COMMISSIONER OF INCOME TAX Vs. HORIZON CAPITAL LTD

JUDGEMENT

(1.) There is a delay of two days in preferring this appeal. Respondent has no objection for the same. Accepting the cause shown in the affidavit filed in support of the application for condonation of delay, delay of two days is condoned. The revenue has preferred this appeal challenging the order passed by the Tribunal allowing the assessee's appeal and granting rebate under section 88E for the Securities Taxation Tax paid by the assessee.

(2.) The assessee is a company, which is engaged in the business of purchase and sale of shares for more than a decade. It filed its return of income for the assessment year 2005-06 on 31-10-2005 declaring taxable income as nil. The assessee had also made a payment of Securities Transaction Tax (for short hereinafter referred to as 'STT') for the assessment year 2005-06 of Rs. 35,05,443. The assessing officer issued a notice under section 148 of the Income Tax Act, 1961 (for short hereinafter referred to as 'the Act') dated 5-2-2008 stating that certain income in respect of the assessment year 2005-06 had escaped assessment. The assessee filed its reply stating that the assessee had returned an income of Rs. 1,04,81,991. After set off of the carry forward losses from the previous years to the extent of the profit in the year, the taxable profit was nil. Therefore, although the credit for the amount paid as STT was available under section 88E, no rebate has been claimed in view of the total taxable income returned being nil. A notice under section 143(2) dated 28-4-2008 seeking details, relevant documents and other proofs was issued to the assessee. The assessee submitted his reply dated 18-6-2008 stating that the payment of tax of both TDS and STT pur together exceeded the tax liability not only under section 115JB but even the liability under regular tax, even if there were no carried forward loss to be set off. Again one more notice was issued to the assessee under section 154 of the Act on 18-6-2009. The assessee submitted his reply along with the statement of total income and also MAT computation and therefrom, the assessee claimed a rebate under section 88E of the Act for the STT paid by it. Assessing officer rejected the claim of the assessee for rebate on STT and computed the tax liability against the income computed under section 115JB of the Act. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals) who confirmed the said order. The assessee preferred a second appeal to the Tribunal. The Tribunal on consideration of the rival contentions held that the rebate under section 87 of the Act 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 Act does not differentiate between the total income computed under the regular provisions of the Act or under section 115JB of the Act. Even though sub-section (1) of section 115JB starts with the non-abstante clause, it is only for the computation of the total income and sub-section (5) of section 115JB provides for a saving clause that the rest of the provisions of the Act relating to deductions, rebate, etc., the other provisions of the Act shall apply. Therefore, the provision of sections 87 and 88A to 88E also apply after the total income is computed under section 115JB of the Act and since the assessee's total income includes the income from the taxable Securities Transaction, the assessee is entitled to a deduction of the amount equal to the STT paid by him in respect of the taxable Securities Transaction entered into in the course of business during the previous year. Therefore, the appeal was allowed and rebate was ordered to be granted. Aggrieved by the said order, the revenue is in appeal.

(3.) The learned counsel for the revenue assailing the impugned order contends that having regard to the language employed both in sections 88E and 115JB of the Act, rebate under section 87 is applicable only if an assessment is made under other provisions of the Act and not under section 115JB. The reason is section 115JB starts with a non-abstante clause and assessment of income on the basis of book entries is a self contained code in itself and the income chargeable arrived at in terms of section 115JB, does not attract rebate. Therefore, he submits that the impugned order passed by the Tribunal is erroneous and requires to be set aside.