TMI Blog2018 (10) TMI 1836X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Sanjay Garg, Judicial Member And Ms. Annapurna Gupta, Accountant Member Assessee by : Smt. Chanderkanta, Sr.DR Revenue by : Sh. Subhash Aggarwal, Advocate Order Annapurna Gupta, AM: The captioned appeals relate to the same assessee and have been filed by the Revenue against separate orders passed by CIT(A)2, Ludhiana [hereinafter referred to as CIT(A)] u/s 250(6)of the Income-tax Act, 1961 (in short 'the Act') for assessment years 200809 and 2015-16 2016-17 respectively. 2. At the outset, it was pointed out that the issue involved in all the three captioned appeals was common. Therefore, they were taken up together for hearing. It was pointed out that the sole issue involved was whether the credit of Minimum Alternate Tax (in short MAT ), which the assessee is entitled to avail against its tax liability, as per the provisions of section 115JAA of the Act, includes surcharge and Cess also besides the normal rate of tax as provided. We shall be dealing with the facts in the appeal in ITA No. 1619/Chd/2017 relating to assessment year 2008-09 and the decision rendered therein will apply mutatis-mutandis to the rest of the appeals als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eon. The calculation of the tax liability computed by the Assessing officer is reproduced in para 3.5 of the CIT(A) order, as under:- 3.5 On Receipt of order of Hon'ble ITAT, Chandigarh the Assessing officer had given effect to the order of Hon'ble ITAT, Chandigarh and determined tax refundable to the assessee company at ₹ 46,82,920/- as under:- Assessed income after giving effect to the order of ITAT ₹ 43,70,28,420/- Tax payable by the assessee company under normal provisions of theAct @ 30% on income of ₹ 43,70,28,420/- ₹ 13,11,08,526/- ADD: Surcharge @ 10% of ₹ 13,11,08,526/- ₹ 13,11,0853/- Total tax and surcharge payable ₹ 14,42,19,379/- Add: Education Cess @ 3% of ₹ 14,42,19,379/- ₹ 43,26,581/- Total tax payable by the assessee company including surcharge and education cess before interest u/s 234C of the Act ₹ 14,85,45,960/- Add:Interest payable u/s 234C of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the case laws relied by the assessee and which have been argued as wrongly applied to the instant case by the Ld. DR. In the case of Vardhman Textiles Ltd. in ITA No. 06/CHD/2015, the Ld. DR argued that it deals with the order of the entry and hence not applicable to the present case. We find that the ground taken in that case pertains to the methodology to be adopted while allowing credit of MAT. The Coordinate Bench of ITAT in para 11 of the above mentioned order examined the issue whether adjustment on account of MAT Credit is to be made against the tax determined under the normal provisions of the Income Tax Act,1961, before levying surcharge and education cess or otherwise. It was found to be based on the judgment of Hon ble Allahabad High Court in the case of DCIT Vs. Vacment India Ltd. 369 ITR 304 wherein the Hon ble High Court after going through the relevant entries in the form ITR-6 and based on the sequence of gross tax payable, credit under 115JAA, surcharge, education cess and then the gross tax liability held that there was no ambiguity with regard to computation of tax liability. The main issue dealt in that case was whether adjustment can be rectified und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... education tax. It talks about only income tax. Wherever statute has required income tax to include surcharge and education tax, it has specifically done it like in Explanation 2 to section 115JB. Similarly Form 29B which is filed along with return of income where MAT is applicable at point 14 it states that the amount of income tax payable by the company would be 15% of col. 12 i.e. book profits, it does not state surcharge or education cess. Therefore, it emerges that MAT payable u/s 115JB is only income tax and does not include surcharge or education cess. Therefore, if only income tax is paid under the provisions of section 115JB it is natural that tax credit u/s 115JAA will only be of income tax and not of surcharge and education cess. This point is further clarified by intimation u/s 143(1) sent to assessee wherein tax payable u/s 115JB has been calculated as only income tax and no surcharge or education cess has been included in the amount of income tax. 8. The submission of Ld AR that tax includes surcharge and education cess as per explanation 2 of section 115JB is correct to the extent that explanation 2 was inserted to clarify the meaning of tax as contemplated in clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and therefore, the ratio laid down in the said decisions would apply in the present case also. 9. We have considered the rival contentions carefully and perused the orders of the authorities below. As pointed out above to us, the sole issue before us is whether the MAT credit allowable to the assessee as per the provisions of section 115JAA of the Act, includes besides the basic specified rate of tax, surcharge and cess also. The relevant section, therefore, for the purpose of adjudicating the issue before us, is section 115JAA and more specifically sub section (1A) and (2A), since they relate to credit of taxes paid earlier u/s 115JB of the Act, which is the fact in the present case, while sub-section (1) (2) relate to credit of taxes paid u/s 115JA of the Act. The provisions of section 115JAA (1A) and (2A) are reproduced herein under for clarity : Tax credit in respect of tax paid on deemed income relating to certain companies. 