Income Tax Appellate Tribunal - Chandigarh
Dcit, C-4, Ludhiana vs M/S Aarti Steels Limited, Ludhiana on 11 October, 2018
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, "ए",च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, 'A', CHANDIGARH ी संजय गग , या यकसद य एवं ीमती अ नपण ू ा ग%ु ता, लेखा सद य BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND Ms. ANNAPURNA GUPTA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1 6 1 9 / C H D / 2 0 1 7 नधा रण वष / Assessment Year :2 0 0 8 - 0 9 The DCIT, Circle-4, बनाम M/s Aarti Steels Ltd., Ludhiana G.T. Raod, Miller Ganj, Ludhiana.
थायीलेखासं./PAN NO:AABCA4455D अपीलाथ /Appellant यथ /Respondent आयकरअपीलसं./ITA Nos.1 5 2 4 & 1 5 2 5 / C H D / 2 0 1 7 नधा रणवष / Assessment Years :2 0 1 5 - 1 6 & 2 0 1 6 - 1 7 The DCIT, Circle-4, बनाम M/s Aarti International Ludhiana Ltd., G.T.Road, Miller Ganj, Ludhiana.
थायीलेखासं./PAN NO:AABCA4454C अपीलाथ /Appellant यथ /Respondent नधा रती क ओर से/Assessee by : Smt. Chanderkanta, Sr.DR राज वक ओरसे/ Revenue by : Sh. Subhash Aggarwal, Advocate सन ु वाई क तार$ख/Date of Hearing : 17.07.2018 उदघोषणा क तार$ख/Date of Pronouncement : 11.10.2018 आदे श/Order PerAnnapurna 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 2 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 Income-tax Act, 1961 (in short 'the Act') for assessment years 2008- 09 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 also.
3. The brief facts relating to the issue are that the assessee had filed its return of income for the year under consideration declaring an income of Rs.43,70,28,420/- under the normal provisions of the Act, whereas, the income chargeable to tax under the deeming provisions of section 115JB of the Act i.e. MAT provisions was declared at Rs.55,23,56,116/-. The tax liability under the normal provisions without surcharge and education cess, came at Rs.13,11,08,526/- i.e. @ of 30% of the normal income, whereas the tax liability without surcharge and cess under the deeming provisions of section115JB of the Act came to Rs. 5,52,35,612/- i.e. @ 10% of the book profits of Rs.55,23,56,116/-, as per section115JB of the 3 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 Act. Since the tax liability under the normal provisions exceeded that under the deeming provisions, the assessee determined its tax liability under the normal provisions without surcharge and cess at Rs.13,11,08,526/-. Against the same, the assessee claimed credit of MAT in respect of tax paid in earlier years i.e. assessment years 2006-07 and 2007-08 under section 115JAA of the Act at Rs.4,62,96,497/- which again did not include surcharge and cess. The net tax liability was thus arrived at Rs. 8,48,03,029/- (Rs. 13,11,08,526 - Rs.4,62,95,497/-). On the same surcharge @ 10% and education cess @ 3% was added and also interest u/s 234 C was levied thus working out the total tax liability at Rs.9,68,12,403/-. After claiming pre-paid taxes @ Rs.9,92,59,948/- which included TDS and advance taxes, refund of Rs.24,47,550/- was claimed by the assessee. The assessment in this case was completed by the Assessing officer making various additions to the income of the assessee which was deleted in appeals upto the ITAT, thus, restoring the assessed income to that returned by the assessee originally. The Assessing officer while passing the appeal effect order, in consequence to the order of the ITAT passed in the case of the assessee, re-worked the calculation of tax liability of the assessee. The Assessing officer determined the tax payable under normal provisions of the Act including surcharge and cess thereon, thereafter interest u/s 234C was also levied. Against the total tax liability so determined, the MAT credit u/s 115JAA of the Act was given to the assessee excluding surcharge and cess thereon. The calculation of the tax 4 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 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 Rs. 46,82,920/- as under:-
Assessed income after giving effect to Rs. 43,70,28,420/- the order of ITAT Tax payable by the assessee Rs. 13,11,08,526/- company under normal provisions of theAct @ 30% on income of Rs.
