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TMI Blog2017 (5) TMI 1650X X X X Extracts X X X X X X X X Extracts X X X X ..... me has to be included while working out the tax effect clause 2 (11) of the Finance Act clearly provides that education cess is an additional surcharge for the purposes of the Union and thus the ratio decidendi of the Hon’ble Supreme Court decision KERALA VERSUS K. SRINIVASAN [1971 (11) TMI 2 - SUPREME COURT] will equally apply to education cess and the same is part of tax. It is clear that surcharge and additional surcharge referred as education cess forms part of tax and are to be considered while working out the tax effect for determining threshold for filing the appeal by the Revenue in terms of CBDT Circular No. 21/2015 dated 10.12.2015. In the instant case, where the tax is so computed after including surcharge and education cess, the tax effect would come to ₹ 10,06,362/- which is above the prescribed limit of ₹ 10 lacs for filing the appeal before the ITAT. Hence the subject appeal filed by the Revenue is clearly maintainable. - ITA No. 579/JP/2013 - - - Dated:- 15-5-2017 - Sh. Kul bharat And Sh. Vikram Singh Yadav, JJ. Assessee by : Sh. Devang Gargieya Revenue by : Sh. R.A. Verma (Addl. CIT) ORDER Sh. Vikram Singh Yadav, T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was whether the words Income Tax in the Finance Act of 1964 in sub-section (2)(a) and subsection (2)(b) of section 2 would include surcharge and addition surcharge. In this regard, the Hon ble Supreme Court held that the legislative history of the various Finance Acts as also the practice would indicate that the term income tax as employed in section 2 includes surcharge and also the special and additional surcharge, where ever provided which are also surcharges within the meaning of Article 271 of the Constitution. In this regard, we deem it appropriate to refer to the findings of the Hon ble Supreme Court which are stated as under: There was no specific mention whatsoever of surcharge in S.2 nor was there any modification of the First Schedule to the Finance Act of 1951 which contained the rates etc relating to the surcharge. Similar state of affairs existed with regard to Finance Act of 1953, 1954, 1957. Section 2 of the Finance Act 1971 is to the effect that the provisions of S. 2 and of the First Schedule to the Finance Act 1970 shall apply in relation to income tax for the assessment year or as the case may be the financial year commencing on the first day of Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed therein between the Union and the States. The legislative power of Parliament to levy taxes and duties is contained in Arts. 245 and 246(1) read with the relevant entries in list I of the seventh Schedule. As mentioned before the legislative entry 82 in list 1 relates to taxes on income other than agricultural income. Income tax, super tax and surcharge would all fall under this entry. It is in exercise of the legislative power conferred by that entry that the Union Parliament enacts the provision in the Finance Act each year relating to them. It is that Act which authorises these tax to be charged and prescribes the rates at which they can be charged. Section 4 of the Act simply provides that where any Central Act enacts that income tax shall be charged for any assessment year at any rate or rates income tax at that rate or those rates shall be charged in accordance thereto and subject to the provisions of the Act. Section 95 which was omitted by the Finance Act of 1965 contained similar provision with regard to super tax. Although under the Act s. 4 is the charging section, income tax can be charged only where the Central Act which, in the present case will be the Finance A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1967 this method or procedure was dropped we do not consider that much significance can be attached to this aspect. In the result we are unable to sustain the view of the High Court. The question that was referred must be answered in the affirmative and in favour of the Revenue. In view of the nature or the point involved the parties are left to bear their own costs in this Court. The appeal by certificate is dismissed. (emphasis supplied) 6. In the light of legal proposition laid down by the Hon ble Supreme Court, we now refer to the provisions of the Income tax Act, 1961 and the relevant Finance Act 2005 which is relevant for the year under consideration. 6.1 Section 2(43) of the Act defines tax as under: Tax in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the said Paragraph A, as if such aggregate income were the total income; (ii) the net agricultural income shall be increased by a sum of fifty thousand rupees, and the amount of income-tax shall be determined in respect of the net agricultural income as so increased at the rates specified in the said Paragraph A, as if the net agricultural income as so increased were the total income; (iii) the amount of income-tax determined in accordance with sub-clause (i) shall be reduced by the amount of income-tax determined in accordance with sub-clause (ii) and the sum so arrived at shall be the income-tax in respect of the total income: Provided that the amount of income-tax so arrived at, as reduced by the amount of rebate of income-tax calculated under Chapter VIII-A, shall be increased by a surcharge for purposes of the Union calculated in each case in the manner provided in that Paragraph and the sum so arrived at shall be the income-tax in respect of the total income. (3) In cases to which the provisions of Chapter XII or Chapter XII-A or section 115JB or sub-section (1A)of section 161 or section 164 or section 164A or section 167B of the Income-tax Act apply, the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery individual, Hindu undivided family, association of persons and body of individuals, whether incorporated or not, at the