2018 (8) TMI 1719 - AT - Income Tax

Rectification of mistake - Rebate claim u/s 88E - computation of rebate u/s 88E was allowed by the AO while framing assessment under section 143(3) - as per AO assessee has also earned income by way of short term capital gains on which the assessee has paid STT and therefore while computing the rebate income from such short term capital gains should have to be reduced - Held that - Section 88E of the Act provides where the total income of the assessee in previous year includes any income chargeable under the head of profits and gains of business or profession arising from transaction chargeable to securities transaction tax he shall be allowed deduction of an amount equal to the securities transaction tax paid by him in respect of transactions chargeable to securities transactions tax entered into in the course of business during that previous year. From the amount of income tax on such income arising from such transaction. An assessee is eligible for deduction from the amount of income tax on such income arising from such transactions computed in the manner provided in section 88E of the Act i.e. an equal amount to the securities transaction paid by him in respect of taxable securities transaction entered into in the course of business during the previous year. It means that the issue has two plausible views and once it is doubtful issue the AO cannot resort to section 154 of the Act i.e. rectification of mistake apparent from record. Accordingly we reverse the orders of the lower authorities and allow the appeal of the assessee. - decided in favour of assessee.

Summary

Issues:
- Dispute over the restriction of rebate claim under section 88E of the Income Tax Act.
- Jurisdictional concerns regarding the rectification order passed by the Assessing Officer (AO).

Analysis:

Issue 1: Dispute over Rebate Claim
The appeal arose from the order of the Commissioner of Income Tax (Appeals) confirming the action of the AO in restricting the rebate claim under section 88E of the Income Tax Act. The appellant contested this restriction, arguing it was a debatable issue and the rectification order by the AO lacked jurisdiction. The appellant's grounds challenged the legal position that debatable issues or those with multiple interpretations cannot be rectified under section 154. The facts revealed that the assessee company, engaged in share trading and investments, claimed a rebate of ?30,93,497 under section 88E for Securities Transaction Tax (STT) paid. However, the AO, through a rectification order, reduced the rebate to ?22,70,512, citing an excessive initial allowance. The AO's calculation considered the average rate of income tax and the income from taxable securities. The CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal.

Issue 2: Jurisdictional Concerns
The Tribunal analyzed the case, emphasizing the interpretation of section 88E and its application to the assessee's situation. Referring to a precedent, the Tribunal highlighted that the deduction of STT paid is permissible if the total income includes profits from business or profession. The Tribunal noted that the AO's calculation post-rectification did not account for the correct income components, leading to an erroneous restriction of the rebate. By comparing the AO's calculation with the appellant's profit and loss account, discrepancies in the computation were evident. The Tribunal concluded that the issue had two plausible views, rendering it debatable. Consequently, the AO's rectification under section 154 was deemed inappropriate. The Tribunal reversed the decisions of the lower authorities and allowed the appellant's appeal, emphasizing the eligibility for deduction as per section 88E provisions.

In conclusion, the Tribunal allowed the appeal, highlighting the debatable nature of the issue and the incorrect application of section 154 by the AO. The judgment underscored the importance of accurate computation and interpretation of tax provisions in resolving disputes over rebate claims under the Income Tax Act.