43,70,28,420/-
ADD: Surcharge @ 10% of Rs. Rs. 13,11,0853/- 13,11,08,526/-
Total tax and surcharge payable Rs. 14,42,19,379/-
Add: Education Cess @ 3% of Rs. Rs.43,26,581/- 14,42,19,379/-
Total tax payable by the assessee Rs. 14,85,45,960/- company including surcharge and education cess before interest u/s 234C of the Act Add:Interest payable u/s 234C of the Rs. 9,98,521/- Act Total tax liability of the assessee Rs. 14,95,44,481/-
including tax
Less : MAT Credit Rs. 4,62,95,497/-
Balance tax payable Rs. 10,32,48,984/-
Less: Pre-paid taxes Rs. 10,79,31,906/-
Amount refundable to the assessee Rs. 46,82,922/-
Rounded off to Rs. 46,82,920/-
5 ITA No.1619/Chd/2017
A.Y.2008-09
ITA No.1524 /Chd/2017
A.Y.2015-16
ITA No.1525 /Chd/2017
A.Y.2016-17
4. The assessee moved an application u/s 154 of the Act stating therein that MAT credit had not been allowed correctly while giving effect to the order of the ITAT and that the MAT credit should have been included surcharge and cess. However, the Assessing officer rejected the application filed by the assessee. The matter was carried in appeal before the CIT(A) who allowed the assessee's appeal stating that identical issue had been decided in the case of the assessee in assessment year 2015-16 in favour of the assessee allowing MAT credit after including surcharge and cess therein. The CIT(A) also noted that the issue was covered in favour of the assessee by the decision of the ITAT in the case of M/s Vardhman Textiles Ltd., ITA No. 06/Chd/2015 and Vardhman Yarn & Threads Ltd., ITA No. 07/Chd/2015.
5. Aggrieved by the same, the Revenue has come in appeal before us raising the following ground:-
"Whether upon thefacts and circumstances of the case, the Ld. CIT(A) s justified inlaw in directing the Assessing officer to allow the MAT credit including Surcharge &Edu.Cess against the tax liability determined by the Revenue?
6. During the course of hearing, before us, the Ld. DR pointed out that the appeal of the Revenue for the preceding year i.e. 2015- 16 had been allowed by the ITAT and the issue had consequently been decided against the assessee. Copy of the order passed in ITA 6 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 No. 1523/Chd/2017 dt.24.04.18 was placed before us. It was pointed out from the said order that the ITAT had decided the issue against the assessee following the decision of ITAT, Delhi in the case of M/s Richa Global Export Pvt Ltd in ITA No. 2303/2012 dated 31.8.2012.Our attention was drawn to the findings of the ITAT at para 15 to 18 of the order as under:-
"15. We have gone through the issue before us and also 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 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. Ltd. ITA No. 93/Agra/2014. and DCIT Vs. Godrej Oil Palm Ltd. ITA No. in ITA No. 5098/Mum/2013 dealt with the issue whether surcharge and Education cess should be levied after giving MAT credit or not which is also not the issue before us in the instant case.
16. With regard to the case of M/s Richa Global Export Private Ltd. ITA No. 2303/2012, we find that the case deals 7 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 with whether the amount of MAT Credit under section 115JA would include surcharge and cess on the tax payable on the book profits which is the similar ground in the present appeal.
17. The Coordinate Bench of ITAT Delhi in its judgment dt. 31/08/2012 held as under:
We have heard the rival submissions of both the parties and have gone through the material available on record. For understanding the amount of tax credit available u/s 115JAA first of all, it is necessary to understand the meaning of income tax as contemplated by section 115JB of the Act. Section 115JBreads 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 6 ITA No2303/Del/2012 computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2010, is less than fifteen 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 income shall be the amount of income-tax at the rate of fifteen per cent. (2) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956)}"
The above section clearly talks that such book profit shall be deemed to be total income of the assessee and tax payable by the assessee on such total income shall be the amount of income tax at specified rate of tax which was 15% for the relevant year under consideration. The section does not talk about the income tax as increased by surcharge & 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 8 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 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 purpose of this section book profit means the net profit as shown in the P&L Account for the relevant previous year prepared under sub section (2) as increased by :-
a) the amount of income tax paid or payable and the provisions thereof:
b) xxxxx
c) xxxxx
d) xxxxx
e) xxxxx
f) xxxxx The above explanation 1 clarifies that explanation 2 to section 115JB was inserted to define the meaning of tax (which of course includes education tax and surcharge) for the purpose of calculating book profits liable to tax u/s 115JB and it cannot be extended to sections 115JB or section 115JAA of the Act.
In view of the above provisions, we are of the considered opinion that tax credit u/s 115JAA was rightly given and we do not find any reason to interfere in the order of Ld CIT(A).
