OASIS SECURITIES LTD, MUMBAI v. DCIT 4(2), MUMBAI

ITA 2534/MUM/2009 | 2006-2007
Pronouncement Date: 30-09-2010 | Result: Partly Allowed

Appeal Details

RSA Number 253419914 RSA 2009
Assessee PAN AAACO0091J
Bench Mumbai
Appeal Number ITA 2534/MUM/2009
Duration Of Justice 1 year(s) 5 month(s) 10 day(s)
Appellant OASIS SECURITIES LTD, MUMBAI
Respondent DCIT 4(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 30-09-2010
Date Of Final Hearing 23-09-2010
Next Hearing Date 23-09-2010
Assessment Year 2006-2007
Appeal Filed On 20-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI BEFORE SHRI R.S.SYAL AM AND SHRI R.S.PADVEKAR JM ITA NO.2534/MUM/2009 : ASST.YEAR 2006-2007 M/S.OASIS SECURITIES LIMITED 2 ND FLOOR BUILDING NO.5 RAJABAHADUR COMPOUND 43 TAMARIND LANE FORT MUMBAI 400 023. PA NO.AAACO0091J. VS. THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 4(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH JOTWANI RESPONDENT BY : SHRI P.N.DEVADASAN O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 31.03.2009 IN RELATION TO THE ASSESSMENT YEAR 2006-2007. 2. THE FIRST GROUND IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.2 19 208 MADE BY THE ASSESSING OFFICER U/S.14A READ WITH RUL E 8D. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTED THAT THE QUESTION OF MAKING DIS ALLOWANCE U/S 14A IS NO MORE RES INTEGRA IN VIEW OF THE RECENT JUDGMENT DATED 12.08.2010 OF THE HONBLE BOMBAY HIGH COURT IN GODREJ& BOYCE LIMITED VS. ACIT HOLDING THAT THE PROVISIONS OF SECTION 14A ARE APPLICABLE IN SUCH CIRCUMSTANCES AN D THE DISALLOWANCE HAS TO BE WORKED OUT BY THE AO ON SOME REASONABLE BASIS AND N OT RULE 8D. UNDER SUCH CIRCUMSTANCES WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE QUANTUM OF DISALLOWANCE AS PER THE AFORENOTED JUDGMENT AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE. ITA NO.2534/MUM/2009 M/S.OASIS SECURITIES LIMITED. 2 4. THE SECOND GROUND IS AGAINST NOT GIVING BENEFIT OF REBATE U/S.88E ON SPECULATION INCOME CHARGEABLE TO TAX. BRIEFLY STATE D THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE CLAIMED REBATE OF RS.7 58 538 U/S.88E. ON BEING CALLED UPON TO JUSTIFY THE CLAIM FOR REBATE THE ASSESSEE CONTENDED THAT S ECURITIES TRANSACTION TAX (STT FOR SHORT) WAS PAID ON THE TRANSACTIONS OF SHARES A ND AS A RESULT OF THAT THERE WAS ENTITLEMENT FOR REBATE U/S.88E. THE ASSESSING OFFIC ER OBSERVED THAT THE REBATE WAS ALLOWABLE ONLY ON THE INCOME I.E. GROSS RECEIPTS MI NUS EXPENSES AS REDUCED BY BROUGHT FORWARD LOSSES. HE NOTED THAT THE ASSESSEE HAD INCOME OF RS.1 92 90 883 FROM SPECULATION BUSINESS IN RESPECT OF WHICH STT W AS PAID. THIS INCOME WAS TOTALLY SET OFF AGAINST BROUGHT FORWARD SPECULATION LOSSES LEAVING NO TAXABLE INCOME FROM SECURITY