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2016 (3) TMI 245 - ITAT HYDERABAD

2016 (3) TMI 245 - ITAT HYDERABAD - TMI - Computation of MAT credit - AO excluded surcharge and education cess while arriving at the amount of total tax payable under the normal provisions of the Income Tax Act, 1961 and under sec. 115JB of the Act - Held that:- On careful reading, the sub-section 2A, the tax credit to be allowed shall be the difference of tax paid for any AY under sub-section (1) of 115JB and the amount of tax payable on his total income computed in accordance with the other pr .....

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and MAT provisions. Both the above tax liabilities are calculated with surcharge and cess. These are the standard format, which are expected to be followed by all the assessees and also important to note that the above format of ITR 6 was amended w.e.f. AY 2012-13 by CBDT. Moreover, this is more relevant for the department also. These formats are regulated by CBDT. Assessing Officer cannot overlook these formats and (interpret it in his own method of calculating tax credit while making assessme .....

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he procedure properly and the Assessing Officer had made the calculations applying his own interpretation or relied on the programme, we are not sure whether it is programme hitch or the interpretation of Assessing Officer was not in line with the calculations proposed in ITR-6. Therefore, we delete the addition made. - ITA No. 146/Hyd/2015 - Dated:- 4-3-2016 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Assessee : Sri A.V. Raghuram and Sri Ravi Bha .....

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sed u/s 143(1) raising demand of ₹ 32,06,700/-. The main difference in the computation of tax by the assessee and the AO was as under: 3. Aggrieved with assessment made u/s 143(1),the assessee filed appeal before the CIT(A) and has raised two grounds in this regard, which are as under: 1. That on the facts and circumstances of the case, the Id. Assessing officer has erred in law and on facts in computation of the eligible MAT credit available of ₹ 3,90,62,234 without including surcha .....

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and then increasing the balance tax liability with surcharge and education cess. 4. The CIT(A) has rejected ground No. 1 of the assessee by observing as under: 4.5 The decision of the ITAT is squarely applicable to the issue in appeal. Following the decision of the ITAT in the case of Richa Global Exports Pvt. Ltd., it is held that surcharge and education cannot be taken into account for the purpose of set off of brought forward MAT credit. 5. The CIT(A) also dismissed ground No. 2 of assessee .....

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. The income-tax payable was, accordingly, as per Paragraph E of the First Schedule of the Finance Act, 30 per cent of the total income, amounting to ₹ 12,86,36,907. As per the Finance Act, it was 'the incometax', i.e. this sum of ₹ 12,86,36,907 on which the surcharge of 5 per cent was to be levied. Similarly, u/s 11 of the Finance Act, the basis for computation of education cess was also the income-tax. 5.6 Further, MAT credit is treated under the Act on par with prepaid tax .....

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tion cess. For the same reason, deduction of MAT credit is not warranted before calculating surcharge and education cess. 5.7 In view of the above, it is held that computation of tax liability by increasing the tax liability with surcharge and education cess and then granting MAT credit is in order and correct. The second ground of appeal is accordingly dismissed. 6. Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising the following grounds of appeal: Based on the fa .....

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e tax liability (excluding interest under section 234C of the Act) by increasing the tax liability with surcharge and education cess and then granting the MAT credit instead of granting the MAT credit and then increasing the balance tax liability with surcharge and education cess. 3. Erred in disregarding the judicial precedent in the case of K. Srinivasan vs CIT (1972) 83 ITR 346 (SC) submitted by the Appellant which has held that the term 'tax' includes surcharge and education cess. 4. .....

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pellant also submits that each of the above grounds is independent and without prejudice to the other grounds of appeal preferred by the Appellant. The Appellant craves leave to add, alter, vary, omit, substitute, amend or withdraw the above grounds of appeal, at any time before or at, the time of hearing, of the appeal, so as to enable the Hon'ble Income Tax Appellate Tribunal, Hyderabad to decide this appeal in accordance with law and on the facts and circumstances of the case. 7. With reg .....

