2010 (7) TMI 991 - AT - Income Tax

ITAT allows rebate claim under section 88E for STT paid, clarifies 'total income' interpretation.

M/s. Horizon Capital Limited, Versus. Income Tax Officer, Ward 11 (2),

The ITAT ruled in favor of the assessee, allowing the rebate claim under section 88E of the Income Tax Act for Securities Transaction Tax paid, even when ... Allowing rebate for Securities Transaction Tax (STT) under section 88E in a case where an assessee is also exigible to tax u/s 115JB - HELD THAT:- it is clear that the provision of sections 87 and 88A to 88E also apply after the total income is computed u/s 115JB and since the assessee’s total income includes the income from the taxable Securities Transactions, the assessee is entitled to a deduction of the amount equal to the STT paid by him in respect of the taxable Securities Transactions entered into in the course of business during the previous year. The assessee’s appeal is thus allowed and the AO is directed to give rebate u/s 88E for the STT paid by the assessee. In the result the assessee’s appeal is allowed. Issues:Non-granting of rebate under section 88E of the Income Tax Act, 1961 for Securities Transaction Tax (STT) paid by the assessee from the income tax on the income computed under section 115JB.Analysis:The assessee, a company engaged in share trading, filed an appeal for the Assessment Year 2005-06, primarily disputing the non-granting of rebate under section 88E of the Income Tax Act, 1961 for the STT paid. The Assessing Officer issued notices regarding escaped assessment, to which the assessee responded by emphasizing that although STT was paid, no rebate was claimed due to the total taxable income being NIL after set off of carry forward losses. The Assessing Officer rejected the rebate claim, leading to appeals before the CIT(A) and subsequently before the ITAT.The counsel for the assessee argued that as per the provisions of the Income Tax Act, the assessee is entitled to a rebate under section 88E for the STT paid. He highlighted relevant sections like 87, 88E, and 115JB to support the claim for rebate. The Departmental Representative contended that section 115JB is self-contained and does not provide for a rebate on STT paid. She argued that STT is a distinct tax type and not akin to advance tax or TDS, hence rebate is not permissible under section 115JB.After hearing both parties, the ITAT analyzed the dispute regarding the allowance of rebate on STT paid against the income tax computed under section 115JB. The ITAT noted that the term 'total income' is defined under the Income Tax Act, and the rebate under section 88E is to be granted from the income tax chargeable on the total income of the assessee, irrespective of computation under regular provisions or section 115JB. The ITAT interpreted that the provisions of sections 87 and 88A to 88E apply post-computation of total income under section 115JB, allowing the assessee to claim a deduction equal to the STT paid for taxable Securities Transactions. Consequently, the ITAT allowed the assessee's appeal and directed the Assessing Officer to grant the rebate under section 88E for the STT paid.In conclusion, the ITAT ruled in favor of the assessee, emphasizing the applicability of rebate provisions under section 88E even when computing income tax under section 115JB. The judgment highlighted the interpretation of 'total income,' ensuring the assessee's entitlement to claim a deduction for STT paid on taxable Securities Transactions.