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2016 (7) TMI 1574 - AT - Income TaxMAT credit - tax credit u/s 115JAA is to be given, whether after levying surcharge and education cess on the tax calculated as per the normal provision or before - whether adjustment on account of MAT credit is to be made against the tax determined under the normal provisions of the Income Tax Act, before levying surcharge and cess or otherwise? - HELD THAT - MAT credit does not include surcharge and cess, which fact we find, has not been controverted by the Revenue. Therefore, following the proposition laid down by the co-ordinate Bench in the above noted cases, also the decision of Vacment India Ltd. 2014 (10) TMI 787 - ALLAHABAD HIGH COURT we hold that the adjustment of MAT credit under section 115JAA is to be made from the tax determined as payable before including surcharge and cess thereon. Direct the AO to allow the MAT credit against the tax liability payable before surcharge and education cess.
Issues Involved:
1. Determination of the point at which tax credit under section 115JAA is to be given—whether before or after levying surcharge and education cess on the tax calculated as per normal provisions. 2. Validity of rectification proceedings under section 154 of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Determination of MAT Credit Adjustment The primary issue in both appeals concerns the determination of the point at which tax credit under section 115JAA is to be given. Specifically, the question is whether this credit should be applied before or after levying surcharge and education cess on the tax calculated as per normal provisions. Facts and Arguments: - The assessee's income under normal provisions was assessed at ?185,02,78,680, with a tax liability of ?55,49,07,440. The book profits under section 115JB were assessed at ?272,99,76,648. - The tax computed under normal provisions was higher, and MAT credit brought forward from previous years was set off against this tax liability. - The AO later noticed that surcharge and education cess were not levied on the assessed tax, resulting in a shortfall and initiated rectification proceedings under section 154. - The assessee argued that the Revenue's methodology was inconsistent, as surcharge and cess were excluded while determining MAT credit for previous years but included for the impugned year. CIT(A) Decision: - The CIT(A) upheld the AO's order, stating that MAT credit under section 115JAA includes only income tax and not surcharge and education cess, relying on the ITAT Delhi Bench's decision in M/s Richa Global Exports Pvt. Ltd. Tribunal's Analysis: - The Tribunal referred to the Allahabad High Court's decision in DCIT Vs. Vacment India Ltd. (369 ITR 304), which clarified that MAT credit should be adjusted from the gross tax payable before computing surcharge and cess. - The Tribunal also cited similar decisions by the Mumbai Bench of the ITAT in Wyeth Ltd. Vs. ACIT and DCIT Vs. Godrej Oil Palm Ltd., which supported the assessee's contention. - The Tribunal concluded that MAT credit should be adjusted before levying surcharge and cess, aligning with the methodology in ITR-6 forms prescribed by the CBDT. Issue 2: Validity of Rectification Proceedings under Section 154 The second issue pertains to whether the rectification proceedings under section 154 were valid, considering the conflicting views on the methodology for adjusting MAT credit. Tribunal's Analysis: - The Tribunal noted that section 154 allows for rectification of apparent errors. Given the conflicting views and judgments cited by the assessee in its favor, the issue was not clear-cut. - The Tribunal held that the issue at hand was not an apparent error suitable for rectification under section 154, thereby rendering the rectification proceedings invalid. Conclusion: The Tribunal set aside the orders of the authorities below and directed the AO to allow MAT credit against the tax liability payable before surcharge and education cess. The appeals of the assessee were allowed, and the rectification proceedings under section 154 were deemed invalid.
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