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as been erroneously calculated, exclusive of surcharge and education cess at ₹ 3,90,62,234 as against the correct eligible MAT credit available for set off of ₹ 4,22,45,803, inclusive of surcharge and education cess as considered in the return of income filed by the Company. 7.1 The ld. AR further submitted that the brought forward MAT credit for A Y 2008-09 is ₹ 3,86,45,182/- and for A Y 2009-10 is ₹ 5,07,73,030. Hence, assessee would be eligible to set off the differenc .....

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setoff for the Company during the captioned A Y, needs to be arrived at by comparing the difference between the tax liability (inclusive of surcharge and cess) computed under the normal provisions of the Act and the tax liability (inclusive of surcharge and cess) computed under the provisions of section 115JB of the Act. (b) Calculation of Surcharge 7.3 Ld. AR submitted that as per intimation, the surcharge has been calculated at ₹ 64,31,845 as against the surcharge of ₹ 44,78,734. L .....

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77; 40,52,063 as against the education cess of ₹ 28,21,602. Ld. AR also submitted that the assessed tax liability (excluding surcharge and education cess) arrived at in the intimation is the same as the returned tax liability (excluding surcharge and education cess). Therefore, as there has been no change in the assessed tax liability, the education cess calculated in the intimation suffers from error and needs rectification. (d) Interest under section 234C of the Act 7.5 Ld. AR submitted .....

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follow the same. He also submitted that CIT(A) has not considered the judicial precedent in the case of K. Srinivasan Vs. CIT, [1972] 83 ITR 346 (SC),on which reliance placed by the assessee, to bring to the knowledge of CIT(A) that in the above judgment, the Apex Court has held that the term tax includes surcharge. Ld. AR also referred to the section 115JAA (2A) of the Act and the provisions of such Act describes the tax credit to be allowed shall be the difference of the tax paid for any AY u .....

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ty irrespective of the method adopted. 8. Ld. DR, on the other hand, relied on the orders of ld. CIT(A). 9. Considered the submissions of both the counsels and material facts on the record. The provisions of section 115JB in brief are: every assessment year, two parallel computations are contemplated. One computation of total income in accordance with the normal provisions of the I.T. Act and another is the computation of book profit as stipulated u/s 115JB. If the income tax payable on the tota .....

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ded on the aggregate of income tax and surcharge. At the same time, section 115JAA provides that where any amount of tax is paid under section 115JB(l) by a company for any assessment year, credit in respect of the taxes so paid for such assessment year shall be allowed on the difference of the tax paid under section 115JB and the amount of tax payable by the company on its total income computed in accordance with the other provisions of the Act. In other words, MAT credit shall be computed as u .....

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e brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on the total income and the tax which would have been payable under section 115JB for that assessment year. 9.2 In other words, MAT credit will be allowed only in that previous year in which tax payable on the total income as per normal provisions of the income tax Act is more than tax payable under section 115JB and it shall be allowed to the extent of the following: Tax payable .....

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e term tax includes surcharge. 9.4 It is also important to evaluate sub-section (5) of section 115JAA. Set off in respect of brought forward tax credit shall be allowed for any AY to the extent of difference between tax on his total income and the tax which would have been payable u/s 115JB, as the case may be for that AY. On careful reading, the term used are tax not income tax or any other term. Needless to say the term tax includes surcharge. 9.5 The sub-section (5) of section 115JAA are appl .....

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Part A . It is pertinent to analyse the total tax liability calculations designed by the CBDT for the AY 2012-13. They are as below: 9.6 The tax liabilities for normal provisions as well as MAT are calculated with surcharge and cess. The MAT credit in row 7 are calculated automatically using the prescribed algorithm, this is nothing but balancing figure i.e., the difference between tax liability as per normal provisions and MAT provisions. Both the above tax liabilities are calculated with surch .....

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essment u/s 143(1) applying different methods when the proper and correct method as proposed by CBDT in ITR-6. The Assessing Officer is expected to follow the ITR-6 format to complete the assessment u/s 143(1) or 143(3) of the Act. 9.5 Let us also analyse the case law of Richa Global Exports Pvt. Ltd. which was applied by CIT(A), the Delhi ITAT opined that section 115JAA applied only to income tax, not of income tax as increased by surcharge and education cess. We are of the view that the Apex c .....

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