TaxTMI 
TaxTMI 
2015 (12) TMI 141
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Income Tax Act, for allowing inaccurate rebate of claim u/s 88E. The AO in the assessment order u/s. 147/143(3) dated 31-12-09 of the Act has observed that the STT paid income of Rs. 4,91,73,037/- was computed by assessee by debiting expenses of Rs. 65,15,839/- from STT income of Rs. 5,56,88,876/- (as per assessee). He noted that assessee had allocated total expenses of Rs. 1,66,63,904/- in the ratio of 25% / 75% basis between STT income of Rs. 55,688,876/- and non- STT income of Rs. 1,07,31,720/-. He observed that assessee failed to explain logic of such expense allocation to arrive at the STT income for the purpose of rebate u/s. 88E calculation and, therefore, reopening was made. 2.2. Brief facts leading to reopening are like this: The original assessment was completed as under:- Rs. Rs. Net Profit as per P & L A/c paid 3,17,75,642/- Add; 1] STT 1,80,13,120/- 2] Depreciation [to be considered separately] 4,86,205/- 3] Preliminary Exp 10,702/- 4] Donation 3,000/- Add: As discussed above: A] u/s 14A 1,500/- B] Expenses 27,892/- 29,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g 4605962 Jobbing, arbitrage dealings 2856925 F/O profit 53939839 Brokerage/others 10731720 Expenses as per Returned of Income (16663904) Returned income 49756692 The expenses were bifurcated on overall business and actual in the under mentioned basis Particulars Own Client Total Remarks Transactions charges 7464182 2488061 99522443 75:25 Terminal operating chgs. 1095649 365216 1460865 75:25 Depository charges 184060 61353 245413 75:25 Electricity charges 64857 21619 86476 75:25 Fees & subscription 283391 94464 377855 75:25 Depreciation 276102 225901 502003 55:45 Others (as per P/L & computation etc.) 4523 4034526 4039049 Actual 9372764 7291140 16663904 The appellant brought to the notice of AO the circulars of CBDT, provisions of Act, ITR 6 and furnished the followings: a) STT income 58545801 Less: Expenses etc. 9372764 49173037 b) Non STT income 10731720 Less: Expenses etc. 7291140 Less: Set off u/s 70 2856925 583655 3.1 The first contention of the assessee was that out of the expenses debited to the profit and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of SIT by the assessee. Therefore, there is no doubt that the income/ loss from jobbing and arbitrage dealing is a part of the SIT related transactions. Therefore, the loss of Rs. 28,56,925/- from these dealings have to be considered in the calculation of STT related income. 4.1. Thus, Ld. CIT(A) observed that allocation as done in an arbitrary manner. During appeal proceedings assessee was required to provide details about the volume of transactions done by the assessee on its own account and on account of its client's from which it transpired as under:- Own transactions Rs.249141541578.47 Client transactions Rs.51113102336.90 4.2. He, accordingly, observed that 83% of the transactions were assessee's own transactions and only 17% were transactions belonging to the clients. Thus, he observed that the substantial portion of the transactions were assessee's own transaction and it was wrong for the ae to claim that it mainly maintain its establishment for its clients. He pointed out that out of te total expenses, other than the STT charges debited in the profit and loss account only the expenses for stamp duty charges amounting to Rs. 22,31,939/- could be said to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e determined. He submitted that assessee's income remains unaltered and, therefore, there was no 4escapement of income. He referred pages 29 and 30 of the Paper Book filed by assessee wherein the Form No. 10DB is contained to demonstrate that STT was paid on assessee's own transactions. He relied the following case laws:- a) Baijnath Saboo And Others v. ITO And Others 113 ITR 303 (Cal) b) CIT v. Birla Jan Kalyan Trust 190 ITR 351 (Cal) c) CIT v. Bombay Gas Co. Ltd 120 ITR 822 (Bom) 7.1 Ld. Counsel further pointed out that it is a case of clear change of opinion. 8. Ld. DR referred to Explanation-2 clause(e) of (iii) / (iv) to Section 147 and pointed out that assessee has been allowed excessive relief and, therefore, it is clearly covered by the deeming provision of Section 147 of the Act. He pointed out that no opinion was formed by AO in original assessment on various aspect in regard to determination of STT income and non-STT income as per the provision of u/s 88E. 9. We have considered the submission of both the parties and have perused the record of the case. As far as the first proposition advanced by Ld. Counsel for the assessee that there is no escapement of income, is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has allocated 83% of expenses towards STT transactions, which were on assessee's own account, after considering the ratio of turnover of STT transactions to non-STT transactions. Ld. Sr. Counsel for the assessee pointed out that in subsequent year the AO himself has allocated only 15% of the establishment expenses towards own transactions resulting into STT income. 10.1 Ld. DR has submitted that merely because in subsequent year the AO has accepted 15% expenses towards STT transactions that can not automatically be applied for current year. After considering submissions of both the parties and taking into consideration the explanation reproduced earlier, we are of the opinion that there is considerable force in the argument of Ld. Counsel of assessee that assessee could enter into own transactions even without having such huge infrastructure. However, it cannot be ignored that considering the volume of assessee's transaction, some infrastructure was very much required. In our opinion, ends of justice would be met if 25% of the establishment expenses are allocated towards assessee's own transactions and 75% are allocated towards client's transaction (non-STT income) in respect of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, "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.] 12.1. A bare perusal makes it clear that the Section has following ingredients (a) total income of assessee includes the income chargeable under the head profit and gains of business (b) such income is arising from taxable securities transactions; (c) deduction under the section is allowable from the amount of income tax on such income arising from such transaction. Thus, the total income used in this section cannot be given a general meaning and has to be ascribed the meaning as contemplated in the context in which Section 88E has been inserted by the Finance Act 2004 with effect from 1.4.2005. The object of Section 88E clearly is to protect the assessee from double taxation. Firstly, by way of payment of STT and secondly by way of income tax on the income earned from STT transaction. The concept of total income as contemplated under Section 2 sub-section (45) cannot be imputed here. The opening words of section 2 dealing with the definition are that unless the context otherwise requires. Therefore, the....