securities
transactions resulting in profit amounted to Rs.25,20,772/ , that rebate u/s.88E should be granted
at least to the extent of Rs.25,20,772/.
3.After considering the submissions of the assessee,the CIT held that Section 88E of the Act
clearly stated that where the total income of the assessee in a previous year includes any income
chargeable under the head Profit & Gains of Business arising from taxable securities transaction
was eligible for a rebate equal to STT paid by the assessee in proportion to the income on which
STT had been paid,that during the year,theassessee had made profit of Rs.4.14 Crores,on some
of the transactions and it had incurred loss of Rs.5,61,59,800/ on some other transactions
thereby incurring a net loss of Rs.1,46,84,000/ on the total securities transactions,that there was
no liability to pay any income tax in the current year on such transactions,that there was no scope
for granting rebate u/s. 88E in respect of STT paid by the assessee,that rebate could be allowed
only when there was some liability to pay income tax on the income of such securities
transactions,that if there was no such liability rebate would not be available.He set aside the
order passed by the AO with a direction to modify the order u/s. 143(3) of the Act by disallowing
the assessee's claim made by it for the rebate u/s.88E of the Act.
4.During the course of hearing before us,the Authorised Representative(AR)submitted that .
Departmental Representative(DR)stated that the order of the AO was erroneous and prejudicial
to the interest of revenue,that the AO not applied his mind,that the AO had allowed the rebate
that was not allowable as per the provisions of the Act,that action of the AO had to be rectified,
that there were no two possible views about the allowability of the rebate,that issuance of
rectification notice u/s.154 of the Act was no bar for initiating revisionary proceedings.
5.We have heard the rival submissions and perused the material before us.We find that the
solitary issue to be decided by us is as to whether the CIT was justified in invoking the
provisions of section 263 in disallowing the rebate u/s.88E of the Act.We find that the AO had
while calculating the tax liability of the assessee had allowed the rebate available u/s.88E of the
Act, that later on he had issued a notice u/s.154 of the Act wherein he had mentioned that the
rebate allowed to the assessee was not as per law and same had to be withdrawn,that the assessee
had suffered loss in STT related transactions,that from overall business and profession it had
shown profits,that it had made an alternate argument before the CIT also.
Proceedings under section 263 of the Act can be initiated if the CIT,on going through the
records,find that the order passed by the AO is erroneous and prejudicial to the interest of
revenue.The courts have defined the both the terms i.e. `erroneous' and `prejudicial to the
interest of revenue.An incorrect assumption of facts or improper application of law would
statisfy the requirement of order being erroneous.It is said that an order can be brought within the
perview of erroneous order if it involves an error by deviating from law or upon the erroneous
application of law.
From the scheme of the Act,it becomes clear that there are extensive machinery provisions for
computing the total income of an assessee and the tax payable thereon. The tax as determined is
subject to rebate as may be available under 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 Incometax payable by him on the total income of the
assessee. There is a clear distinction between the scope of Chapter VIIIA of the Act and that of
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
to determine the total income of the assessee,the rebates under Chapter VIIIA of the Act provide
for certain deductions from the tax payable as computed on the total income of an assessee.The
purpose of section 88E of the Act is to grant an assessee,to a limited extent, credit in tax on
account of securities transaction tax already borne by him in respect of the business carried out
by him in dealing in securities.In other words Section 88E provides for remission of tax to the
extent of securities transaction tax as paid by the assessee provided the condition specified
therein is satisfied, namely, the income of the assessee includes income chargeable under the
head "Profits and gains of business or profession", arising from taxable securities transactions,
an assessee is entitled to a deduction to the extent of the securities transaction tax borne by it
during the course of business in the relevant previous year.So,the assessee would not be entitled
to rebate if the income is arising under the head income from capital gains.In the case before us
there was loss under the head capital gains,therefore,the assessee was not entitled to claim rebate
u/s. 88 of the Act.As the AO had not made any inquiry in that regard,so,in our opinion the CIT
had rightly invoked the provisions of section 263 and had issued the revisionary notice.But,as far
as quantum of rebate is concerned we hold that the alternate claim made by the assessee needs to
be considered.Therefore,allowing the appeal filed by the assessee in part,we direct the AO to
calculate the 88E rebate for the business transactions i.e.the alternate ground raised by the
assesee has to be given effect.
As a result,appeal filed by the assessee stand partly allowed.
Order pronounced in the open court on 29th July,2015.
(.. /A.D. Jain) ( / RAJENDRA)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
/Mumbai, /Date: 29 .07.2015
/Copy of the Order forwarded to :
1.Appellant / 2. Respondent /
3.The concerned CIT(A)/ , 4.The concerned CIT /
5.DR A Bench, ITAT, Mumbai / , ,.. .
/ BY ORDER,
/ Dy./Asst. Registrar
, /ITAT, Mumbai.