2019 (8) TMI 196 - HC - Income Tax

MAT computation - MAT credit under Section 115JAA - refusal to allow credit for surcharge and education cess - Department submits that the term Tax as defined under MAT provisions in Section 115JB for calculating book profit cannot be extended to provisions for calculating carry forward and set off of MAT credit. Surcharge and education cess do not fall within the category of income tax - HELD THAT - Respondent No. 2, being Principal Commissioner of Income Tax, for the same assessment year, that is assessment year 2015-2016, has not considered the order passed by the Commissioner (Appeals) on 1st September, 2016. While passing his order on 28th February, 2019, the respondent No. 2 considered the judgement in Srei Infrastructure Finance Ltd. Vs. Deputy Commissioner Of Income-Tax 2016 (8) TMI 967 - CALCUTTA HIGH COURT but failed to distinguish why both the cases are found different from each other. For the above reasons, I quash the order dated 28th February, 2019 and remand the matter back to the respondent No. 2 being Principal Commissioner of Income Tax, to consider and pass a reasoned order after giving an opportunity of hearing to the petitioner, preferably within a period of eight weeks from date.

Summary

Issues:
1. MAT credit entitlement for surcharge and education cess on brought forwarded MAT credit.
2. Interpretation of the term "Tax" under MAT provisions.
3. Consideration of previous appellate order by the Principal Commissioner of Income Tax.
4. Application of relevant case law in determining MAT credit eligibility.

Analysis:
1. The petitioner, engaged in manufacturing and exporting synthetic blended yarn, filed its original income tax return for the Assessment year 2015-2016, seeking MAT credit under Section 115JAA. The ACIT allowed MAT credit but omitted to grant credit for surcharge and education cess on brought forwarded MAT Credit. The petitioner appealed against this refusal, and the CIT (Appeals) partly allowed the appeal by considering a previous judgment by the Division Bench of the High Court. Subsequently, a revised return was filed, and the ACIT once again denied credit for surcharge and education cess. The petitioner then filed a revisional application challenging this denial before the Principal Commissioner of Income Tax.

2. The Department argued that the term "Tax" under MAT provisions cannot be extended to include surcharge and education cess for calculating carry forward and set off of MAT credit. They contended that surcharge and education cess are not classified as income tax and, therefore, should not be considered for MAT credit eligibility. The Court heard both parties and opined that the Principal Commissioner failed to consider the previous appellate order while passing the order denying MAT credit against surcharge and cess. The Court noted that the Principal Commissioner did not adequately distinguish between the cases cited.

3. In light of the above, the Court quashed the order dated 28th February, 2019, and remanded the matter back to the Principal Commissioner of Income Tax to reconsider and pass a reasoned order after providing an opportunity of hearing to the petitioner. The Court emphasized the need for a thorough review, preferably within eight weeks from the date of the judgment. The writ petition was disposed of without any costs, and parties were directed to obtain an urgent certified copy of the order upon fulfilling necessary formalities.