TRANSACTIONS. IT WAS THEREFORE HELD THAT THE REBATE U/S.88E WOULD NOT BE ALLOWED TO THE ASSESSEE. THE ASSESSEE CONTESTED THIS POINT IN THE FIRST APPEAL BUT WITHOUT ANY SUCCESS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. FROM THE COMPUTATION OF TOTAL INCOME OF THE ASSESSEE A COPY OF WHICH HAS BEEN PLACED ON RECORD IT IS SEEN THAT INCOME FROM SPECULATION BUSINESS OF PURCHASE AND SALE OF SHARES WAS DECLARED AT RS.1.92 CRORE AN D THE SAME WAS SET OFF AGAINST BROUGHT FORWARD SPECULATION LOSS THEREBY REDUCING I NCOME FROM SPECULATION BUSINESS TO RUPEES NIL. THERE IS SOME OTHER NOMINA L BUSINESS INCOME OF RS.9.30 LAKHS WHICH IS NOT RELATED TO THE TRANSACTIONS ON WHICH STT WAS PAID. 6. NOW THE CLAIM OF THE ASSESSEE IS THAT THE REBAT E U/S.88E SHOULD BE ALLOWED BECAUSE THERE WAS INCOME FROM SPECULATION BUSINESS OF SHARES BEFORE SETTING OFF OF THE BROUGHT FORWARDS SPECULATION LOSS. IN ORDER TO APPRECIATE THE CONTENTION IT WOULD BE IN FITNESS OF THINGS TO TAKE STOCK OF THE RELEVANT PART OF SECTION 88E WHICH READS AS UNDER:- ITA NO.2534/MUM/2009 M/S.OASIS SECURITIES LIMITED. 3 (1) WHERE THE TOTAL INCOME OF AN ASSESSEE IN A PRE VIOUS YEAR INCLUDES ANY INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION ARISING FROM TAXABLE SE CURITIES TRANSACTIONS HE SHALL BE ENTITLED TO A DEDUCTION FROM THE AMOUNT OF INCOME-TAX ON SUCH INCOME ARISING FROM SUCH TRANSAC TIONS COMPUTED IN THE MANNER PROVIDED IN SUB-SECTION (2) OF AN AM OUNT EQUAL TO THE SECURITIES TRANSACTION TAX PAID BY HIM IN RESPECT O F THE TAXABLE SECURITIES TRANSACTIONS ENTERED INTO IN THE COURSE OF HIS BUSINESS DURING THAT PREVIOUS YEAR. PROVIDED THAT NO DEDUCTION UNDER THIS SUB-SECTION S HALL BE ALLOWED UNLESS THE ASSESSEE FURNISHED ALONG WITH THE RETURN OF INCOME EVIDENCE OF PAYMENT OF SECURITIES TRANSACTION TAX I N THE PRESCRIBED FORM : PROVIDED FURTHER THAT THE AMOUNT OF DEDUCTION UNDER THIS SUB-SECTION SHALL NOT EXCEED THE AMOUNT OF INCOME-TAX ON SUCH I NCOME COMPUTED IN THE MANNER PROVIDED IN SUB-SECTION (2). 7. CHAPTER VIII OF THE INCOME-TAX ACT 1961 HAS TW O PARTS A AND B. WHEREAS PART A DEALS WITH REBATE OF INCOME-TAX PART B DEAL S WITH RELIEF FROM INCOME TAX. SECTION 88E HAS ITS RESIDENCE IN PART A OF THIS CH APTER WHICH HAS ONLY THREE SECTIONS EXISTING IN THE RELEVANT YEAR VIZ 87 8 8 AND 88E. SECTION 87(1) PROVIDES THAT IN COMPUTING THE AMOUNT OF INCOME TAX ON THE T OTAL INCOME OF AN ASSESSEE WITH WHICH HE IS CHARGEABLE FOR ANY ASSESSMENT YEAR THE RE SHALL BE ALLOWED FROM THE AMOUNT OF INCOME TAX (AS COMPUTED BEFORE ALLOWING THE DEDUCTIONS UNDER T HIS CHAPTER) IN ACCORDANCE WITH AND SUBJECT TO THE PRO VISIONS OF SECTIONS 88 AND 88E THE DEDUCTIONS SPECIFIED IN THOSE SECTIONS . SUB-SECTION (2) OF SECTION 87 PROVIDES THAT THE AGGREGATE OF AMOUNT OF DEDUCTIONS U/SS. 88 OR 88E SHALL NOT IN ANY CASE EXCEED THE AMOUNT OF INCOME-TAX (AS COMPUTED BEFORE ALLOWING THE DEDUCTION UNDER THIS CHAPTER) ON THE TOTAL INCOME OF THE ASSESSEE W ITH WHICH HE IS CHARGEABLE FOR ANY ASSESSMENT YEAR. ITA NO.2534/MUM/2009 M/S.OASIS SECURITIES LIMITED. 