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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Shri M.Balaganesh, AM & Shri S.S.Viswanethra Ravi, JM]
ORDER Per M.Balaganesh, AM
1. This appeal is directed by the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-15, Kolkata [in short the ld CIT(A)] in Appeal No.389/CIT(A)-15/14-15/CPC/Cir-8/R&T/Kol dated 30.11.2015 against the intimation under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) in CPC/1112/I6/1111738773 dated 09.01.2012 by the Centralized Processing Center, Income Tax Department, Post Bag No. 2, Electronic City, Post Office, Bangalore- 560100.
The only issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in not granting the credit for surcharge and cess while computing the tax credit u/s 115JAA of the Act, in the facts and circumstances of the case.
2 Bhagwati Oxygen Ltd. A.Yr.2011-2 3. The brief facts of this issue is that the assessee is a private limited company and had electronically filed its return of income for the assessment year 2011-12 disclosing total income of Rs. 1,41,26,460/-. The assessee computed the tax liability at Rs. 46,92,789/- including surcharge and cess under the normal provisions of the Act.
3.1 The assessee computed the book profit u/s 115JB of the Act at Rs. 92,42,889/- and determined the tax payable thereon at Rs. 17,13,632/- including surcharge and cess.
3.2. The assessee computed the MAT credit u/s 115JAA of the Act to be adjusted in future years at Rs. 29,79,157/- ( 46,92,789 – 17,13,632).
This return was processed u/s 143(1) by Centralized Processing Centre, Bangalore (in short “CPC”) wherein the total income under normal provisions of the Act was determined at Rs. 1,41,27,460/- and tax @ 30% thereon was determined at Rs. 42,38,238/-.
4.1. In the said intimation u/s 143(1) the book profit u/s 115JB of the Act was determined at Rs. 92,42,889/- and tax @ 18% was determined at Rs. 16,63,720/-.
4.2. Accordingly, the CPC in the intimation u/s 143(1) of the Act determined the MAT credit u/s 115JAA of the Act at Rs. 25,74,518/- (4238238 – 1663720).
4.3. The only dispute that arises in this issue is that CPC while determining the MAT credit u/s 115JAA completely ignored the surcharge portion and cess portion computed by the assessee , both under normal provisions of the Act as well as under computing the tax liability u/s 115JB of the Act. In view of this, the assessee was fastened with a demand payable.
3 Bhagwati Oxygen Ltd. A.Yr.2011-2 5. Against this intimation, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee pleaded that surcharge and cess are nothing but a component of tax. In support of this proposition, the assessee placed reliance on the decision of Hon'ble Supreme Court in the case of CIT vs. K. Srinivasan reported in 83 ITR 346 (SC) among other decisions. The Ld. CIT(A) however was not convinced with the argument of the assessee and upheld the demand raised by the CPC in the intimation u/s 143(1) of the Act by observing as under:
“4. Decision I have carefully gone through the submissions made by the AR of the assessee. However, I am not convinced with the arguments. The rate at which income tax is to be calculated is given in Part III which says that in the case of the company, same is to be calculated @ 30%. The surcharge and the education cess are separately mentioned there, which are to be levied over and above the income tax calculated at the rate given above, Section 2(43) of the Act defines tax as “tax” in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent 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 tax payable under section 115WA]. Thus, it is clear that while working out the tax credit u/s 115JAA, only income tax is to be considered and not the surcharge and the education cess. Hence, the tax calculation is held to be rightly done in this case by the CPC. It is held in a similar case by Hon’ble ITAT Delhi Bench, in the case of Richa Global Exports (P) Ltd. 25 Taxman. Com 1(Del) that amount of surcharge and education cess cannot be included in amount of MAT credit u/s 115JAA. It is held that tax u/s 115JAA does not talk about the income tax as increased by surcharge and education cess. It talks about only income tax. Wherever statute has sought income tax to include surcharge and education cess, it has specifically done as the case of Expln. 2 to Section 115JB. Similarly, Form 29B which is filed along with return of income where MAT is applicable, it states that amount of income tax payable by the company….; it does not state about surcharge or education cess. Further, the assessee’s condition that such tax calculation is not possible u/s 143(1) is also without any basis. The controversy being cited by the assessee in calculation of the tax credit is of his own creation and because of twisting the 3
4 Bhagwati Oxygen Ltd. A.Yr.2011-2 interpretation of otherwise straight meaning of Section 115JAA. Thus, this contention of the assessee is rejected. In the result, the appeal of the assessee is dismissed.”
Aggrieved, the assessee is in appeal before us on the following grounds:
For that in the facts and circumstances of the case Appellate order passed was in violation of principles of natural justice hence is unjustified, unwarranted and uncalled for.
