2013 (2) TMI 715 - AT - Income Tax

Summary

Issues involved:
The issue involved in this appeal is whether the assessee would be entitled to the tax rebate u/s.88E of the Act where its income is assessed on the basis of book profit, i.e., u/s. 115JB of the Act.

Details of the judgment:

Issue 1: Entitlement to tax rebate u/s.88E of the Act:
The controversy in this case revolves around the entitlement of the assessee to the tax rebate u/s.88E of the Act when its income is assessed based on book profit u/s.115JB of the Act. The Revenue argues that the tax rebate u/s.88E should be considered after reducing the tax payable by the assessee. On the other hand, the assessee contends that the tax rebate u/s.88E is independent of the manner in which the tax liability under the Act is determined. The Tribunal, following the decision in the case of CIT vs. Horizon Capital Ltd., held that the tax rebate u/s.88E is to be allowed to the assessee regardless of whether the tax is payable under the regular provisions of the Act or on the basis of book profit u/s.115JB. The legislative intent behind providing the tax rebate u/s.88E is to avoid double payment of tax on income from security transactions. Therefore, the Tribunal ruled in favor of the assessee, stating that the benefit of section 88E is available even when the total income under the Act is assessed u/s.115JB.

Issue 2: Determination of tax rebate u/s.88E:
During the hearing, the ld. DR argued that the tax rebate u/s.88E should only be with reference to the tax on the business income from securities transactions disclosed or assessed by the assessee. The Tribunal found merit in this argument, emphasizing that the tax rebate u/s.88E aims to provide relief in respect of tax already paid to prevent double taxation. Therefore, only the eligible tax arising from income from security transactions, whether assessed under the regular provisions of the Act or under the book profit provisions, qualifies for the tax rebate u/s.88E. Additionally, the Tribunal accepted the Revenue's plea regarding the determination of the quantum of the tax rebate under s.88E(2) based on the clear language of the relevant provisions and in alignment with the legislative intent behind the provision of s.88E as explained in the case of Horizon Capital Ltd.

In conclusion, the Tribunal disposed of the Revenue's appeal in favor of the assessee, affirming the entitlement to the tax rebate u/s.88E even when the income is assessed based on book profit u/s.115JB of the Act.