IN HIGH COURT OF DELHI AT NEW DELHI ITA Nos. 412/2014 and 413/2014 COMMISSIONER OF INCOME TAX-I Appellant Through Mr. Kamal Sawhney, Sr. Standing Counsel. versus CNB FINWIZ LIMITED Respondent Through Mr. S. Krishnan, Advocate. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE V. KAMESWAR RAO ORDER 22.08.2014 issue raised in present appeals relating to assessment years 2007-08 and 2008-09 is whether remission/rebate of tax under Section 88E of Income Tax Act, 1961 (Act, for short) should be taken into consideration for computing difference between tax payable on normal income and on book profits for invoking Section 115JB of Act ? 2. Tribunal has followed judgment of Delhi High Court in Commissioner of Income Tax Vs. MBL and Co. Ltd. [2013] 358 ITR 0001, wherein it has been held that there is no reason why remission of tax under Section 88E should not be available on tax as computed under Minimum Alternative Tax scheme as both Section 115JB as well as normal provisions have been enacted to provide machinery for computing total income of assessee which is exigible to tax. There would be no rationale to limit plain words of Section 88E and hold that remission in payment of tax is only applicable to tax determined under normal provisions of Act. It has been observed:- ?10. Section 115JB of Act provides for computation method for determining total income of assessee as alternative to total income as computed under Chapters IV, V, VI, VIA of Act and under other provisions of Act. Section 115JB also specifies rate at which tax is payable on income as determined under said section. Section 88E provides for remission of tax to extent of Securities Transaction Tax as paid by assesse provided condition specified therein is satisfied, namely, income of assessee includes income chargeable under head ?Profits and gains of business or profession?, arising from taxable securities transactions, and assessee furnishes alongwith return of income, evidence of payment of securities transaction tax in prescribed form. We find that there is no reason why remission in tax which is available under Section 88E of Act to assessee be not available on tax as computed under Minimum Alternative Tax scheme as both Section 115JB of Act as well as other provisions of Act referred above have been enacted to provide machinery for computing total income of assessee which is exigible to income tax. rebate under Section 88E of Act provides for certain rebates available on tax payable by assessee. In our view, there would be no rationale to limit plain words of Section 88E of Act and hold that rebate in payment of tax is only applicable to tax as determined under normal provisions of Act and not available with respect to minimum alternative tax as computed under Section 115JB of Act. purpose of Section 88E of Act is to grant assessee, to limited extent, credit in tax on account of Security Transaction Tax already borne by him in respect of business carried out by him in dealing in securities. This rebate would be equally applicable to tax as computed under Section 115JB of Act as under normal provisions of Act. division bench of High Court of Karnataka has, in case of Commissioner of Income Tax v. M/s Horizon Capital Ltd.: ITA No.434/2010 decided on 24.10.2011, held that rebate under Section 88E of Act would be available to tax as payable under Section 115JB of Act. relevant extract from said judgment is quoted below:- 15. Under Section 88E, where total income of assessee in previous year includes any income chargeable under head ?Profits and gains of business of profession?, arising from taxable securities transactions, he shall be entitled to deduction, from amount of income-tax on such income arising from such transactions. Section also provides limit to which deductions shall be given. 16. Therefore, it is clear that assessee is liable to pay Securities Transaction Tax when he enters into securities transaction. Tax is payable simultaneously after realizing consideration. However, if that transaction is included in total income of assessee where total income is assessed either under provisions of Act or under Section 115JB when tax chargeable on such income is arrived at, he is given benefit of tax deductions of amount, which he has paid under section 88E by virtue of Section 87. When under Section 82A, assessee is made liable to pay tax with assurance that it will be deducted and 87 of Act gives effect to such promise made under statute. That is reason why word used to rebate. amount paid is handed back to assessee. In other words, payment of tax twice on same income is avoided. 17. Therefore, contention that this benefit is not available to assessee whose total income is assessed under Section 115JB has no substance. In other words, when total income is assessed and tax chargeable is computed, it is from that tax which is chargeable, tax paid under Section 88E is given deduction, by way of rebate, under Section 87 of Act. This is legislative intent. That is promise to give deduction of tax already paid. This is mode in which tax already paid is handed back at time of final computation. Therefore, judgment referred by Tribunal is strictly in accordance with law and does not suffer from any legal infirmity, which called for interference. We do not see any substantial question of law involved in this appeal, which merits admission. appeal is dismissed. 11. We are also of view, and accordingly hold, that Income Tax Appellate Tribunal was correct in holding that provisions of Sections 87 and 88E of Act apply to total income computed under Section 115JB of Act and assessee would be entitled to deduction to extent of Security Transaction Tax borne by him during course of business in relevant previous year. 3. effect of aforesaid decision would be that while computing tax payable under Section 115JB, remission in form of Securities Transaction Tax (STT) in terms of Section 88E read with Section 87 would be available to assessee. same would be position while computing tax payable under normal provisions. Thus, tax remission under Section 88E has to be and should be taken into consideration both under normal provisions as well as book profits computed under Section 115JB. amount of remission under Section 88E would, therefore, get reduced from tax payable under two methods/manners of computing taxable income. end result would be that figure of STT would get balanced and not adversely affect either Revenue or assessee. Prejudice is not caused to either side. Learned counsel for appellant accepts that in case benefit of Section 88E is given under two methods, difference on tax payable would be less than 10%. In such circumstances, Section 115JB would not be applicable. appeal has no merit is accordingly dismissed. SANJIV KHANNA, J. V. KAMESWAR RAO, J. AUGUST 22, 2014 NA $5 IN HIGH COURT OF DELHI AT NEW DELHI ITA Nos. 412/2014 and 413/2014 COMMISSIONER OF INCOME TAX-I Appellant Through Mr. Kamal Sawhney, Sr. Standing Counsel. versus CNB FINWIZ LIMITED ..... Respondent Through Mr. S. Krishnan, Advocate. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE V. KAMESWAR RAO ORDER 22.08.2014 issue raised in present appeals relating to assessment years 2007-08 and 2008-09 is whether remission/rebate of tax under Section 88E of Income Tax Act, 1961 (Act, for short) should be taken into consideration for computing difference between tax payable on normal income and on book profits for invoking Section 115JB of Act ? 2. Tribunal has followed judgment of Delhi High Court in Commissioner of Income Tax Vs. MBL and Co. Ltd. [2013] 358 ITR 0001, wherein it has been held that there is no reason why remission of tax under Section 88E should not be available on tax as computed under Minimum Alternative Tax scheme as both Section 115JB as well as normal provisions have been enacted to provide machinery for computing total income of assessee which is exigible to tax. There would be no rationale to limit plain words of Section 88E and hold that remission in payment of tax is only applicable to tax determined under normal provisions of Act. It has been observed:- ?10. Section 115JB of Act provides for computation method for determining total income of assessee as alternative to total income as computed under Chapters IV, V, VI, VIA of Act and under other provisions of Act. Section 115JB also specifies rate at which tax is payable on income as determined under said section. Section 88E provides for remission of tax to extent of Securities Transaction Tax as paid by assesse provided condition specified therein is satisfied, namely, income of assessee includes income chargeable under head ?Profits and gains of business or profession?, arising from taxable securities transactions, and assessee furnishes alongwith return of income, evidence of payment of securities transaction tax in prescribed form. We find that there is no reason why remission in tax which is available under Section 88E of Act to assessee be not available on tax as computed under Minimum Alternative Tax scheme as both Section 115JB of Act as well as other provisions of Act referred above have been enacted to provide machinery for computing total income of assessee which is exigible to income tax. rebate under Section 88E of Act provides for certain rebates available on tax payable by assessee. In our view, there would be no rationale to limit plain words of Section 88E of Act and hold that rebate in payment of tax is only applicable to tax as determined under normal provisions of Act and not available with respect to minimum alternative tax as computed under Section 115JB of Act. purpose of Section 88E of Act is to grant assessee, to limited extent, credit in tax on account of Security Transaction Tax already borne by him in respect of business carried out by him in dealing in securities. This rebate would be equally applicable to tax as computed under Section 115JB of Act as under normal provisions of Act. division bench of High Court of Karnataka has, in case of Commissioner of Income Tax v. M/s Horizon Capital Ltd.: ITA No.434/2010 decided on 24.10.2011, held that rebate under Section 88E of Act would be available to tax as payable under Section 115JB of Act. relevant extract from said judgment is quoted below:- 15. Under Section 88E, where total income of assessee in previous year includes any income chargeable under head ?Profits and gains of business of profession?, arising from taxable securities transactions, he shall be entitled to deduction, from amount of income-tax on such income arising from such transactions. Section also provides limit to which deductions shall be given. 16. Therefore, it is clear that assessee is liable to pay Securities Transaction Tax when he enters into securities transaction. Tax is payable simultaneously after realizing consideration. However, if that transaction is included in total income of assessee where total income is assessed either under provisions of Act or under Section 115JB when tax chargeable on such income is arrived at, he is given benefit of tax deductions of amount, which he has paid under section 88E by virtue of Section 87. When under Section 82A, assessee is made liable to pay tax with assurance that it will be deducted and 87 of Act gives effect to such promise made under statute. That is reason why word used to rebate. amount paid is handed back to assessee. In other words, payment of tax twice on same income is avoided. 17. Therefore, contention that this benefit is not available to assessee whose total income is assessed under Section 115JB has no substance. In other words, when total income is assessed and tax chargeable is computed, it is from that tax which is chargeable, tax paid under Section 88E is given deduction, by way of rebate, under Section 87 of Act. This is legislative intent. That is promise to give deduction of tax already paid. This is mode in which tax already paid is handed back at time of final computation. Therefore, judgment referred by Tribunal is strictly in accordance with law and does not suffer from any legal infirmity, which called for interference. We do not see any substantial question of law involved in this appeal, which merits admission. appeal is dismissed. 11. We are also of view, and accordingly hold, that Income Tax Appellate Tribunal was correct in holding that provisions of Sections 87 and 88E of Act apply to total income computed under Section 115JB of Act and assessee would be entitled to deduction to extent of Security Transaction Tax borne by him during course of business in relevant previous year. 3. effect of aforesaid decision would be that while computing tax payable under Section 115JB, remission in form of Securities Transaction Tax (STT) in terms of Section 88E read with Section 87 would be available to assessee. same would be position while computing tax payable under normal provisions. Thus, tax remission under Section 88E has to be and should be taken into consideration both under normal provisions as well as book profits computed under Section 115JB. amount of remission under Section 88E would, therefore, get reduced from tax payable under two methods/manners of computing taxable income. end result would be that figure of STT would get balanced and not adversely affect either Revenue or assessee. Prejudice is not caused to either side. Learned counsel for appellant accepts that in case benefit of Section 88E is given under two methods, difference on tax payable would be less than 10%. In such circumstances, Section 115JB would not be applicable. appeal has no merit is accordingly dismissed. SANJIV KHANNA, J. V. KAMESWAR RAO, J. AUGUST 22, 2014 NA $5 Commissioner of Income-tax-I v. CNB Finwiz Limited