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TMI Blog2020 (5) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... redit at Rs. 3, 08, 43, 650/- without including surcharge and education cess while arriving at the amount of total tax payable under the normal provisions of the Income Tax Act as well as u/s 115JB of the Act, whereas the eligible MAT credit adjustment should have been computed at Rs. 3,49, 45, 854/- by including the surcharge and education cess. 4. Without prejudice to the Ground No.l above, the Ld. CIT(Appeals) has erred on law and facts in allowing the calculation of tax liability of Rs. 1, 57, 59, 564 /- on account of surcharge and education cess on the tax payable before allowing the MAT credit u/s 115JAA whereas the same should have been allowed to be calculated at Rs.l, 16, 57, 358/-after granting the MAT credit. 5. That the interest of Rs. 10, 82, 592/- u/s 234B and Rs. 2,07, 163 /- u/s 234C has been wrongly charged, whereas the assesse is not liable to pay additional interest u/s 234B & 234 C. Therefore, additional interest u/s 234B & 234C may please be deleted. 6. The assessee craves leave to add, alter and amend any of the above grounds of appeal before the same is heard or disposed of. 3. At the outset, Ld. Counsel for the assessee has submitted that the issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad High Court in the case of DCIT Vs. Vacment India Ltd. 369 ITR 304 wherein the Hon'ble High Court after going through the relevant entries in the form ITR-6 and based on the sequence of gross tax payable, credit under 115JAA, surcharge, education cess and then the gross tax liability held that there was no ambiguity with regard to computation of tax liability. The main issue dealt in that case was whether adjustment can be rectified under section 154 or not and the Tribunal held that the proceedings under section 154 in that case were not legally valid. Similarly the judgments in the case of DCIT Vs. Vacmet India Pvt. Ltd. ITA No. 93/Agra/2014. and DCIT Vs. Godrej Oil Palm Ltd. ITA No. in ITA No. 5098/Mum/2013 dealt with the issue whether surcharge and Education cess should be levied after giving MAT credit or not which is also not the issue before us in the instant case. 16. With regard to the case of M/s Richa Global Export Private Ltd. ITA No. 2303/2012, we find that the case deals with whether the amount of MAT Credit under section 115JA would include surcharge and cess on the tax payable on the book profits which is the similar ground in the present appeal. 17. The Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess. This point is further clarified by intimation u/s 143(1) sent to assessee wherein tax payable u/s 115JB has been calculated as only income tax 7 ITA No2303/Del/2012 and no surcharge or education cess has been included in the amount of income tax. 8. The submission of Ld AR that tax includes surcharge and education cess as per explanation 2 of section 115JB is correct to the extent that explanation 2 was inserted to clarify the meaning of tax as contemplated in clause (a) of explanation (1) with respect to calculation of book profit which is read as under:- "Explanation-1 for the purpose of this section book profit means the net profit as shown in the P&L Account for the relevant previous year prepared under sub section (2) as increased by :- a) the amount of income tax paid or payable and the provisions thereof: b) xxxxx c) xxxxx d) xxxxx e) xxxxx f) xxxxx The above explanation 1 clarifies that explanation 2 to section 115JB was inserted to define the meaning of tax (which of course includes education tax and surcharge) for the purpose of calculating book profits liable to tax u/s 115JB and it cannot be extended to sections 115JB or section 115JAA of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case, while sub-section (1) & (2) relate to credit of taxes paid u/s 115JA of the Act. The provisions of section 115JAA (1A) and (2A) are reproduced herein under for clarity :- "Tax credit in respect of tax paid on deemed income relating to certain companies. 115JAA. (1A) Where any amount of tax is paid under sub-section (1) of section 115JB by an assessee, being a company for the assessment year commencing on the 1st day of April, 2006 and any subsequent assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section.] . . . (2A) The tax credit to be allowed under sub-section (1A) shall be the difference of the tax paid for any assessment year under sub-section (1) of section 115JB and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act: 10. As per the above, sub section (1A) allows credit of taxes paid under the deeming provisions of section 115JB.The quantum of tax credit so allowed is set out in sub-section (2A) which states the same to be the difference of the tax paid u/s 115JB and the tax payable as per norma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2007, is less than ten per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of ten per cent. Thus the specified rate of tax u/s 115JB of the Act is 10 % of the book profits. The second proviso to clause 3 of the Finance act, states that the amount of income tax so computed shall be increased by a surcharge.The said proviso is reproduced hereunder: "Provided further that in respect of any income chargeable to tax under sections 115A, 115AB, 115AC, 115ACA, 115AD, 115B, 115BB, 115BBA, 115E and 115JB or fringe benefits chargeable to tax under section 115WA of the Income-tax Act, the amount of income-tax computed under this subsection shall be increased by a surcharge for purposes of the Union, calculated,- Clause 11 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to in those articles by a surcharge for the purposes of the Union and the whole proceeds of any such surcharge shall form part of the consolidated fund of India. Art. 270 provides for taxes levied and collected by the Union and distributed between the Union and the States. Clause (1) says that taxes on income other than agricultural income shall be levied and collected by the Government of India and distributed between the Union and the States in the manner provided in cl. (2). Art. 269 deals with taxes levied and collected by the Union but assigned to the States. The provisions of Art. 268 which is the first one under the heading "Distribution of revenue between the Union and the States" relate to duties levied by the Union but collected and appropriated by the States. Thus, these articles deal with the levy, collection and distribution of the proceeds of the taxes and duties mentioned 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. 9. As mentioned before, the legislative entry 82 in List I relates to taxes on income ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the basic charge of a tax or duty for the purpose of distributing the proceeds of the same between the Union and the States. The proceeds of the surcharge are exclusively assigned to the Union. Even in the Finance Act itself it is expressly stated that the surcharge is meant for the purpose of the Unio 12. We shall now refer to Explanation 2 to section 115 JB which reads as under:- Explanation 2 to section 115JB Explanation 2.-For the purposes of clause (a) of Explanation 1, the amount of income-tax shall include- (i) any tax on distributed profits under section 115-O or on distributed income under section 115R; (ii) any interest charged under this Act; (iii) surcharge, if any, as levied by the Central Acts from time to time; (iv) Education Cess on income-tax, if any, as levied by the Central Acts from time to time; and (v) Secondary and Higher Education Cess on income-tax, if any, as levied by the Central Acts from time to time. A bare perusal of the above would reveal that the said explanation also corroborates what has been stated by us above and what has been held by the Hon'ble Supreme Court in the case of K Srinivasan (supra) that taxes paid include s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ys. Surcharge at 5% shall be levied if book profit exceeds 1 crore. Education cess @ 3% shall be added on the aggregate of income tax and surcharge. At the same time, section 115JAA provides that where any amount of tax is paid under section 115JB(l) by a company for any assessment year, credit in respect of the taxes so paid for such assessment year shall be allowed on the difference of the tax paid under section 115JB and the amount of tax payable by the company on its total income computed in accordance with the other provisions of the Act. In other words, MAT credit shall be computed as under: MAT credit available = Tax paid u/s 115JB - Tax payable on the total income under normal provisions of the Act. 9.1 The amount of tax credit so determined shall be allowed to be carried forward and set off in a year when the tax becomes payable on the total income computed under the regular provisions. However, no carry forward shall be allowed beyond the tenth assessment year immediately succeeding the assessment year in which the tax credit becomes allowable. The set off in respect of the brought forward tax credit shall be allowed for any assessment year to the extent of the differ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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