2020 (10) TMI 1155 - HC - Income Tax

MAT credit u/s 115JAA - Whether MAT credit includes surcharge and education cess instead of excluding surcharge and education cess - HELD THAT - Identical question was considered in the case of M/s.Scope International Pvt. Ltd. 2019 (7) TMI 185 - MADRAS HIGH COURT wherein held Explanation (2)(iii) and (iv) to Section 115JB of the Act states that for the purposes of Clause (a) of Explanation 1 to Section 115JB of the Act, the amount of income tax shall include surcharge as levied by the Central Acts from time to time and education cess on income-tax, if any, as levied by the Central Acts from time to time. In the case of K.Srinivasan 1971 (11) TMI 2 - SUPREME COURT took note of the legislative history of the Finance Act as also the practice to indicate that the term income tax as employed in Section 2 of the Finance Act, which includes surcharge as also the special and the additional surcharge whenever provided which are also surcharges within the meaning of Article 271 of The Constitution. The Hon'ble Supreme Court took note of the distinction made by the High Court in the case and held that the distinction made by the High Court that the surcharges are levied only under the Finance Act and income tax under the Act may not hold good. The Hon'ble Supreme Court explained the term 'surcharge' to mean as the charge in addition to or subject to an additional or extra charge. The decision of the Hon'ble Supreme Court in the case of K.Srinivasan will apply with full force to the assessee's case. - Decided against revenue.

Summary

Issues:
1. Interpretation of MAT credit under Section 115JAA of the Income Tax Act, 1961.
2. Applicability of surcharge and education cess in MAT credit calculation.
3. Authority of CIT(A) to direct Assessing Officer to verify claims.
4. Comparison of decisions in different cases regarding MAT credit adjustment.

Issue 1: Interpretation of MAT credit under Section 115JAA:
The High Court addressed the appeal filed by the Revenue challenging the order of the Income Tax Appellate Tribunal regarding MAT credit under Section 115JAA. The Court considered whether the MAT credit should include surcharge and education cess or exclude them. The Court referred to the legislative history and previous decisions to analyze the interpretation of the term "tax" under the Act. The Court highlighted that the term "tax" includes applicable surcharge and cess based on the Finance Act and circulars issued by the Central Board of Direct Taxes. The Court emphasized the understanding that tax effect includes surcharge and cess, supporting the inclusion of these components in MAT credit calculation.

Issue 2: Applicability of surcharge and education cess in MAT credit calculation:
The Court examined the contention raised by the Revenue that surcharge and cess should not be included in MAT credit calculation. The Court compared the decision in the case of K.Srinivasan to the present case, emphasizing the relevance of including surcharge and cess in tax calculations. The Court upheld the Tribunal's decision to include surcharge and cess in MAT credit calculation, citing legislative provisions and circulars to support this interpretation. The Court concluded that the Revenue failed to establish a case for interfering with the Tribunal's order, affirming the inclusion of surcharge and cess in MAT credit calculation.

Issue 3: Authority of CIT(A) to direct Assessing Officer to verify claims:
The Court addressed the Revenue's challenge regarding the CIT(A)'s authority to direct the Assessing Officer to verify claims. The Court discussed the Tribunal's decision in light of the Supreme Court's ruling in K.Srinivasan and upheld the Tribunal's authority to direct verification of claims by the Assessing Officer. The Court rejected the Revenue's argument against the Tribunal's decision, emphasizing the Tribunal's entitlement to verify claims related to MAT credit.

Issue 4: Comparison of decisions in different cases regarding MAT credit adjustment:
The Court compared the decision in the present case with the High Court of Calcutta's ruling in another case related to MAT credit adjustment. The Court distinguished the facts and circumstances of the Calcutta case from the present case, highlighting the continued relevance of the Supreme Court's decision in K.Srinivasan. The Court emphasized consistency in following previous decisions and upheld the Tribunal's decision based on the precedent set by the Supreme Court's ruling. The Court dismissed the Tax Case Appeal, answering the Substantial Question of Law against the appellant/Revenue.

In conclusion, the High Court of Madras affirmed the inclusion of surcharge and education cess in MAT credit calculation, upheld the Tribunal's decision, and emphasized the importance of consistent interpretation based on legislative provisions and previous judgments.