rate of ten per cent of such tax where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds ten lakh rupees; (b) in the case of every firm, artificial juridical person referred to in sub-clause (vii)of clause (31)of section 2 of the Income-tax Act, and domestic company, at the rate of ten per cent of such tax; (c) in the case of every company, other than domestic company, at the rate of two and one-half per cent of such tax. (7) In cases in which tax has to be collected under the proviso to section 194B of the Income-tax Act, the collection shall be made at the rates specified in Part II of the First Schedule, and shall be increased, by a surcharge for purposes of the Union, calculated in the manner provided therein. (8) In cases in which tax has to be collected under section 206C of the Income-tax Act, the collection shall be made at the rates specified in that section and shall be increased by a surcharge for purposes of the Union, calculated,- (a) in the case of every individual, Hindu und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of the Union, calculated,- (a) in the case of every individual, Hindu undivided family, association of persons and body of individuals, whether incorporated or not, at the rate of ten per cent of advance tax where the total income exceeds ten lakh rupees; (b) in the case of every firm, artificial juridical person referred to in sub-clause (vii)of clause (31)of section 2 of the Income-tax Act, and domestic company, at the rate of ten per cent of such advance tax ; (c) in the case of every company, other than domestic company, at the rate of two and one-half per cent of such advance tax . (10)In cases to which, Paragraph A of Part III of the First Schedule applies, where the assessee has, in the previous year or, if by virtue of any provision of the Income-tax Act, income-tax is to be charged in respect of the income of a period other than the previous year, in such other period, any net agricultural income exceeding five thousand rupees, in addition to total income and the total income exceeds one lakh rupees, then, in charging income-tax under sub-section (2)of section 174 or section 174A or section 175 or sub-section (2)of section 176 of the said Act or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax so arrived at, as reduced by the rebate of income-tax calculated under Chapter VIII-A of the said Act, shall be increased by a surcharge for purposes of the Union calculated in each case, in the manner provided therein. (11) The amount of income-tax as specified in sub-sections (1)to (10)and as increased by a surcharge for purposes of the Union calculated in the manner provided therein, shall be further increased by an additional surcharge for purposes of the Union, to be called the Education Cess on income-tax , so as to fulfil the commitment of the Government to provide and finance universalised quality basic education, calculated at the rate of two per cent of such income-tax and surcharge. (12)For the purposes of this section and the First Schedule,- (a) domestic company means an Indian company or any other company which, in respect of its income liable to income-tax under the Income-tax Act for the assessment year commencing on the 1st day of April, 2005, has made the prescribed arrangements for the declaration and payment within India of the dividends (including dividends on preference shares) payable out of such income; (b) insurance commission means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ten per cent of such income-tax; (ii) in the case of every person, other than those mentioned in item (i), be increased by a surcharge for purposes of the Union calculated at the rate of ten per cent of such income-tax: Provided that in case of persons mentioned in item (i) above having a total income exceeding eight hundred and fifty thousand rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of eight hundred and fifty thousand rupees by more than the amount of income that exceeds eight hundred and fifty thousand rupees. 6.4 On combined reading of section 2(43) of the Act which defines tax to means income-tax chargeable under the provisions of this Act, Section 4 which is a charging section which states that income-tax shall be charged only where the Finance Act enacts that income shall be charged for any assessment year at rate or ratesspecified therein and Clause 2 of the Finance Act 2005 which provides that income-tax shall be charged at the rates specified in Part I of the First Schedule and such tax shall be increased by a surcharge for purposes of the Union calcula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Further, as per section 2(11), the amount of income-tax shall be further increased by an additional surcharge for the purposes of the Union to be called the Education Cess on income-tax . We have also gone through the Finance Act 2004 and found that the provisions therein regarding education cess are pari-materia to the provisions contained in the Finance Bill 2004. Even the subsequent Finance Acts contains identical provisions except the fact that another additional surcharge for the purposes of Union, to be called the Secondary and Higher Education Cess on income tax has been introduced which has the same character as that of education cess. The nature of education cess is therefore clearly additional surcharge for the purposes of the Union and being a surcharge, it partake the nature and character of tax. Similarly, under chapter VI of the Finance Bill 2004 which contains detail provisions on levy of education cess, clause 81 (1) provides that without prejudice to the provisions of sub-section (11) of section 2, there shall be levied and collected, in accordance with the provisions of this Chapter as surcharge for purposes of the Union, a cess to be called the Educatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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