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TMI Blog2012 (12) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... icipated profit in the shape of appreciated value of the closing stock is not brought into the account, as no prudent trader would care to show increased profit before its realization. Issue decides in favour of assessee Whether rebate u/s 88E for STT paid has been allowed from tax payable under MAT u/s 115 JB - Assessee had made the payment of tax under normal provisions by comparing his total income u/s 115 JB before claiming rebate u/s 88E – Held that:- Following the decision in case of Horizon Capital Ltd. (2011 (10) TMI 489 - KARNATAKA HIGH COURT) that when the total income is assessed and the tax chargeable is computed, it is from that tax which is chargeable, the tax paid u/s 88E is given deduction, by way of rebate, u/s 87. This is the mode in which tax already paid is handed back at the time of final computation. Issue decides in favour of assessee. - ITA No. 5162/Mum/2011 - - - Dated:- 25-7-2012 - SHRI VIJAY PAL RAO SHRI RAJEDNRA, JJ. Assessee by Sh S C Kapadia Revenue by Sh Rajesh K Arvind PER VIJAY PAL RAO, JM This appeal by the revenue is directed against the order dated 04/05/2011 of CIT(A) for the assessment year 2008 09. 2 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of jurisdictional High Court in the case of Star Chemicals Ltd in Income Tax Appeal no. 1915 of 2007 order dated 27.02.2007. CIT vs/ PR Share Stock Brokers P Ltd vide Income Tax Appeal No. 79 of 2008 dt 26/6/2008 and decision of Income Tax Appellate Tribunal in the case of ACIT v Olympia Securities Ltd (supra). In the light of the said decisions the claim of the assessee is allowed., 4.1 We further note that this issue is also covered by the special bench decision of this Tribunal in case of Shri Shreyas S Morkhia reported in 5 ITR (Trib) 1 (Mumbai)(SB) which has been upheld by the honourable jurisdictional High Court in ITA No. 89 of 2011 vide order dated 28/02/2012. Accordingly, this issue is decided in favour of the assessee ands against the revenue. 5 Ground number 2 regarding disallowance of loss on account of marked to market. 5.1 The assessee had debited in the profit and loss account provision for loss on mark to market of open contract in equity index/stock future but the profit on account of such mark to market had been ignored on the basis of prudent principle. The Assessing Officer was of the view that the derivative contracts are not accounted for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Loans and Advances. (c) As on the Balance Sheet date, profit /loss on open positions in Index / Stock Futures are accounted for as follows: 7 ITA No: 5324/Mum/2007 Credit balance in the Mark-to Market Margin Equity Index / Stock Futures Account , being anticipated profit, is ignored and no credit for the same is taken in the Profit and Loss Account. Debit balance in the Mark-to-Market Margin Equity Index / Stock Futures Account , being anticipated loss, is adjusted in the Profit and Loss Account. (d) On final settlement or squaring-up of contracts for Equity Index / Stock Futures, the profit or loss is calculated as the difference between settlement / squaring-up price and contract price. Accordingly, debit or credit balance pertaining to the settled / squared-up contract in Mark-to-Market Margin Equity Index / Stock Futures Account is recognized in the Profit and Loss Account. The aforesaid Note gives a fair picture of the nature of the provision. The provision in substance has been made to cover the anticipated loss in the derivates trading. There is no dispute that the assessee holds derivatives as its stock-in-trade and there is also no dispute tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal principle. If the derivatives have been treated as stock-in-trade then there is nothing unusual in the assessee valuing each derivative by applying the rule cost or market whichever is lower. 7 Following the order of this Tribunal in the case cited supra, we decide this is issue in favour of the assessee and against the revenue. 8 Ground number 3 regarding disallowance of credit of STT from the tax payable under section 115 JB. 8.1 The assessee had made the payment of tax under normal provisions by comparing his total income under section 115 JB before claiming rebate under section 80E. The Assessing Officer asked the assessee as to why the total income o after granting rebate under section 88E be not compared with the income under section115JB. The assessee submitted that tax rebate is a step which comes after determining income tax payable on total income computed as per applicable provisions including MAT; therefore, the comparison under section 115 JB is between income tax payable on total income and 10% of the book profit. In support of his contention, the assessee has referred the income tax returns (ITR-6) prescribed by CBDT wherein the gross tax liability before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded in the total income of the assessee where the total income s assessed either under the provisions of the Act or under Section 115B when tax chargeable on such income is arrived at, he is given the benefit of tax deductions of the amount, which he has paid under section 88E by virtue of Section 87. When under Section 82A, the assessee s made liable to pay tax with an assurance that it will be deducted and 87 of the Act gives effect to such promise made under the statute. That is the reason why the word used is rebate. The amount paid is handed back to the assessee. In other words, payment of tax twice on the same income is avoided. 17. Therefore, the contention that this benefit is not available to the assessee whose total income is assessed under Section 115B has no substance. In other words, when the total income is assessed and the tax chargeable is computed, it is from that tax which is chargeable, the tax paid under Section 88E is given deduction, by way of rebate, under Section 87 of the Act. This is the legislative intent. That is a promise to give deduction of the tax already paid. This is the mode in which tax already paid is handed back at the time of final comput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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