2015 (10) TMI 757 - AT - Income Tax

Computation of MAT tax liability - Whether the tax liability arising under normal provisions of the Act and u/s 115JB should be compared before allowing Rebate u/s 88E of the Act or after allowing the rebate? - Held that - CIT(A) has followed the decision rendered by the Bangalore bench of Tribunal in the case of M/s Horizon Capital Ltd (2010 (7) TMI 991 - ITAT BANGALORE) and also the decision rendered by the Delhi bench of Tribunal in the case of M/s MBL & Co. Ltd (2011 (4) TMI 1312 - ITAT DELHI), wherein it was held that the rebate u//s 88A to 88E shall also apply to the tax computed u/s 115JB of the Act. The Tribunal has also noticed that the Return of income (ITR-6) prescribed in the Income tax Rules also supported the view taken by the assessees. Accordingly, the Ld CIT(A) reversed the view taken by the AO. We notice that the decision rendered by the Bangalore bench of Tribunal in the case of M/s Horizon Capital Ltd (supra) has since been approved by the Hon ble High Court of Karnataka (2011 (10) TMI 489 - KARNATAKA HIGH COURT ), wherein it was held that the assessee is entitled to deduct the rebate u/s 88E of the Act from the tax liability arising u/s 115JB of the Act. Thus the tax liability arising under normal provisions of the Act and u/s 115JB of the Act should be compared before allowing rebate u/s 88E of the Act. - Decided in favour of assessee. Transaction charges paid to BSE/NSE - disallowance u/s 40(a)(ia) - non-deduction of tax at source - CIT(A) deleted the disallowance - Held that - The various benches of the Tribunal have been holding that the tax was not deductible at source from the transaction charges paid to the Stock exchanges. Hence, it can be seen that the assessee before us also, was under bona fide belief in this regard and hence, we are of the view that the benefit of doubt given to the assessee by the Hon ble Bombay High Court in the case of Kotak Securities Ltd (2011 (10) TMI 24 - Bombay High Court ) should also be extended to the assessee. The Ld A.R submitted that the assessee has started deducting tax at source from the transaction charges subsequent to the decision of Hon ble Bombay High Court. Hence, for the foregoing reasons, we uphold the decision of Ld CIT(A) on this issue.- Decided in favour of assessee.

Summary

Issues:
1. Whether tax liability under normal provisions and u/s 115JB should be compared before allowing Rebate u/s 88E?
2. Whether transaction charges paid to BSE/NSE are liable for disallowance under sec. 40(a)(ia) for non-deduction of tax at source?

Analysis:

Issue 1:
The appeal concerned the tax liability comparison under normal provisions and u/s 115JB before allowing Rebate u/s 88E. The AO compared tax payable under normal provisions after rebate u/s 88E with Book Profit under sec. 115JB. The AO applied 10% tax on Book Profit, leading to an appeal. The Ld CIT(A) reversed the AO's decision, following precedents from Bangalore and Delhi Tribunals. These decisions held that rebate u/s 88A to 88E applies to tax computed under sec. 115JB. The Tribunal upheld Ld CIT(A)'s decision, citing consistent views from Tribunals and High Courts. The comparison of tax liabilities under both provisions before allowing rebate u/s 88E was deemed appropriate.

Issue 2:
Regarding the disallowance of transaction charges paid to BSE/NSE under sec. 40(a)(ia) for non-deduction of tax at source, the AO disallowed the amounts under sec. 40(a)(ia) as tax was not deducted at source. However, the Ld CIT(A) deleted the disallowance, citing precedents and the assessee's bona fide belief. The Hon'ble Bombay High Court's decision in a similar case supported the assessee's stance. The Tribunal upheld Ld CIT(A)'s decision, extending the benefit of doubt to the assessee due to the bona fide belief. The assessee began deducting tax post the High Court's decision, further supporting the Tribunal's decision.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding Ld CIT(A)'s decisions on both issues. The judgment provided detailed reasoning, referencing legal precedents and interpretations to support the conclusions reached.