18. Since we find the facts and circumstances of the case and the grounds before us to be adjudicated are squarely covered by the judgment by the coordinate bench, the appeal of the Revenue is hereby allowed 9 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17
7. Ld. Counsel for the assessee, on the other hand, contended that the issue had been decided in favour of the assessee in a number of decisions as under:
1. Virtusa (India) Pvt Ltd Vs. DCIT (2016) 3 TM I 245 (Hyd) dated 4.3.2016 2 Wyeth Ltd Vs. ACIT,ITA No. 6682/2011 assessment year 2007-08 dated 9.1.2015 (Mumbai) 3 AMQ Agro India Pvt Ltd Vs. ACIT (2016) 5 TM I 485 (Delhi) dated 29.4.2016 4 Garware Wall Ropes Ltd v Addl. C IT and vice versa 92016) 8 TM I 906 (Mum) dated 13.7.2016 5 DCIT Vs. Vacmet India ltd ITA No.94/2014 A.Y. 2011-
12 (Agra) dated 22.5.2014 6 ACIT v Divi's Laboratories Ltd, ITA No. 596/2017 A.Y. 2011-2 (Hyd) dated 29.11.2017 7 DCIT Vs. Godrej Oil Palm Ltd ITA No. 5098/2013 A.Y. 2011-12 (Mumbai) dated 14.1.2015 8 DCIT Vs. Saint GobainGyproc India Ltd ITA No. 2122/2015 A.Y. 2013-14 (Chennai) dated 3.2.2016 9 Value Source Technologies Pvt Ltd Vs. DC IT ITA No.449/2016 A.Y. 2011-12 (Chennai) dated 19.5.2016 10 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. 10 ITA No.1619/Chd/2017
A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17
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, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section.] .
.
.
(2A) The tax credit to be allowed under sub-section (1A) shall be the difference of the tax paid for any assessment year under sub-section (1) of section 115JB and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act:
10. As per the above, sub section (1A) allows credit of taxes paid under the deeming provisions of section 115JB.The quantum of tax 11 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 credit so allowed is set out in sub-section (2A) which states the same to be the difference of the tax paid u/s 115JB and the tax payable as per normal provisions i.e. credit to the extent of excess/surplus tax paid under the special provisions of section 115JB of the Act as compared to the normal tax payable by the assessee is allowed. Now, for the purpose of determining the MAT credit allowable to the assessee as per sub section (2A) of section 115JAA of the Act, it is important to determine two things - • Tax paid u/s 115JB of the Act and • Tax payable under the normal provisions of the Act. Tax" has been defined under section 2(43) of the Act as under:
2.In this Act, unless the context otherwise requires:-
.
.
.
][(43) "tax" in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date [and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA];]
11. Thus tax means the Income Tax chargeable under the provisions of this Act. The rate of Income Tax charged /chargeable each year is provided in the Finance Act of each year,which is an Act giving effect to the financial proposals of the Central Government for each year. ,Since in the present case, credit is being claimed of taxes 12 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 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 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 income shall be the amount of income-tax at the rate of ten per cent.
Thus the specified rate of tax u/s 115JB of the Act is 10% of the book profits.
The second proviso to clause 3 of the Finance act, states that the amount of income tax so computed shall be increased by a surcharge.The said proviso is reproduced hereunder:
"Provided further that in respect of any income chargeable to tax under sections 115A, 115AB, 115AC, 115ACA, 115AD, 13 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 115B, 115BB, 115BBA, 115E and 115JB or fringe benefits chargeable to tax under section 115WA of the Income-tax Act, the amount of income-tax computed under this subsection shall be increased by a surcharge for purposes of the Union, calculated,-
Clause 11 of the Finance Act further increases the tax by an education cess. The said clause is reproduced hereunder:
"(11) The amount of income-tax as specified in sub-sections (1) to (10) and as increased by a surcharge for purposes of the Union calculated in the manner provided therein, shall be further increased by an additional surcharge for purposes of the Union, to be called the "Education Cess on income-tax", so as to fulfill the commitment of the Government to provide and finance universalised quality basic education, calculated at the rate of two per cent, of such income-tax and surcharge."
Therefore the income tax levied u/s 115JB as specified by the Finance Act, is the tax rate as specified in the section increased by surcharge & education cess. It is pertinent to note that the Finance Act specifies that surcharge and cess "increase " the tax levied. It follows therefore that surcharge and cess are part of tax levied. And it can therefore safely be concluded that taxes paid u/s 115JB include surcharge and cess alongwith the basic rate of tax specified in the section. We draw support from the decision of the Hon'ble apex court in the case of CIT vs K. Srinivasan 83 ITR 346 (SC) holding that taxes would include surcharge and cess. The relevant findings 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 14 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 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). Art. 269 deals with taxes levied and collected by the Union but assigned to the States. The provisions of Art. 268 which is the first one under the heading "Distribution of revenue between the Union and the States"
relate to duties levied by the Union but collected and appropriated by the States. Thus, these articles deal with the levy, collection and distribution of the proceeds of the taxes and duties mentioned therein between the Union and the States. The legislative power of Parliament to levy taxes and duties is contained in Arts. 245 and 246(1) read with the relevant entries in List I of the Seventh Schedule.
