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TMI Blog2018 (10) TMI 1900X X X X Extracts X X X X X X X X Extracts X X X X ..... on 115JB and 115JAA are concerned, are allowed as indicated above. - ITA NOs.2348 & 2350/Mum/2017 - - - Dated:- 11-10-2018 - Shri Joginder Singh And Shri Ramit Kochar, JJ. For the Assessee: Shri Ajit Jain For the Revenue: Chaudhary Arun Kumar Singh-DR ORDER Joginder Singh, J. These two appeals are by the assessee against the impugned orders dated 20/01/2017 and 25/01/2017 of the Ld. First Appellate Authority, Mumbai, confirming the action of the Ld. ACIT in restricting the MAT credit of the Assessment Year 2006-07 to the extent of ₹ 44,29,848/- instead of ₹ 49,70,291/-, claimed by the assessee and further the fact that the said MAT credit under section 115JAA of the Act consist of sur-charge of ₹ 4,42,985/- and education cess of ₹ 97,457/-, which would be part of MAT payable under section 115JB of the Act for Assessment Year 2006-07. 2. During hearing, the ld. counsel for the assessee, Shri Ajit Jain, advanced arguments, which are identical to the ground raised by contending that the assessee moved application under section 154 of the Act, which was not considered in proper perspective. Plea was also raised that tax includes s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31/-. Now, the assessee is in appeal before us. 4. Firstly, it was submitted by the ld. AR that the assessee has moved an application u/s 154 for AY 2010-11 for rectifying the quantum of MAT credit and the AO has since accepted that the assessee company is eligible to carry forward MAT credit of ₹ 10,41,894/- pertaining to AY 2010-11 vide its order dated 12.02.2018. It was further submitted that the Hon ble Supreme Court in case of CIT vs. K. Srinivasan [1972] 83 ITR 346 has held that the words income-tax would include surcharge and additional surcharge. Therefore, the tax paid and tax payable as per section 115JAA(2A) would include both surcharge and education cess and the MAT credit claimed by the assessee company is correct. Further, reference was drawn to the Coordinate Bench decision in case of ACIT vs. Smt. Zahida Bano (ITA No. 579/JP/2013 dated 15.05.2017) where the aforesaid decision of the Hon ble Supreme Court has been followed. Further, the ld. AR referred to the decision of Hon ble Calcutta High Court in the case of Srei Infrastructure Finance Ltd. vs. DCIT [2016] 395 ITR 291 (Cal) wherein the earlier decision of the Hon ble Allahabad High Court in case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oning is, as such required to show why are we unable to follow the judgment of the Allahabad High Court in the case of Vacment India (supra)? . 12. There can be no quarrel with the aforesaid view. But the same has no application to this case because the form for the relevant year, which provided inspiration to the assessee to take this point, did in fact seek to control or derogate from the sections quoted above. That form, as a matter of fact, was erroneous. That form has subsequently been corrected. Had it not been a case of a wrong form, the corrected form would in that case be contrary to law. Our attention was not drawn nor was it contended that the corrected form is contrary to law. Both the forms, viz. the one which was prevalent at the relevant period of time and which was corrected for the assessment year 2012-13, could not be the correct forms. If the form of 2012-13 was correct, then the form of 2008-09 was wrong, and naturally contrary to law. 13. We, as such, answer the question in the affirmative and against the assessee .. 6. Further, the reliance was placed on the decisions of Coordinate Bench in the case of Virtusa (India) (P) Ltd. vs. DCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act rectifying the mistakes of quantum of MAT credit and since the earlier application was not disposed of by the Ld. Assessing Officer, the assessee moved another application, therefore, two appeals has been moved for Assessment Year 2008-09 but the issues involved are same. The issue before us is with respect to whether MAT credit will include income tax, sur-charge and education cess. The facts, in brief, are that the assessee vide application dated 02/04/2014 applied for rectification of order dated 07/01/2004, under section 154 of the Act as per which, it was claimed that there was short grant of MAT credit. The contention of the assessee was not found acceptable. Before adverting further, it is our bounded duty to examine section 115JB of the Act, which is reproduced hereunder:- 115JB. (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, 2012, is less than eighteen and one-half per cent of its book profit, such book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) the amount of income-tax paid or payable, and the provision therefor; or (b) the amounts carried to any reserves, by whatever name called, other than a reserve specified under section 33AC; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed ; or (f) the amount or amounts of expenditure relatable to any income to which section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply; or (fa) the amount or amounts of expenditure relatable to income, being share of the assessee in the income of an association of persons or body of individuals, on which no income-tax is payable in accordance with the provisions of section 86; or (fb) the amount or amounts of expenditure relatable to income accruing or arising to an assessee, being a foreign company, from,- (A) the capital gains arising on transactions in securities; or (B) the interest, royalty or fees for technical services chargeable to tax at the rate or rates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Explanation or Explanation below the second proviso to section 115JA, as the case may be; or (ii) the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply, if any such amount is credited to the 80[statement of profit and loss]; or (iia) the amount of depreciation debited to the 80[statement of profit and loss] (excluding the depreciation on account of revaluation of assets); or (iib) the amount withdrawn from revaluation reserve and credited to the 80[statement of profit and loss], to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause (iia); or (iic) the amount of income, being the share of the assessee in the income of an association of persons or body of individuals, on which no income-tax is payable in accordance with the provisions of section 86, if any, such amount is credited to the 80[statement of profit and loss]; or (iid) the amount of income accruing or arising to an assessee, being a foreign company, from,- (A) the capital gains arising on transactions in securities; or (B) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.-For the purposes of this clause, net worth shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); or 85[(viii) the amount of deferred tax, if any such amount is credited to the 85[statement of profit and loss]. 