4 8. IT IS VIVID ON A PLAIN READING OF SECTION 87 THAT THE REBATE IS ALLOWED UNDER THE SECTIONS PROVIDED IN THIS CHAPTER INCLUDING 88E TO THE EXTENT OF INCOME-TAX PAYABLE. IT HAS BEEN CONTENDED BY THE LD. AR THAT B UT FOR THE BROUGHT FORWARD SPECULATION LOSS THERE WAS POSITIVE INCOME FROM SP ECULATION IN THIS YEAR AND HENCE THE REBATE SHOULD HAVE BEEN ALLOWED BY CONSIDERING THE POSITIVE INCOME FROM SPECULATION BUSINESS OF THE CURRENT YEAR. 9. AT THIS JUNCTURE IT WOULD BE RELEVA NT TO CONSIDER THE PROVISIONS OF SECTION 80B(5) WHICH DEFINES GROSS TOTAL INCOME TO MEAN T HE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER. IT THEREFORE TRANSPIRES THAT THE TOTAL I NCOME OF AN ASSESSEE IS COMPUTED BY FIRSTLY DETERMINING THE GROSS TOTAL INCOME AND THEN DEDUCTIONS AS PROVIDED FOR IN CHAPTER VI-A ARE ALLOWED. GROSS TOTAL INCOME IS THU S COMPUTED BY AGGREGATING THE INCOME UNDER SEPARATE HEADS GIVEN IN THE ACT GIVIN G EFFECT TO THE CLUBBING PROVISIONS AND ALSO THE PROVISIONS OF CHAPTER VI R ELATING TO SET OFF OF CARRY FORWARD OF LOSSES. IT IS ONLY WHEN EFFECT IS GIVEN TO THE PROVISIONS AS CONTAINED IN UP TO CHAPTER VI THAT IS BEFORE GRANTING DEDUCTI ONS UNDER CHAPTER VI-A THAT THE AMOUNT OF GROSS TOTAL INCOME IS DETERMINED. IT IS A MPLY DEMONSTRATED BY THE ARRANGEMENT OF SECTIONS IN THE SCHEME OF THE ACT AS WELL BECAUSE THE GROSS TOTAL INCOME IS COMPUTED IN THE MANNER DISCUSSED ABOVE AS PER THE PROVISIONS WHICH ARE PRIOR TO SECTION 80 WHICH DEFINES GROSS TOTAL INCO ME. IT IS THUS MANIFESTED THAT ANY BROUGHT FORWARD LOSS IS LIABLE TO BE FIRSTLY AD JUSTED AGAINST THE INCOME OF THE CURRENT YEAR UNDER SEPARATE HEADS AS PER THE RELEVA NT PROVISIONS AND ONLY THEREAFTER GROSS TOTAL INCOME IS DETERMINED. IT IS IMPOSSIBLE TO CONCEIVE GROSS TOTAL INCOME WITHOUT FIRST GIVING EFFECT TO BROUGHT FORWARD LOSS ES AS PER LAW. ITA NO.2534/MUM/2009 M/S.OASIS SECURITIES LIMITED. 5 10. COMING BACK TO SECTION 88E(1) WHICH HAS BEEN REPRODUCED ABOVE AND WHOSE INTERPRETATION IS CHIEFLY BEFORE US WE FIND THAT IT HAS FOLLOWING ESSENTIAL INGREDIENTS: (I) THERE SHOULD BE INCOME CHARGEABLE UNDER THE HEA D `PROFITS AND GAINS OF BUSINESS OR PROFESSION; (II) SUCH INCOME SHOULD ARISE FROM TAXABLE SECURI TIES TRANSACTIONS; (III) DEDUCTION IS TO BE ALLOWED FROM THE AMOUNT OF INCOME-TAX ON SUCH INCOME ARISING FROM SUCH TRANSACTIONS 11. FROM THE ABOVE IT CAN BE CLEARLY SEEN THA T REBATE U/S.88E IS AVAILABLE ONLY AGAINST THE AMOUNT