2. For that in the facts and circumstances of the case the adjustment made in the Intimation u/s 143(1) of the I.T. Act, 1961 is beyond the scope of the Act. Thus, the same is bad in law. 3. For that in the facts and circumstances of the adjustment in respect of credit u/s 115JAA of the I.T. Act, 1961 made in the intimation passed u/s 143(1) of the Income Tax Act, 1961 was beyond the scope of the said section hence, the said order be quashed. 4. For that in the facts and circumstances of the assessing officer erred in overcharging surcharge and the assessing officer be directed to recomputed the same as per law. 5. For that in the facts and circumstances of the assessing officer erred in under allowing credit u/s 115JAA of the I.T. Act, 1961 the assessing officer be directed to allow the credit as per law. 6. For that the interest computed u/s 234B/C of the I.T. Act, 1961 is over charges and wrongly calculated and/or is not applicable to the assessee’s case hence, the interest be deleted and/or correctly computed. 7. The appellant craves leave to press new, additional grounds of appeal, amend and/or modify, withdraw any of the above grounds before or at the time of hearing of the appeal.
The Ld. AR placed before us the copy of the Hyderabad Tribunal in the case of M/s Virtuse (India) Pvt. Ltd. vs. DCIT, Cir-17(2), Hyderabad in dated 04.03.2016 wherein the Co-ordinate Bench of Hyderabad Tribunal after considering the decision of Delhi Tribunal (relied upon by ld CITA) and by placing
5 Bhagwati Oxygen Ltd. A.Yr.2011-2 reliance on the decision of Hon'ble Supreme Court in the case of CIT vs. K. Srinivasan (supra) observed that tax includes surcharge and cess and accordingly for computing the MAT credit u/s 115JAA of the Act, both surcharge and cess should be taken into account. In response to this, the Ld. DR vehemently relied on the decision of the Delhi Tribunal by the Ld. CIT(A).
We have heard the rival submissions. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. We find that the issue under dispute has been addressed against the assessee by the decision of Delhi Tribunal in the case of Richa Global Exports Pvt. Ltd. reported in 25 taxmann. com 1 (Del). We find that the issue under dispute is covered in favour of the assessee by the Co-ordinate Bench of Hyderabad Tribunal relied upon by the Ld. AR (supra). We find that Hyderabad Tribunal after considering the decision of Delhi Tribunal (supra) and after considering the decision of the Apex Court in the case of CIT vs. K. Srinivasan reported in 83 ITR 346 (SC) had held that tax includes surcharge and cess and accordingly the entire component of taxes including surcharge and cess shall have to be reckoned for calculating the MAT credit u/s 115JAA of the Act. We also find that the Hon’ble Apex Court had in the case referred to supra, had held that meaning of word ‘surcharge’ is nothing but an ‘additional tax’. In our considered opinion, this understanding of surcharge and cess being included as part of the tax gets further sanctified by the amendment which has been brought in Section 234B of the Act in Explanation 1 Clause 5 while defining the expression ‘assessed tax’. For the sake of convenience, the said explanation 1 to Section 234B is reproduced hereunder:
“In this Section, “assessed tax” means the tax on the total income determined under sub-section (1) of Section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of- (i) Any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income; 5
6 Bhagwati Oxygen Ltd. A.Yr.2011-2 (ii) Any relief of tax allowed under section 90 on account of tax paid in a country outside India; (iii) Any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section; (iv) Any deduction, from the Indian income tax payable, allowed under section 91, on account of tax paid in a country outside India; and (v) Any tax credit allowed to be set of in accordance with the provisions of section 115JAA [or section 115JD].”
From the aforesaid provisions it could be inferred that the legislature wanted to treat the payment of entire taxes (including surcharge and cess) eligible for MAT credit u/s 115JAA while calculating the interest on ‘assessed tax’ u/s 234B of the Act, meaning thereby, the assessed tax shall be determined after reducing the entire MAT credit u/s 115JAA of the Act for the purpose of calculating interest u/s 234B of the Act. We find that this is clinching evidence of the intention of the legislature not to deprive any credit of any payment of surcharge and cess made by the assessee either in the MAT or under the normal provisions of the Act. It is not in dispute that the surcharge and cess portion was not paid by the assessee along with the tax portion. The bifurcation of the total payment of taxes by way of tax, surcharge and cess is only for the administrative convenience of the Union of India in order to know the purpose for which the said portion of amounts are to be utilized for their intended purposes. Hence the bifurcation is only for utilization aspect and does not change the character of payment in the form of taxes from the angle of the assessee. As far as assessee is concerned, it had simply discharged the statutory dues comprising of tax, surcharge and cess to the Union of India and hence if paid in excess, would be eligible for either refund or adjustment as contemplated u/s 115JAA of the Act. If the version of the ld CITA is to be accepted, then it would result in an situation wherein if the assessee is entitled for refund, he would not be entitled for refund on the surcharge and cess portion. This cannot be the intention of the legislature and it is already well settled that the tax is to be collected only to the extent as authorized by law in terms of Article 265 of the Constitution and the department cannot be unjustly enriched with the surcharge and cess portion of the 6
7 Bhagwati Oxygen Ltd. A.Yr.2011-2 amounts actually paid by the assessee. With these observations, we hold that the reliance placed by the Ld. AR on the decision of Hyderabad Tribunal is well founded and squarely applies to resolve the dispute under appeal before us. Accordingly, the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 15 .11.2017