2015 (1) TMI 1299 - AT - Income Tax

MAT credit against the tax liability inclusive of surcharge and cess - Held that - The authorities below held that the MAT credit is allowable against the tax liability inclusive of surcharge and cess and not the tax payable before the surcharge and cess. The assessee has relied upon the Judgment of Allahabad High Court in the case of CIT Vs. Vacment India (2014 (10) TMI 787 - ALLAHABAD HIGH COURT ) wherein Hon ble High Court has taken into account the order of entries in the form ITR-6 for the A.Y. 2011-12 in the said case and held that as per form ITR-6 the MAT credit has to be given against the gross tax payable exclusive of surcharge /cess and only after the MAT credit tax liability the surcharge and cess has to be calculated for the purpose of working out the grand tax liability. We also find merit and substance in the alternative contention of the assessee that if the MAT credit is taken into account without including the surcharge and education cess then the surcharge and education cess on the tax liability has to be calculated only after allowing the MAT credit. Alternatively the amount of MAT credit should also include surcharge and education cess for the purpose of allowing the credit against the tax liability inclusive of surcharge and education cess. Therefore the MAT as well as normal tax before allowing the MAT credit has to be taken on parity either exclusion of surcharge and education cess or inclusive of surcharge and education cess or inclusive of surcharge and education cess. Accordingly we set aside the orders of authorities below and direct the Assessing Officer to allow the MAT credit against the tax liability payable before surcharge and education cess or alternatively the amount of MAT credit should also be inclusive of surcharge and education cess and then allow the credit against the tax payable inclusive of surcharge and education cess. - Decided in favour of assessee.

Summary

Issues involved:
1. MAT credit against tax liability inclusive of surcharge and cess
2. Interest under section 244A

Issue 1: MAT credit against tax liability inclusive of surcharge and cess:

The appeal raised concerns regarding the setting off of MAT credit under section 115JAA against the total tax liability inclusive of surcharge and education cess for the assessment year 2007-08. The contention was whether the MAT credit should be given against the tax liability before surcharge and cess or inclusive of surcharge and cess. The assessee argued that MAT credit should be granted before surcharge as per ITR-6 and referred to the decision of the High Court of Allahabad in support. On the other hand, the Revenue argued that tax, including surcharge and cess, should be considered for MAT credit as per section 4 of the Income Tax Act. The authorities below had held that MAT credit is allowable against the tax liability inclusive of surcharge and cess. The High Court's judgment in the case of CIT Vs. Vacment India supported the assessee's argument that MAT credit should be given from the gross tax payable before surcharge and cess. The Tribunal set aside the lower authorities' orders and directed the Assessing Officer to allow MAT credit against the tax liability payable before surcharge and education cess or alternatively include surcharge and education cess in the MAT credit amount before allowing the credit against the tax payable inclusive of surcharge and education cess.

Issue 2: Interest under section 244A:

The computation of interest under section 244A was considered consequential to the MAT credit issue. The Assessing Officer was directed to recompute the interest under section 244A after giving MAT credit according to the Tribunal's directions on the MAT credit issue.

In conclusion, the appeal by the assessee was allowed, with the Tribunal directing the Assessing Officer to adjust the MAT credit against the tax liability either before surcharge and education cess or by including surcharge and education cess in the MAT credit amount. The interest under section 244A was to be recomputed accordingly.