2017 (2) TMI 1482 - AT - Income Tax

MAT credit available u/s 115JAA of tax paid along with surcharge and education cess - Surcharge and education cess as part of the income-tax - HELD THAT - As noted from the above working that first of all tax amount has been computed on the total income of the assessee. Thereafter surcharge and education cess has been worked out upon the tax liability. Then from the gross amount so arrived at the amount of credit available u/s 115JB on account of income-tax surcharge and education cess (all combined together) have been deducted and accordingly net tax payable after setting off credit available u/s 115JB has been worked out. In our view this is the correct method of computing tax liability as well as credit available u/s 115JAA. Accordingly we direct the AO to verify the facts as have been given in the aforesaid working and compute the tax liability accordingly and allow the necessary relief to the assessee

Issues:
1. Correct method of computing tax liability and credit available u/s 115JAA.
2. Granting MAT credit along with surcharge and education cess.
3. Interpretation of provisions to prevent unjust enrichment of Revenue.

Analysis:

Issue 1: Correct method of computing tax liability and credit available u/s 115JAA
The appeal challenged the order of the Commissioner of Income-tax (Appeals) regarding the working of tax payable done by the Assessing Officer. The appellant argued that the tax payable should have been calculated before surcharge and Education cess, following the method in ITR-6 for the assessment year. The Tribunal examined the provisions of MAT u/s 115JB and the credit available u/s 115JAA. Referring to judgments of different High Courts, it was established that the computation of tax liability and setting off tax credit should be done in accordance with the law. The Tribunal reviewed various worksheets presented during the hearing and determined the appropriate method of computing tax liability and setting off credit available u/s 115JAA. The correct method involved calculating tax on total income, adding surcharge and education cess, and then deducting the credit available u/s 115JAA to arrive at the net tax payable.

Issue 2: Granting MAT credit along with surcharge and education cess
The appellant contended that MAT credit available u/s 115JAA should include surcharge and education cess along with tax paid. The Tribunal analyzed the judgments of different High Courts and concluded that the entire amount paid under MAT, including surcharge and cess, should be considered for carry forward of credit available u/s 115JAA. Therefore, the Tribunal directed the Assessing Officer to compute the tax liability by including surcharge and education cess in the credit available u/s 115JAA, providing necessary relief to the assessee.

Issue 3: Interpretation of provisions to prevent unjust enrichment of Revenue
The appellant argued that the Act should be interpreted to prevent unjust enrichment of the Revenue at the taxpayer's cost. The Tribunal considered this argument along with the judgments cited by the appellant and the submissions made by the Departmental Representative. It was emphasized that the correct method of computing tax liability and credit available u/s 115JAA should be followed to ensure fairness and equity in tax assessments. The Tribunal partially allowed the appeal, directing the Assessing Officer to verify the facts and compute the tax liability according to the correct method determined during the proceedings.

In conclusion, the Tribunal's judgment clarified the correct method of computing tax liability and credit available u/s 115JAA, ensuring that MAT credit includes surcharge and education cess. The interpretation of provisions aimed at preventing unjust enrichment of the Revenue was upheld, emphasizing the importance of following the prescribed methods for tax assessments to maintain fairness and equity in taxation.

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