OF INCOME-TAX ARISING FROM THE T RANSACTIONS WHICH HAVE SUFFERED STT. IT IS NOBODYS CASE AND RIGHTLY SO THAT THE AM OUNT OF INCOME TAX ON OTHER ITEMS OF INCOMES IS ALSO ELIGIBLE FOR REBATE U/S 88 E IN RESPECT OF STT PAID ON THE TRANSACTIONS OF SECURITIES. SO IN ORDER TO BE ELIG IBLE FOR RELIEF UNDER THIS SECTION IT IS IMPERATIVE THAT THERE SHOULD BE SOME LIABILITY T O PAY INCOME-TAX ON THE TRANSACTIONS WHICH SUFFERED STT AND THEN REBATE IS ALLOWABLE TO THE EXTENT OF SUCH INCOME-TAX LIABILITY FOR AN AMOUNT MAXIMUM OF STT PAID. THE NATURAL COROLLARY IS THAT IF THERE IS NO INCOME LIABLE TO I NCOME-TAX ON SUCH TRANSACTIONS THERE CANNOT BE ANY QUESTION OF GRANTING REBATE. T HE LD. AR HAS OVEREMPHASIZED ON THE WORD `CHARGEABLE IN SUB-SECTION (1) OF S EC. 88E TO CANVASS THE VIEW POINT THAT SINCE THE INCOME FROM SECURITIES ON WHI CH STT HAS BEEN PAID IS OTHERWISE CHARGEABLE TO TAX THE BENEFIT OF RELIEF CANNOT BE DENIED. WE DO NOT DENY THAT THE INCOME FROM SUCH SECURITIES IS NOT C HARGEABLE TO TAX. BUT THE FACT OF THE MATTER IS THAT THE REBATE IS PERMISSIBLE ONLY IF THE ASSESSEE IS LIABLE TO PAY TAX IN RESPECT OF SUCH TRANSACTIONS. THUS BOTH THE COND ITIONS OF CHARGEABILITY OF INCOME TO TAX AND LIABILITY TO PAY INCOME-TAX ON SUCH TRAN SACTIONS SHOULD CO-EXIST SO AS TO ITA NO.2534/MUM/2009 M/S.OASIS SECURITIES LIMITED. 6 BECOME ELIGIBLE FOR RELIEF UNDER THIS SECTION. OUR VIEW IS REINFORCED WHEN WE HAVE A GLANCE AT THE SECOND PROVISO TO SUB-SECTION (1) O F SECTION 88E WHICH PROVIDES THAT ` THE AMOUNT OF DEDUCTION UNDER THIS SUB-SECTION SHAL L NOT EXCEED THE AMOUNT OF INCOME-TAX ON SUCH INCOME. ON A CONJOINT READING OF SECTION 88E IN JUXTAPOSITION TO SECTIONS 87 AND 80B(5) IT BECOMES ABUNDANTLY PATENT THAT THERE SHOULD BE SOME LIABILITY TO PAY INCOME TAX ON TRAN SACTIONS ON WHICH STT HAS BEEN PAID ONLY IN THAT SITUATION AND FURTHER TO THE EXT ENT OF LIABILITY TO PAY INCOME TAX ON SUCH TRANSACTIONS THERE SHALL BE ALLOWED REBATE U/S 88E. 12. THE LEARNED A.R. HAS PLACED RELIANCE ON THE ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN DCIT VS. PRIYASHA MEVEN FI NANCE LTD. IN ITA NO.6445/MUM/2009 ORDER DATED 15.09.2010. IN THAT CA SE THERE WAS A SUM OF RS.37.74 LAKHS REPRESENTING F&O PROFIT ON ACCOUNT O F NOTIONAL GAINS. THE A.O. NOTED THAT THIS PROFIT WAS RESULT OF MARKET VALUATI ON ON ACCOUNT OF F&O OPEN POSITIONS WHICH WERE NOT SQUARED UP AND THEREFORE C ARRIED FORWARD. HE OPINED THAT THE PROFIT ARISING ON ACCOUNT OF OPEN F&O WAS NOT L IABLE TO STT AND HENCE EXCLUDED SUCH AMOUNT FOR COMPUTING REBATE U/S.88E. THE TRIBUNAL CONCURRED WITH THE VIEW TAKEN BY THE LEARNED CIT(A) ON THE GROUND THAT STT WAS PAID EVEN ON THE PROFIT OF F&O OPEN POSITION AND SINCE SUCH PROFIT W AS ALSO INCLUDED IN THE TAXABLE