CRYSTAL CROP PROTECTION LIMITED,DELHI vs. DCIT, DELHI

ORDER PER BRAJESH KUMAR SINGH, AM,

This appeal by the assessee is directed against the order of National Faceless Appeal Centre (NFAC), Delhi, dated 14.12.2021 pertaining to Assessment Year 2011-12.

2. The grounds of appeal raised by the assessee reads as under:-

“1. That on the facts and in the circumstances of the case, the disallowance, imposition of tax and interest with reference thereto, the quantification of taxable income and the tax liability, has been grossly unjustified, erroneous and unsustainable and necessary direction be given to the Ld. AO to give appropriate relief in accordance with law.

2. That on the facts and in the circumstances of the case the Ld. AO erred in giving credit of MAT by first adding education cess and surcharge to gross tax and then adjusting MAT credit therefrom instead of first adjusting such credit from gross tax exclusive of surcharge and education cess and then adding education cess and surcharge thereto.

Sl. Dates Description No. 1 30.09.2011 Original return of income filed declaring total income of Rs.129,93,65,800/- computed under the normal provisions of the Act and Rs.138,36,55,191/- u/s 115JB of the Act. 2 30.09.2011 Revised return of income filed declaring total income of Rs.129,93,65,800/- computed under the normal provisions of the Act and Rs.138,36,55,191/- u/s 115JB of the Act. 3 24.03.2014 Assessment u/s 143(3) made, wherein, disallowance u/s 14A read with Rule-8D was made 4 29.12.2015 CIT(A) dismissed the appeal of the assessee against the aforesaid order u/s 143(3). 5 02.12.2019 The ITAT passed an order in favour of the assessee in respect of the appeal filed by the assessee against the order of the ld. CIT(A) dated 20.12.2015. 6 04.08.2020 An order u/s 254 was passed determining refund of Rs.2,89,14,430/-. In this order, the MAT credit of Rs.8,60,09,567/- was adjusted from the total tax liability of Rs.40,36,45,338/- including surcharge (Rs.2,73,41,071/-) and education cess (Rs.1,17,56,660/-)

4. Against the above tax adjustment of the MAT credit against the total tax liability of the assessee as detailed at Sr. No.6 as above, the assessee submits that the MAT credit of Rs.8,60,09,567/- should have been adjusted first from the tax exclusive of surcharge and education Cess and then surcharge and education Cess should have been calculated. With this plea the assessee filed an appeal before the Ld. CIT(A), who dismissed the appeal of the assessee vide order dated 14.12.2021.

4.1. The Ld. CIT(A) did not agree with the case laws relied upon by the assessee, wherein, it was held that MAT credit u/s 115JA should be first reduced from the tax payable and thereafter on the residual amount, the surcharge and education cess should be levied. The Ld. CIT(A) dealt with the provisions u/s 115JAA and relied upon the decision of Hon’ble Apex Court in the case of CIT vs K. Srinivasan (83 ITR 346)(SC), which held that the term ‘tax’ includes surcharge. The Ld. CIT(A) also did not accept the plea of the assessee regarding the part -B of the ITR-6 being revised from Assessment Year 2012-13, wherein, credit u/s 115JAA was placed after the gross tax liability including tax, surcharge and education cess, whereas, in the part-B of ITR-6 in AY 2011-12, the sequence of credit u/s 115JAA was just below gross tax payable and thereafter the charge of surcharge and education cess followed on the ground that there was no change in the provisions of Section 115JAA of the Act with respect to MAT Credit. The Ld. CIT(A) also relied upon the following case laws to hold that the MAT Credit has to be allowed after charging of surcharge and education cess and not against the tax liability before the levy of surcharge and education Cess as contended by the assessee. The case laws relied by the Ld. CIT(A) are as under:-

1. CIT vs K. Srinivasan [83 ITR 346](SC)

6. The ld. AR submitted the same arguments as made before the ld. CIT(A) and filed a written submission as under:-.

2. The Revenue has formulated the following question of law in support of the appeal: "Whether the Hon'ble ITAT has erred in law as well as in the facts and circumstances of the case in allowing the calculation of tax in violation of the provisions of the relevant Finance Act which prescribe calculation of tax as inclusive of cess and surcharge."

3. In the present case, the assessee filed an appeal before the Commissioner (Appeals) against an order that was passed under Section 143 (1) read with Section 154 of the Act by the ACIT-Centralized Processing Centre (CPC), Bangalore, by which a demand of Rs.10,92,766.00 was raised on the assessee. The following grounds of appeal were raised before the Commissioner (Appeals).

1. Because the rectification application filed under Section 154 of the I.T. Act before CPC, Bangalore has been wrongly and illegally rejected.

2. Because surcharge and education cess on the tax payable has been calculated before allowing credit of tax paid in the earlier years under Section 115JAA which is apparently wrong and hence, ACIT (CPC) has erred on facts and as well as on law in rejecting the application filed under Section 154 of the I.T. Act.

3. Because without prejudice to the above mentioned grounds, if the credit of tax paid under Section 115JAA is to be allowed after charging surcharge and education cess, then the credit which has been allowed of the taxes paid in the earlier year should also be inclusive of surcharge and education cess."

the appeal filed by the Revenue by its order dated 22 May 2014. 5. The only question which is raised pertains to the computation of tax in accordance with the modalities which are prescribed in the relevant form, ITR-6. Insofar as is material, the relevant entries in the form (Part B-TTI) are as follows 3 Gross tax payable (enter higher of 2c and 1) 3 4 Credit under section 115JAA of tax 4 paid in earlier years (if 2c is more than 1)(7 of Schedule MATC)

5 Tax payable after credit under section 5 115JAA [(3-4)]

6 Surcharge on 5 6 7 Education cess, including secondary 7 and higher education cess on (5+6)

8 Gross tax liability 8

7. The Tribunal has noted that from the next assessment year, AY 2012-13, the position was materially altered, but in the present case, since the dispute related to AY 2011-12, the method of computation, as directed by the Commissioner (Appeals), was plainly in accordance with the methodology as provided in ITR-6. The Tribunal in confirming the order of the Commissioner (Appeals) has, hence, not committed any error. The appeal will not give rise to any substantial question of law and is, accordingly, dismissed. There shall be no order as to costs.” 8. 7.1. Further, on perusal of the decisions relied upon by the Ld. CIT(A) in dismissing the appeal of the assessee, it is seen that the same held that when the tax is paid u/s 115JB along with surcharge and cess, then entire amount would be considered for credit available u/s 115JAA and accordingly the entire amount would be available for the benefit of set off in the subsequent years from the amount of gross tax payable by the assessee. In this case, as evident from the chart submitted by the assessee, the assessee has calculated tax payable u/s 115JB as well as the MAT credit available for the current year as well as the cumulative MAT available amounting to Rs.8,60,09,567/- without considering surcharge and education cess as the case may be during the said years. Therefore, the decision of the Ld. CIT(A) in dismissing the appeal of the assessee and thereby upholding the action of the AO for including surcharge and education cess on tax payable before allowing MAT credit without giving the parity benefit to the assessee to include similar surcharge and education cess paid on the MAT credit in the respective assessment years before making such an adjustment cannot be sustained.

7.2. Further, the decision of Hon’ble Allahabad High Court in the case of Vacment India (supra) squarely covers the case in favour of the assessee.

Respectfully following the same in the given facts of the case, we, therefore, direct the AO to adjust first MAT credit of Rs.8,60,09,567/- from the tax payable exclusive of surcharge and education cess and thereafter, surcharge and education cess should be calculated as claimed by the assessee. Ground Nos. 1 & 2 of the appeal are allowed.