2018 (5) TMI 2057 - AT - Income Tax

Surcharge and education cess as part of the income-tax - According to the Ld. D.R. from the gross amount so arrived the amount of credit available under Section 115JB on account of income-tax surcharge and education cess have to be deducted and the net tax payable after setting off credit available under Section 115JB of the Act has to be worked out - HELD THAT - It is not in dispute that if surcharge and education cess form part of incometax then it has to be adjusted against the tax liability under the MAT scheme. Article 271 of the Constitution of India in categorical term says that surcharge and education cess include income-tax. This was also clarified by the Apex Court in the case of K. Srinivasan 1971 (11) TMI 2 - SUPREME COURT Therefore this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Appeal filed by the Revenue is dismissed.

Summary

Issues:
1. Whether surcharge and education cess are part of income-tax for the purpose of adjustment under the MAT scheme.

Analysis:
The appeal before the Appellate Tribunal ITAT Chennai involved the question of whether surcharge and education cess should be considered part of income-tax for adjusting tax liability under the MAT scheme. The Revenue contended that the surcharge and education cess should be worked out on the tax liability and deducted from the gross amount to determine the net tax payable after setting off credit available under Section 115JB of the Income-tax Act, 1961. The Revenue relied on a decision of the Mumbai Bench of the Tribunal. On the other hand, the assessee argued that surcharge and education cess are indeed part of income-tax as per Article 271 of the Constitution of India and the judgment in CIT v. K. Srinivasan (1972) 83 ITR 346. The assessee emphasized that when income-tax is adjusted, surcharge and education cess should also be adjusted against the tax liability. The CIT(Appeals) had directed the Assessing Officer to recompute and allow the MAT credit against the tax liability based on this argument.

The Tribunal examined the submissions from both sides and reviewed the relevant legal provisions and precedents. It noted that Article 271 of the Constitution of India explicitly states that surcharge and education cess are included in income-tax. The Tribunal also referred to the decision of the Apex Court in CIT v. K. Srinivasan, which supported the inclusion of surcharge and education cess within the ambit of income-tax. Consequently, the Tribunal found no grounds to interfere with the order of the lower authority, affirming that surcharge and education cess should be adjusted against the tax liability under the MAT scheme. Therefore, the appeal filed by the Revenue was dismissed, and the order of the lower authority was upheld.

In conclusion, the Tribunal's judgment clarified that surcharge and education cess are considered part of income-tax for the purpose of adjusting tax liability under the MAT scheme. The decision was based on constitutional provisions and legal precedents establishing the inclusion of surcharge and education cess within the definition of income-tax.