RELIANCE PORTS AND TERMINALS LTD,MUMBAI vs. ASST CIT 3(3), MUMBAI

O R D E R

PER MAHAVIR SINGH, JM:

2. The only issue in this appeal of Revenue is against the order of CIT (A) in confirming the charge of Surcharge and Education Cess before giving credit of Minimum Alternative Tax u/s 115JAA of the Act. For this, the assessee has raised following two grounds.

“1. The learned Commissioner of Income-tax (Appeals) erred in confirming the action of Assessing Officer of charging Surcharge and Education Cess on tax before giving credit u/s 115JAA for Minimum Alternative Tax paid in earlier year and thereby erred confirming excess levy of Rs. 8,27,05,713 by way of Surcharge and Education Cess.

SHOWING CALCULATION OF TAX Sr. No. Particulars As per return As per AO of income 1. Gross total income 580,95,69,093 580,95,69,093 2. Tax on above @ 30% 174,28,70,727 174,28,70,727 3. Less: MAT credit (Note) 62,18,47,465 - 4. Balance Tax 112,10,23,262 174,28,70,727 5. Add: Surcharge @10% 11,21,02,326 17,42,87,073 6. Add: Education cess @ 3% 3,69,93,768 5,75,14,734 7. Tax, surcharge and cess 127,01,19,356 197,46,72,534 8. Less: MAT credit - 62,18,47,465 9. Total tax 127,01,19,356 135,28,25,069 In view of the above, the learned Counsel for the assessee taken us through the provision of section 115JAA (1) and 115JAA (1A) of the Act which read as under:-

Tax credit in respect of tax paid on deemed income relating to certain companies. 115JAA. (1) Where any amount of tax is paid under sub-section (1) of section 115JA by an assessee being a company for any assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section. [(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.] Further, he carried us through the provisions of sub-section 3 & 4 of section 115JAA of the Act which reads as under:-

(3) The amount of tax credit determined under sub-section (2) shall be carried forward and set off in accordance with the provisions of sub- sections (4) and (5) but such carry forward shall not be allowed beyond the fifth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1). (3A) The amount of tax credit determined under sub-section (2A) shall be carried forward and set off in accordance with the provisions of sub- sections (4) and (5) but such carry forward shall not be allowed beyond the [tenth] assessment year immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1A).] (4) The tax credit shall be allowed set-off in a year when tax becomes payable on the total income computed in accordance with the provisions of this Act other than section 115JA [or section 115JB, as the case may be]

It was claimed by the learned Counsel for the assessee in view of the above provisions of the section 115JAA of the Act, the brought forward tax credit u/s 115JAA of the Act has to be given set off before levy of Surcharge and Education Cess. It was argued by the learned Counsel that charging of Surcharge and Education Cess prior to giving of credit u/s 115 JAA will lead to absurd results and this is not the correct position of law. We find that the CIT (A) following the decision of co-ordinate Bench of Bangalore in the case of Infosys Technologies Ltd. v. CIT (2007) 108 TTJ (Bang.) disallowed the claim of assessee by observing as under:-

Let me refer to para 334.1 (page 837) Taxmann’s Direct Taxes – Law and Practice (50th Edition, 2013-14).The same is extracted below: Tax liability – Tax liability of a company is calculated as follows:- computation 1 – Under normal Computation 2 – Under minimum provisions alternate tax Step 1 Find out taxable income Step-8 Find out book profit (see under normal provisions para 336.2) Step-2 Find out income tax at the Step 9- Find out 18.5 per cent of rate of 30 percent (40 percent in book profit the case of foreign company)of income computed under (1) supra. There is no exemption limit Step-3 Add: Surcharge Step 10 – Add. Surcharge Step-4 Find out (2) + (3) Step 11 – Find out (9) +(10) Step-5 Add: education cess at the Step 12 – Add education cess at rate of 2 per cent of (4) and the rate of 2 per cent of (11) and secondary and higher education secondary and higher education cess at the rate of 1 per cent of (4) cess at the rate of 1 percent of (11) Step – 6 Deduct tax rebate or tax Step – 13 Find out (11) + (12) credit under sections 86, 90, 90A and 91E It has been held in Infosys Technologies Ltd. v. CIT (2007) 108 TTJ (Bang.) 282 that there is no merit in contention that before adding surcharge, tax payable is to be reduced by credit for double taxation.