115JAA. (1A) Where any amount of tax is paid under sub-section (1) of section 115JB by an assessee, being a company for the assessment year commencing on the 1st day of April, 2006 and any subsequent assessment year, then, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the same provides that tax rate for the purpose of section 115JB are that specified in the section. The said clause is reproduced hereunder: (3) In cases to which the provisions of Chapter XII or Chapter XII-A or Chapter XII-H or section 115JB or sub-section (1A) of section 161 or section 164 or section 164A or section 167B of the Income-tax Act apply, the tax chargeable shall be determined as provided in that Chapter or that section, and with reference to the rates imposed by sub-section (1) or the rates as specified in that Chapter or section, as the case may be Tax rate specified u/s 115JB of the Act, is as under:- Special provision for payment of tax by certain companies. 115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2007, is less than ten per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 940 and 1941 showed that only the rates of income-tax and super- tax were to be increased by a surcharge for the purpose of the Central Government. In the Finance Act of 1958, the language used showed that income-tax which was to be charged was to be increased by a surcharge for the purposes of the Union. The word surcharge has thus been used to either increase the rates of income-tax and super-tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term income-tax as used in s. 2 includes surcharge. 8. According to Art. 271, notwithstanding anything in Arts. 269 and 270, Parliament may at any time increase any of the duties or taxes referred to in those articles by a surcharge for the purposes of the Union and the whole proceeds of any such surcharge shall form part of the consolidated fund of India. Art. 270 provides for taxes levied and collected by the Union and distributed between the Union and the States. Clause (1) says that taxes on income other than agricultural income shall be levied and collected by the Government of India and distributed between the Union and the States in the manner provided in cl. (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or to subject to an additional or extra charge. If that meaning is applied to s. 2 of the Finance Act, 1963, it would lead to the result that income-tax and super-tax were to be charged in four different ways or at four different rates which may be described as : (i) the basic charge or rate (In Part I of the First Schedule); (ii) surcharge; (iii) special surcharge; and (iv) additional surcharge calculated in the manner provided in the Schedule. Read in this way, the additional charges form a part of the income-tax and supertax. It is possible to argue, and that argument has been commended on behalf of the Revenue, that the word surcharge has been used in Art. 271 for the purpose of separating it from the basic charge of a tax or duty for the purpose of distributing the proceeds of the same between the Union and the States. The proceeds of the surcharge are exclusively assigned to the Union. Even in the Finance Act itself it is expressly stated that the surcharge is meant for the purpose of the Union. 12. We shall now refer to Explanation 2 to section 115JB which reads as under:- Explanation 2 to section 115JB Explanation 2.-For the purposes of clause (a) of Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 total income is less than 18.5% of the book profit computed u/s 115JB, then the book profit so computed shall be deemed to be the total income, then the book profit so computed shall be deemed to be the total income and the company shall pay tax @ 18.5% thereon. The amount so paid as the MAT shall be available to the credit of the company to be set off as contemplated u/s 115JAA within a period of 10 AYs. Surcharge at 5% shall be levied if book profit exceeds 1 crore. Education cess @ 3% shall be added 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Richa Global Export Pvt Ltd.(supra). The said decision has been dealt with and distinguished in the case of Virtusa (supra) as under: 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 court decision in the case of K. Srinivasan (supra) may not have been brought to the knowledge of the ITAT, Delhi. Moreover, the explanation 2 of section 115JB is applicable to calculate tax liability u/s 115JB and the same explanation should also be applied for giving credit u/s 115JAA. The tax liabilities calculated u/s 115JB by applying the explanation 2, the tax liability so computed are remitted by the assessee and then the same was carried forward for future MAT credit. In our view, while calculating the MAT credit u/s 115JAA, the same explanation 2 in section 115JB must be applied. Therefore, the said decision will not apply to the case of the assessee. In view of the above, the appeal filed by the Revenue is dismissed. 14. Since the facts and issue involved in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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