Tuesday 24 January 2012

THE issue before the Bench is - Whether assessee is entitled to rebate for STT paid even if the total income is computed u/s 115JB. And the verdict goes in favour of the assessee.

BANGALORE, JAN 24, 2012: Facts of the case

The assessee is engaged in the business of purchase and sale of shares for more than a decade. It filed its return of income declaring taxable income as nil. The assessee had also made a payment of STT. The AO issued a notice u/s 148. The AO rejected the claim of the assessee for rebate on STT and computed the tax liability against the income computed u/s 115JB. The CIT (A) confirmed the said order. The Tribunal held that the rebate u/s 87 is to be granted from the amount of income tax chargeable on the total income of the assessee. The income tax was computed after arriving at the total income of the assessee and Section 87 did not differentiate between the total income computed under the regular provisions of the Act or u/s 115JB. 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 section 87 and 88A to 88E also apply after the total income is computed u/s 115JB and since the assessee's total income included the income from the taxable Securities Transaction, the assessee was 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 and allowed the appeal.

On Appeal the Revenue's Counsel contended that having regard to the language employed both in Sections 88E and 115JB, rebate u/s 87 was applicable only if an assessment was made under other provisions of the Act and not u/s 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.

The HC held that,
++ the assessee is liable to pay securities transaction tax when he enters into securities transaction. Tax is payable simultaneously after realizing the consideration. However, if that transaction is included in the total income of the assessee where the total income is assessed either under the provisions of the Act or u/s 115JB when tax chargeable on such income is arrived at, he is given the benefit of tax deductions of the amount, which he has paid u/s 88E by virtue of Section 87. When u/s 82A, the assessee is made liable to pay tax with an assurance that it will be deducted and section 87 gives effect to such promise made under the statute. That is the reason why the word used is rebate. The amount paid is handed back to the assessee. In other words, payment of tax twice on the same income is avoided;

++ the contention that this benefit is not available to the assessee whose total income is assessed u/s 115JB has no substance. In other words, when the total income is assessed and the tax chargeable is computed, it is from that tax which is chargeable, the tax paid u/s 88E is given deduction, by way of rebate, u/s 87. This is the legislative intent. That is a promise to give deduction of the tax already paid. This is the mode in which tax already paid is handed back at the time of final computation.

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