2020 (4) TMI 477 - AT - Income Tax

Computation of tax u/s 115JB - not granting MAT credit u/s 115JAA including surcharge and cess as claimed by the assessee - HELD THAT - As decided in M/S VIRTUSA (INDIA) PVT. LTD. VERSUS DCIT, CIRCLE 17 (2) , HYDERABAD 2016 (3) TMI 245 - ITAT HYDERABAD the tax liabilities for normal provisions as well as MAT are calculated with surcharge and cess. The MAT credit in row 7 are calculated automatically using the prescribed algorithm, this is nothing but balancing figure i.e., the difference between tax liability as per normal provisions and MAT provisions. Both the above tax liabilities are calculated with surcharge and cess. These are the standard format, which are expected to be followed by all the assessees and also important to note that the above format of ITR 6 was amended w.e.f. AY 2012-13 by CBDT. Moreover, this is more relevant for the department also. These formats are regulated by CBDT. Assessing Officer cannot overlook these formats and (interpret it in his own method of calculating tax credit while making assessment u/s 143(1) of the Act.) proceed to calculate the MAT credit to compute assessment u/s 143(1) applying different methods when the proper and correct method as proposed by CBDT in ITR-6. The Assessing Officer is expected to follow the ITR-6 format to complete the assessment u/s 143(1) or 143(3) of the Act. Apex court decision in the case of K. Srinivasan 1971 (11) TMI 2 - SUPREME COURT may not have been brought to the knowledge of the ITAT, Delhi. Moreover, the explanation 2 of section 115JB is applicable to calculate tax liability u/s 115JB and the same explanation should also be applied for giving credit u/s 115JAA. The tax liabilities calculated u/s 115JB by applying the explanation 2, the tax liability so computed are remitted by the assessee and then the same was carried forward for future MAT credit. In our view, while calculating the MAT credit u/s 115JAA, the same explanation 2 in section 115JB must be applied. The assessee had followed the procedure properly and the Assessing Officer had made the calculations applying his own interpretation or relied on the programme, we are not sure whether it is programme hitch or the interpretation of Assessing Officer was not in line with the calculations proposed in ITR-6. Therefore, we delete the addition made. - Decided in favour of assessee.

Summary

Issues involved:
Computation of tax under section 115JB and non-granting of MAT credit under section 115JAA including surcharge and cess as claimed by the assessee.

Analysis:

Issue 1: Computation of tax under section 115JB and MAT credit under section 115JAA
The assessee filed an appeal against the order of the Ld. CIT(A) challenging the non-granting of MAT credit under section 115JAA as claimed. The appellant contended that it was entitled to carry forward MAT credit under section 115JAA for the current assessment year based on previous years' tax payments. The Ld. CIT(A) dismissed the appeal, stating that the appellant was eligible for set off of brought forward MAT credit as per section 115JAA. The appellant further argued that the MAT credit calculation by the department excluded surcharge, contrary to the appellant's calculation method. The appellant relied on various case laws to support their claim that surcharge should be included in the tax liability calculation for MAT credit purposes.

Issue 2: Interpretation of tax credit provisions
The ITAT considered the provisions of section 115JB and 115JAA, emphasizing that MAT credit should be allowed based on the difference between tax paid under section 115JB and tax payable on total income under normal provisions. The ITAT highlighted that the term "tax" includes surcharge as per legal interpretations. The ITAT also discussed the importance of following the ITR-6 format approved by the CBDT for calculating tax liabilities and MAT credit. Referring to previous judgments, the ITAT concluded that the Assessing Officer should adhere to the prescribed format for assessing MAT credit under section 115JAA.

Outcome:
Based on the analysis and legal interpretations, the ITAT allowed the appeal filed by the assessee, emphasizing the correct calculation method for MAT credit under section 115JAA. The ITAT's decision aligned with previous judgments and the CBDT's prescribed format for tax calculations, highlighting the importance of including surcharge in the tax liability computation for MAT credit purposes.