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2016 (2) TMI 1203 - AT - Income TaxAllowance of MAT credit u/s.115JAA - Surcharge and Education cess included in the MAT credit - Held that - As decided in WYETH LIMITED VERSUS ASSISTANT COMMISSIONER OF INCOME TAX, LARGE TAXPAYERS UNIT, MUMBAI 2015 (1) TMI 1299 - ITAT MUMBAI 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 against revenue.
Issues involved:
1. Allowance of MAT credit under section 115JAA and inclusion of surcharge and education cess in MAT credit for set off. Detailed Analysis: 1. The appeal was filed by the Revenue against the order of the Commissioner of Income-tax (Appeals) concerning the allowance of MAT credit under section 115JAA and the treatment of surcharge and education cess in the MAT credit. The Revenue contended that the Commissioner erred in directing the Assessing Officer to allow MAT credit and include surcharge and education cess in the credit for set off. The assessee had filed the return of income admitting total income under normal provisions and Section 115JB of the Income Tax Act. The tax liability under normal provisions was higher, and the assessee claimed a set off of MAT credit, including surcharge and education cess from earlier assessment years. The case was processed, and a demand was raised, but the MAT credit was granted only for the tax amount excluding surcharge and education cess. The Commissioner directed the Assessing Officer to allow MAT credit and set off against tax payable under normal provisions before including surcharge and educational cess. 2. In the appellate proceedings, the Commissioner considered the facts, submissions, and judicial decisions. The Commissioner relied on a previous ITAT order that stated MAT credit should first reduce the tax payable, and then surcharge and educational cess should be levied on the residual amount. The Commissioner directed the Assessing Officer to allow setoff of MAT credit and allowed the grounds of the assessee. The Department appealed the Commissioner's order before the Tribunal, arguing against the inclusion of surcharge and education cess in the MAT credit. 3. During the Tribunal hearing, the Departmental Representative argued against allowing MAT credit under section 115JAA and including surcharge and education cess in the credit for set off. On the contrary, the Authorised Representative submitted that the provisions of Section 115JB include surcharge and education cess in MAT credit, and the Assessing Officer cannot segregate and allow tax credit. The Authorised Representative relied on judicial decisions and prayed for the dismissal of the Revenue's appeal. The Tribunal considered the arguments, perused the material, and cited judicial decisions supporting the allowance of MAT credit against income tax on normal provisions, including surcharge and education cess as part of tax components under Section 115JB. 4. The Tribunal referred to a decision by the ITAT, Mumbai Bench, which endorsed the provisions of allowing MAT credit against tax liability exclusive of surcharge/cess, and then calculating surcharge and cess on the remaining tax liability. The Tribunal upheld the Commissioner's order based on this decision and dismissed the Revenue's appeal. The Tribunal concluded that MAT credit should be allowed against tax liability before surcharge and education cess or alternatively, the MAT credit amount should include surcharge and education cess for credit against tax payable inclusive of surcharge and education cess. The Tribunal's decision was in line with the principles established in the cited judicial decisions. In conclusion, the Tribunal upheld the Commissioner's order, dismissing the Revenue's appeal regarding the allowance of MAT credit and the treatment of surcharge and education cess in the credit for set off.
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