PROFIT THERE COULD BE NO OBJECTION TO THE REBATE BE ING GIVEN. WE FIND THAT THE FACTS OF THAT CASE LIE IN AN ALTOGETHER DIFFERENT COMPART MENT AND BEAR NO RESEMBLANCE TO THOSE UNDER SCRUTINY AT PRESENT. WE ARE CONCERNED WITH A CASE IN WHICH THERE IS NO INCOME FROM THE TRANSACTIONS ON WHICH STT WAS PAID. 13. AS IN THE INSTANT YEAR THERE WAS INCOME OF RS.1.92 CRORE FROM THE TRANSACTIONS WHICH SUFFERED STT. BROUGHT FORWARD SP ECULATION LOSS WAS SET OFF TO ITA NO.2534/MUM/2009 M/S.OASIS SECURITIES LIMITED. 7 THE TUNE OF RS.1.92 CRORE THEREBY LEAVING NO INCOME IN RESPECT OF SUCH TRANSACTIONS. IT SHOWS THAT THERE WAS NO LIABILITY TO PAY ANY INCOME-TAX IN THE CURRENT YEAR ON SUCH TRANSACTIONS. THAT BEING THE POSITION WE ARE UNABLE TO APPRECIATE AS TO HOW THERE CAN BE ANY SCOPE FOR GRA NTING REBATE IN RESPECT OF STT PAID BY THE ASSESSEE U/S 88E. 14. IT IS SIMPLE AND PLAIN THAT REBATE CAN BE ALLOWED ONLY WHEN THERE IS SOME LIABILITY TO INCOME-TAX. IF THERE IS NO SUCH LIABIL ITY ACCORDING TO THE RELEVANT PROVISIONS THE OTHERWISE ELIGIBLE REBATE BECOMES UNAVAILABLE. THIS POSITION CAN BE VIEWED FROM ANOTHER ANGLE ALSO. SECTION 88 WHIC H ALSO FALLS UNDER PART A OF THE SAME CHAPTER PROVIDES FOR REBATE ON LIFE INSURANCE PREMIUM AND CONTRIBUTION TO PROVIDENT FUND ETC. UNDER THIS SECTION AN ASSESSEE IS ENTITLED TO DEDUCTION OF AN AMOUNT EQUAL TO TWENTY PERCENT OF THE PAYMENT OF EL IGIBLE SUMS SUBJECT TO MAXIMUM OF THIS REBATE IS ALLOWABLE AGAINST THE AMOUNT OF INCOME-TAX ON THE TOTAL INCOME OF THE ASSESSEE. TH IS PROVISION IS SIMILAR TO SECTION 88E TO THE EXTENT OF PROVIDING REBATE AGAINST THE AMOUNT OF INCOME-TAX. TAKE A SITUATION IN WHICH ALBEIT THE ASSESSEE HAS PAID LI FE INSURANCE PREMIUM ETC. WHICH OTHERWISE ENTITLE HIM TO REBATE U/S 88 BUT THERE I S NO INCOME CHARGEABLE TO TAX. IN SUCH A CASE THERE IS NO POSSIBILITY TO ALLOW ANY REBATE NOTWITHSTANDING THE FACT THAT LIFE INSURANCE PREMIUM WAS PAID BY THE ASSESSE E ON WHICH REBATE IS OTHERWISE AVAILABLE U/S.88 OF THE INCOME-TAX ACT. 15. IN THE FINAL ANALYSIS WE APPROVE THE VIEW TAKEN BY THE LEARNED CIT(A) THAT THE AMOUNT OF STT IS NOT ELIGIBLE FOR REBATE U/S.88 E FOR THE REASON THAT THERE IS NIL INCOME FROM THE TRANSACTIONS WHICH SUFFERED STT. AS NO AMOUNT OF INCOME-TAX IS PAYABLE IN RESPECT OF SUCH TRANSACTIONS THE QUESTI ON OF GRANTING ANY REBATE U/S.88E DOES NOT ARISE. THIS GROUND FAILS. ITA NO.2534/MUM/2009 M/S.OASIS SECURITIES LIMITED. 8 16. IN THE RESULT THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 30 TH DAY OF SEPTEMBER 2010. SD/- SD/- (R.S.PADVEKAR) JUDICIAL MEMBER (R.S.SYAL) ACCOUNTANT MEMBER MUMBAI : 30 TH SEPTEMBER 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - IV MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.