2016 (4) TMI 707 - AT - Income Tax

Allowance of STCL on STT paid transactions to be set off against the STCG on non-STT paid transactions - Held that - Following the aforesaid decision of the co-ordinate bench of this Tribunal in the case of First State Investments (Hong Kong) (2009 (7) TMI 908 - ITAT MUMBAI ), we hold that the set off as proposed by the assessee in the case on hand is to be allowed, and accordingly uphold the order of the Ld. CIT(A) in directing the Assessing Officer to permit the set off of the STCL (STT paid) against STCG (non STT paid). - Decided against revenue Tax levy on STCG - Held that - We concur with the observations of the Ld. CIT(A) that no reasons have been given by the Assessing Officer for taxing the said STCG @ 30%, whereas the assessee has shown the same as STT paid and therefore liable to tax @10% in the return of income. Evidence to this effect has also been placed before us at pgs 41 and 60 of the assessee s paper book which indicate that the assessee has in fact paid STT in respect of this transaction. Before us, Revenue has failed to controvert both the evidence placed before us and the finding of the Ld.CIT(A) in this regard. In this factual matrix of the case, we uphold the order of the Ld. CIT(A) on this issue in directing the Assessing Officer to tax this amount of ₹ 7,04,43,724/- @ 10%.- Decided against revenue

Summary

Issues:
1. Whether STCL on STT paid transactions can be set-off against STCG on non-STT paid transactions.
2. Whether tax should be levied at 10% or 30% on STCG amount from the sale of equity shares underlying GDRs.

Analysis:

Issue 1:
The appeal by the Revenue was against the CIT(Appeals)-10, Mumbai order for Asst. Year 2008-09. The Assessing Officer determined the assessee's income at a certain amount, including unexplained investment brought to tax under "Income from other sources." The order also denied set off of STCG on which no STT was paid against STCL. The CIT(A) allowed the assessee's appeal. The Revenue appealed to the Tribunal, questioning the set-off of STCL on STT paid transactions against STCG on non-STT paid transactions. The Tribunal referred to a previous decision and held that the assessee had the choice to set off STT paid losses against non-STT paid profits and then against STT paid profits. The Tribunal dismissed the Revenue's appeal on this ground.

Issue 2:
The Revenue's second ground was regarding the tax rate on STCG amount from the sale of equity shares underlying GDRs. The Revenue argued for tax to be levied at 30%, while the CIT(A) directed tax at 10%. The Tribunal noted that the Assessing Officer did not provide reasons for taxing the STCG at 30% despite the assessee showing it as STT paid and liable for 10% tax. Evidence of STT payment was presented. The Tribunal upheld the CIT(A)'s decision to tax the amount at 10% and dismissed the Revenue's appeal on this issue.

In conclusion, the Tribunal dismissed the Revenue's appeal for Asst. Year 2008-09, upholding the CIT(A)'s decisions on both issues.