2012 (9) TMI 99 - AT - Income Tax

Disallowance of credit of surcharge and education cess - MAT u/s 115JAA - Held that - Section 115JB 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. 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 - against assessee. Interest u/s 234B & 234C - Held that - As it is a mandatory provision and is consequential in nature and in view of our adjudication on ground 1 as decided against the assessee

Summary

Issues:
1. Calculation of credit of Minimum Alternate Tax (MAT) under section 115JAA.
2. Inclusion of surcharge and education cess in the definition of tax for the purposes of tax credit.
3. Calculation of interest under sections 234B & 234C.

Issue 1 - Calculation of credit of MAT under section 115JAA:
The appellant raised concerns regarding the allowance of MAT credit for the previous year, specifically focusing on the discrepancy in the credit amount allowed by the Ld CIT(A). The appellant argued for the inclusion of surcharge and education cess in the credit calculation, emphasizing the importance of considering the total tax liability. The Ld CIT(A) rejected the appellant's claim, stating that the definition of tax under section 2(43) does not encompass surcharge and education cess. The Tribunal analyzed the provisions of section 115JB, emphasizing that MAT payable under this section pertains only to income tax and does not include surcharge or education cess. Therefore, the Tribunal upheld the decision of the Ld CIT(A) regarding the calculation of MAT credit under section 115JAA.

Issue 2 - Inclusion of surcharge and education cess in the definition of tax for tax credit:
The appellant contended that the definition of tax under Explanation 2 of section 115JB should be applied to all sections of Chapter-XIIB, including section 115JAA. However, the Ld CIT(A) and the Tribunal clarified that the definition of tax under section 115JB, which includes surcharge and education cess, is specific to the calculation of book profit and cannot be extended to other sections. Therefore, the Tribunal concluded that tax credit under section 115JAA should only cover income tax and not surcharge or education cess.

Issue 3 - Calculation of interest under sections 234B & 234C:
The Tribunal addressed the appellant's argument regarding the calculation of interest under sections 234B & 234C, emphasizing that these provisions are mandatory and consequential. Given the Tribunal's decision on the first issue, which confirmed the exclusion of surcharge and education cess from the tax credit calculation, the Tribunal also ruled against the appellant on the second ground of appeal related to interest calculation. The Tribunal dismissed the appeal filed by the assessee, affirming the decisions of the Ld CIT(A) on both issues.