TMI Blog2020 (5) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, the assessee has taken following grounds:- 1. That the order passed by the Ld. CIT(Appeals) is contrary to law and facts of the case. 2. That the Ld. CIT(Appeals) has erred on law and facts in ignoring the methodology adopted by CPC w. r. t. computation of MAT credit in variation to that provided in section 115JAA and 115JB of the income Tax Act as well as form ITR 6 as prescribed by CBDT. 3. That the Ld. CIT(Appeals) has erred on law and facts in confirming the computation of eligible MAT credit at ₹ 3, 08, 43, 650/- without including surcharge and education cess while arriving at the amount of total tax payable under the normal provisions of the Income Tax Act as well as u/s 115JB of the Act, whereas the eligible MAT credit adjustment should have been computed at ₹ 3,49, 45, 854/- by including the surcharge and education cess. 4. Without prejudice to the Ground No.l above, the Ld. CIT(Appeals) has erred on law and facts in allowing the calculation of tax liability of ₹ 1, 57, 59, 564 /- on account of surcharge and education cess on the tax payable before allowing the MAT credit u/s 115JAA whereas the same should have been allowed to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 154 or not and the Tribunal held that the proceedings under section 154 in that case were not legally valid. Similarly the judgments in the case of DCIT Vs. Vacmet India Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 7 ITA No2303/Del/2012 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 clause (a) of explanation (1) with respect to calculation of book profit which is read as under:- Explanation-1 for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vardhman Textiles Ltd Vs. ACIT ITA No. 6/2015, A. Y. 2010-11 7/2015 A. Y. 2009-10 (Chd) dated 12. 7. 2016 8. Ld. Counsel for the assessee pointed out that the decision rendered in the case of M/s Richa Global Export Pvt. Ltd had been considered in the aforesaid decisions while deciding the issue in favour 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 115 JAA and more specifically sub section (1A) and (2A), since they relate to credit of taxes paid earlier u/s 115 JB 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 repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the financial proposals of the Central Government for each year. , Since in the present case, credit is being claimed of taxes paid u/s 115JB relating to A. Y 2006-07 2007-08 , Finance Act 2006 2007 need to be referred to , for determining the tax payable u/s 115JB of the Act. Chapter II of the Finance Act outlines the rate of tax applicable for the relevant years. Clause (3) 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the apex court at para of the order is as under: The above legislative history of the Finance Acts, as also the practice, would appear to indicate that the term income- tax as employed in s. 2 includes surcharge as also the special and the additional surcharge whenever provided which are also surcharges within the meaning of Art. 271 of the Constitution. The phraseology employed in the Finance Acts of 1940 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 Unio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unnecessary to express any opinion in the matter because the essential point for determination is whether surcharge is an additional mode or rate for charging income-tax. 10. The meaning of the word surcharge as given in the Webster's New International Dictionary includes, among others, to charge (one) too much or in addition... ; also additional tax . Thus, the meaning of surcharge is to charge in addition 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 super-tax. 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 distri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gwith the relevant clauses of the Finance Act, we have no hesitation in holding that the MAT credit allowable to the assessee is inclusive of surcharge and cess. On the same analogy, the coordinate bench of the ITAT has held that MAT credit will include surcharge and cess , in its decision in the case of Virtusa ( India) Pvt. Ltd(supra). The findings in the said case are as under: 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 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. Surcharg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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. The said view has been reiterated in various decisions of the ITAT as cited by the Ld.Counsel for the assessee before us. As for the decision rendered in the case of the assessee in the earlier year by the ITAT, we find that the said decision was rendered on the basis of the decision in the case of M/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 calcula ..... X X X X Extracts X X X X X X X X Extracts X X X X
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