9. As mentioned before, the legislative entry 82 in List I relates to taxes on income other than agricultural income; income-tax, super-tax and surcharge would all fall under this entry. It is exercise of the legislative power conferred by that entry that the Union Parliament enacts the provision in the Finance Act each year relating to them. It is that Act which authorises these taxes to be charged and prescribes the rates at which they can be charged. Sec. 4 of the Act simply provides that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates income-tax at that rate or those rates shall be charged in accordance thereto and subject to the provisions of the Act. Sec. 95, which was omitted by the Finance Act of 1965, contained similar provision with regard to super-tax. Although under the Act s. 4 is the charging section yet income-tax can be charged only where the Central Act which, in the present case, will be the Finance Act, enacts that income- tax shall be charged for any assessment year at the rate or rates specified therein. The distinction made by the High Court that the surcharges are levied only under the Finance Act and income- tax under the Act may not hold good if the above view which has been pressed on behalf of the revenue were to be accepted. In our judgment it is unnecessary to express any opinion in the matter because the essential point for 15 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 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 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 Unio
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 Explanation 1, the amount of income-tax shall include--
(i) any tax on distributed profits under section 115-O or on distributed income under section 115R;
(ii) any interest charged under this Act;
(iii) surcharge, if any, as levied by the Central Acts from time to time;
(iv) Education Cess on income-tax, if any, as levied by the Central Acts from time to time; and
(v) Secondary and Higher Education Cess on income-tax, if any, as levied by the Central Acts from time to time.
A bare perusal of the above would reveal that the said explanation also corroborates what has been stated by us above and what has been 16 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 held by the Hon'ble Supreme Court in the case of K Srinivasan (supra) that taxes paid include surcharge and cess.
As a natural corollary, tax paid under the normal provisions would also include surcharge and cess.
Thus, what follows from the aforesaid discussion is that tax credit to be computed would be after inclusion of surcharge and cess for both the tax paid u/s 115JB of the Act and tax payable as per normal provisions of the Act.
13. We shall now be dealing with the question of point at which credit of MAT to be given .Section115JAA(4) of the Act deals with the same stating as under:-
"115JAA. (1) ......
(4) The tax credit shall be allowed set-off in a year when tax becomes payable on the total income computed in accordance with the provisions of this Act other than section 115JA or section 115JB, as the case may be.
As is clear from the above tax credit is to be allowed when tax becomes payable. Deriving from the definition of tax payable as to include surcharge and cess, what is arrived at is that taxes payable under the normal provisions including surcharge and cess is to be first calculated and the credit of MAT,including surcharge and cess is to be allowed.
In view of the above, after analyzing the provisions of section 115JAA, 115JB and 2(43) of the Act, read alongwith the relevant 17 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 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. 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 total income computed in accordance with the other provisions of the Act. In other words, MAT credit shall be computed as under:
MAT credit available = Tax paid u/s 115JB - Tax payable on the total income under normal provisions of the Act.
9.1 The amount of tax credit so determined shall be allowed to be carried forward and set off in a year when the tax becomes payable on the total income computed under the regular provisions. However, no carry forward shall be allowed beyond the tenth assessment year immediately succeeding the assessment year in which the tax credit becomes allowable. The set off in respect of the 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 18 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 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 on total income under the normal provisions of the Act - tax payable under section 115JB = MAT credit to be allowed.
9.3 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 provisions of this Act. The important word used is tax paid and as per the Hon'ble Apex Court decision in the case of K. Srinivasan (supra), the 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." 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 19 ITA No.1619/Chd/2017 A.Y.2008-09 ITA No.1524 /Chd/2017 A.Y.2015-16 ITA No.1525 /Chd/2017 A.Y.2016-17 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 remaining two appeals in ITA Nos.1524 & 1525/Chd/2017 are identical to that has been decided by us in ITA No. 1619/Chd/2017, the decision rendered therein will apply mutatis-mutandis to the said two appeals and also following which, we dismiss the appeals of the Revenue.
15. In effect, all the three appeals of the Revenue are dismissed Order pronounced in the Open Court on 11.10.2018.
Sd/- Sd-
(संजय गग /SANJAY GARG) (अ नपण
ू ा ग%ु ता/ANNAPURNA GUPTA)
या यक सद य/ Judicial Member लेखा सद य/ Accountant Member
Dated :11.10.2018
"आर.के."
आदे श क त*ल+प अ,े+षत/ Copy of the order forwarded to :
• अपीलाथ / The Appellant
• यथ / The Respondent
• आयकरआय-
ु त/ CIT
• आयकरआय-
ु त (अपील)/ The CIT(A)
20 ITA No.1619/Chd/2017
A.Y.2008-09
ITA No.1524 /Chd/2017
A.Y.2015-16
ITA No.1525 /Chd/2017
A.Y.2016-17
• +वभागीय त न0ध, आयकरअपील$यआ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH • गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायकपंजीकार/ Assistant Registrar