In view of the above, there is no merit in the contentions of the appellant that charging of surcharge and education cess prior to giving credit u/s 115 JA is erroneous method of working. In view of the above the working done by the Assessing Officer is affirmed. We have heard the rival contentions and gone through the facts and 4. circumstances of the case. We have gone through the ITR-6 i.e. (Income Tax Return) for the AY 2010-11 and noted the method of computation of tax liability on total

B-TTI for computation of tax liability on total income reads as under :-

The learned Counsel stated that the CBDT notified ITR-6 also support the contention of the assessee wherein computation of tax liability on total income in part-B TTI is provided. On examination of the part of the ITR-6 relating to computation of tax liability on total income for the AY under consideration, it can be seen that credit u/s 115JAA of the Act is to be allowed in column 4 and then the amount of tax payable after giving of the credit u/s 115JAA of the Act is to be arrived in column 5 and then surcharge has to be computed on the amount mentioned in column 5 (tax payable after credit u/s 115JAA of the Act) and thereafter, the education cess including secondary and higher education cess is to be computed on the amount in column 5 and column 6 and then the gross tax liability of the assessee has to be arrived in column 8 including the tax payable after credit u/s 115JAA of the Act mentioned in column 5 plus surcharge mentioned in column 6 and education cess mentioned in column 7. Going by the above method of computation of tax payable by the assessee as provided in ITR-6 for AY 2011-12, it is very much clear that the surcharge and education cess is to be levied after reducing the MAT credit first. Therefore, we are in Counsel for the assessee that the tax credit u/s 115JAA of the Act should be allowed first and thereafter, Surcharge and Education Cess should be charged as per column 5, 6 and 7 provided in the part relating to computation of tax liability of total income of ITR-6 and then gross tax liability of the assessee should be arrived as provided in column No.8. However, the above position has changed from AY 2012-13 onwards. From AY 2012-13, Surcharge and Education Cess is levied before giving the MAT credit. Since the assessment year under consideration is AY 2011-12, it is decided as per the AY 2011-12, keeping in view the Form ITR-6 applicable for the AY 2011-12. Therefore, according to us the AO should compute the gross tax liability of the assessee in accordance with the method of computation provided in ITR-6 for AY 2011-12 as discussed above.

“ 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. In so far 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) 4. Credit under section 115JAA of tax paid in earlier years (if 2c is more than 1) (7 of schedule MATC) 5. Tax payable after credit under section 115JAA [3-4] 6. Surcharge on 5 7 Education cess, including secondary and higher education cess on (5+6) 8. Gross tax liability (5+6+7) The aforesaid entries leave no manner of ambiguity in regard to the method of computation of tax liability. Entry 3 requires computation of the gross tax payable. Under entry 4, credit is required to be given under section 115JAA of the Act of the tax paid in earlier years. Entry 5 requires a computation of the tax payable after credit under section 115JAA of the Act. The matter is placed beyond doubt by the parenthesis, which indicates that tax payable under entry 5 is to be 'arrived at by deducting the credit under section 115JAA of the Act (under entry 3) from the gross tax payable (under entry 4). The surcharge 'is computed on the amount reflected in entry 5. 7 The Tribunal has noted that from the next assessment year, the AY 2012-13, the position was materially altered but, in the present case, since the dispute related to the assessment year 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.”

Sd/ Sd/ (RAJESH KUMAR) (MAHAVIR SINGH) ACCONTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 26 -10-2016 Sudip Sarkar/Sr.PS