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 tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies (Indian Accounting Standards) Rules, 2015, the book profit as computed in accordance with Explanation 1 to sub-section (2) shall be further- (a) increased by all amounts credited to other comprehensive income in the statement of profit and loss under the head Items that will not be re-classified to profit or loss ; (b) decreased by all amounts debited to other comprehensive income in the statement of profit and loss under the head Items that will not be re-classified to profit or loss ; (c) increased by amounts or aggregate of the amounts debited to the statement of profit and loss on distribution of non-cash assets to shareholders in a demerger in accordance with Appendix A of the Indian Accounting Standards 10; (d) decreased by all amounts or aggregate of the amounts credited to the statement of profit and loss on distribution of non-cash assets to shareholders in a demerger in accordance with Appendix A of the Indian Accounting Standards 10: Provided that nothing contained in clause (a) or clause (b) shall apply to the amount credited or debited to other comprehensive income under the head Items that will not be re-classified to profit or loss in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porting period as defined in the Indian Accounting Standards 101; (iii) transition amount means the amount or the aggregate of the amounts adjusted in the other equity (excluding capital reserve and securities premium reserve) on the convergence date but not including the following:- (A) amount or aggregate of the amounts adjusted in the other comprehensive income on the convergence date which shall be subsequently re-classified to the profit or loss; (B) revaluation surplus for assets in accordance with the Indian Accounting Standards 16 and Indian Accounting Standards 38 adjusted on the convergence date; (C) gains or losses from investments in equity instruments designated at fair value through other comprehensive income in accordance with the Indian Accounting Standards 109 adjusted on the convergence date; (D) adjustments relating to items of property, plant and equipment and intangible assets recorded at fair value as deemed cost in accordance with paragraphs D5 and D7 of the Indian Accounting Standards 101 on the convergence date; (E) adjustments relating to investments in subsidiaries, joint ventures and associates recorded at fair value as deemed cost in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section,- (a) International Financial Services Centre shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005); (b) unit means a unit established in an International Financial Services Centre; (c) convertible foreign exchange means a foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999) and the rules made thereunder.] 2.3. If the aforesaid section is analyzed, explanation-2 inserted by the Finance Act, 2008, w.r.e.f. 01/04/2001 clarifies that 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Finance Act of 1964 in subsection (2)(a) and sub-section (2)(b) of section 2 would include surcharge and additional surcharge ? The High Court answered the question in the negative and in favour of the assessee. Section 2 of the Finance Act, 1964, which is headed as Income-tax and super-tax provides in sub-section (1) that income-tax and supertax shall be charged at the rates specified in Parts I and II of the First Schedule respectively and that in cases to which certain paragraphs of those Parts apply these taxes shall be increased for surcharge for the purpose of the Union. According to sub-section (2) where the total income of an assessee not being a company includes any income chargeable under the head Salaries income-tax and supertax payable by the assessee on the salary portion of the total income shall be the proportionate amount payable according to the rates provided in the Finance Act, 1963. Under section 2 of the Finance Act, 1963, income-tax was to be charged at the rates specified in Part I of the First Schedule and super-tax at the rates specified in Part II of that Schedule. The income-tax was to be increased in the cases mentioned by a surcharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. The Government of India Act, 1935, Part VII, contained provisions relating to finance, property, contracts and suits. Sections 137 and 138 in Chapter I headed finance provided for levy and collection of certain succession duties, stamp duties, terminal tax, taxes on fares and freights, and taxes on income, respectively. In the proviso to section 137 the federal legislature was empowered to increase at any time any of the duties or taxes leviable under that section by a surcharge for federal purposes and the whole proceeds of any such surcharge were to form part of the revenues of the federation. Subsection (3) of section 138 which dealt with taxes on income related to imposition of a surcharge. Under the Government of India Act, 1935, the surcharge was levied for the first time by the Indian Finance No. 2 Act, 1940. Section 3(1) of that Act read : Subject to the provisions of this section, the rates of income-tax and rates of super-tax . . . imposed by sub-section (1) of section 7 of the Indian Finance Act, 1940, shall, in respect of the year beginning onthe first day of April, 1940, be increased by a surcharge for the purposes of the Central Government . Similar phra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges within the meaning of article 271 of the Constitution. The phraseology employed in the Finance Acts of 1940 and 1941 showed that only the rates of income-tax and super-tax were to be increased by a surcharge for the purpose of the Central Government. In the Finance Act of 1958, the language used showed that income-tax which was to be charged was to be increased by a surcharge for the purposes of the Union. The word surcharge has thus been used to either increase the rates of income-tax and super-tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term income-tax as used in section 2 includes surcharge. According to article 271, notwithstanding anything in articles 269 and 270, Parliament may at any time increase any of the duties or taxes referred 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. Article 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... among others, to charge (one) too much or in addition................ ; also additional tax . Thus, the meaning of surcharge is to charge in addition or to subject to an additional or extra charge. If that meaning is applied to section 2 of the Finance Act, 1963, it would lead to the result that income-tax and super-tax were to be charged in four different ways or at four different rates which may be described as : (i) the basic charge or rate (In Part I of the First Schedule); (ii) surcharge ; (iii) special surcharge ; and (iv) additional surcharge calculated in the manner provided in the Schedule. Read in this way, the additional charges form a part of the income-tax and super-tax. It is possible to argue, and that argument has been commended on behalf of the revenue, that the word surcharge has been used in article 271 for the purpose of separating it from 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 Union. It would appear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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