2012 (10) TMI 600 - AT - Income Tax

Validity of Order passed by CIT u/s 263 Security transaction tax Rebate u/s 88E - Whether rebate u/s 88E can be claimed from tax payable under MAT u/s 115JB Held that - The powers u/s 263 cannot be exercised to safeguard the interests of the revenue unless the order so subjected to revision is erroneous and prejudicial to the interest of the revenue and an order cannot be classified in this category when AO takes a possible view of the matter even if CIT does not agree with the said view. The action of the CIT cannot therefore be approved. We accordingly set aside the impugned revision order. In favour of assessee

Summary

Issues:
Challenge to correctness of Commissioner's order under section 263 r.w.s. 143(3) for assessment year 2007-08 regarding allowance of credit under sec. 88E for STT paid while computing tax under MAT.

Analysis:

Issue 1: Correctness of Commissioner's Order
The appellant challenged the correctness of the Commissioner's order dated 5th March, 2012, passed under section 263 r.w.s. 143(3) of the Income Tax Act, 1961. The grounds of challenge included the order being arbitrary, illegal, and bad in law. The appellant contended that the Commissioner erred in passing the order under section 263 when there was a lack of settled law and differing opinions among judicial authorities regarding the allowance of credit under sec. 88E for STT paid while calculating tax under MAT. The appellant argued that the credit for STT should have been correctly allowed by the Assessing Officer under sec. 115JB, and requested modification of the Commissioner's order to grant relief to the assessee.

Issue 2: Interpretation of Tax Liability Calculation
The Commissioner's order was based on the interpretation of tax liability calculation under section 115JB. The Commissioner considered that the provisions of sec. 115JB would apply when the actual normal tax liability, after allowing rebate under sec. 88E, is less than the tax computed under sec. 115JM. In contrast, the Assessing Officer accepted that the normal tax liability before allowing rebate under sec. 88E was relevant for this purpose. The Assessing Officer's stance aligned with various judicial precedents, including a decision by a coordinate bench in a specific case. Despite acknowledging the unsettled nature of the law on this issue, the Commissioner invoked revision powers to direct the Assessing Officer to charge tax at a specific amount. However, the Tribunal found that the Assessing Officer's view was not only a possible interpretation but also the correct one at that time. The Tribunal concluded that the Commissioner's exercise of revision powers was erroneous and not in the interest of revenue, leading to the setting aside of the revision order and granting relief to the assessee.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, emphasizing that the Commissioner's order under section 263 was incorrect as it was based on an erroneous interpretation of the law and prejudicial to the interest of the revenue. The Tribunal highlighted the importance of assessing the correctness of orders based on existing legal interpretations and precedents, ensuring that revision powers are exercised judiciously and in alignment with the principles of tax law.