Case Law Details
Brief of the Case
ITAT Hyderabad held in the case of M/s Virtusa (India) Pvt. Ltd. vs. DCIT that per sec.115JB (2A), the tax credit shall be the difference of tax paid for any AY under 115JB(1) and the amount of tax payable on his total income computed in accordance with the other provisions of this Act. The important word used is tax paid and as per the Hon’ble Apex Court decision in the case of K. Srinivasan [1972] 83 ITR 346 (SC), the term ‘tax’ includes surcharges. Also the assessee has relied on the ITR – 6 format as approved by CBDT to arrive at the total liability as well as the MAT credit calculations and paid tax accordingly. The assessee had followed the procedure properly and the Assessing Officer had made the calculations applying his own interpretation or relied on the programme, we are not sure whether it is programme hitch or the interpretation of Assessing Officer was not in line with the calculations proposed in ITR-6. Hence MAT credit is needed to be calculated after taking surcharge and education cess into consideration.,
Facts of the Case
The assessee filed its return of income on 30/11/2012 admitting total income of Rs. 42,87,89,690 under the normal provisions of the Income-tax Act,1961. The return of income was processed by the CPC, Bangalore and assessed u/s 143(1) raising demand of Rs. 32,06,700/-. The main difference in the computation of tax by the assessee and the AO was on account of surcharge & education cess while calculating MAT credit under MAT provisions.
Contention of the Assessee
The ld counsel of the assessee submitted that it is clear from the return of income filed by the assessee that the difference between the tax payable under normal provisions and as per MAT provisions is Rs 4,22,45,804 (i.e. Rs. 13,91,20,812 less Rs 9,68,75,009). On the other hand, as per intimation u/s 143(1) of the Act, it is Rs. 3,90,62,234 (i.e. Rs 12,86,36,907 less Rs 8,95,74,673). Hence, in the intimation, the eligible MAT credit considered for set off has been erroneously calculated, exclusive of surcharge and education cess at Rs. 3,90,62,234 as against the correct eligible MAT credit available for set off of Rs. 4,22,45,803, inclusive of surcharge and education cess as considered in the return of income filed by the Company.
He further submitted that as per section 115JAA (5) of the Act, set off in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on its total income and the tax which would have been payable under the provisions of Section 115JB of e Act for that assessment year. Accordingly, the eligible MAT credit available to set off for the Company during the captioned A Y, needs to be arrived at by comparing the difference between the tax liability (inclusive of surcharge and cess) computed under the normal provisions of the Act and the tax liability (inclusive of surcharge and cess) computed under the provisions of section 115JB of the Act.
He further submitted that the MAT credit is arrived at by the assessee based on the ITR 6 form, which is being followed universally by all the assessees under the Act. He, therefore, submitted that the AO also bound to follow the same. He also submitted that CIT(A) has not considered the judicial precedent in the case of K. Srinivasan Vs. CIT, [1972] 83 ITR 346 (SC),on which reliance placed by the assessee, to bring to the knowledge of CIT(A) that in the above judgment, the Apex Court has held that the term ‘tax’ includes surcharge. Ld. AR also referred to the section 115JAA (2A) of the Act and the provisions of such Act describes the tax credit to be allowed shall be the difference of the tax ‘paid’ for any AY under subsection (1) of section 115JB and the amount of tax payable by the assessee on total income computed in accordance with the other provisions of the Act. From the above, it is important that the assessee has paid the tax which includes surcharge and education cess; hence, the MAT credit should include surcharge and education cess. Ld. AR also submitted alternate MAT credit calculation before us to demonstrate that the method adopted by the assessee and the AO will give the same tax liability irrespective of the method adopted.
Held by CIT (A)
CIT (A) dismissed the appeal of the assessee. It was held that following the decision of the ITAT in the case of Richa Global Exports Pvt. Ltd., surcharge and education cannot be taken into account for the purpose of set off of brought forward MAT credit. Further held that MAT credit is treated under the Act on par with prepaid taxes. This is clear from sec.140A where the self- assessment tax is required to be determined after deducting advance tax, TDS and other relief u/s 90, 90A and 91. It follows that surcharge and education cess are levied on the gross amount of income tax and not the net figure after deducting advance tax, TDS etc. In fact, though the appellant had claimed credit for TDS of ~2.36 crores and advance tax of Rs. 6.95 crores, these sums were not deducted for the purpose of levy of surcharge and education cess. For the same reason, deduction of MAT credit is not warranted before calculating surcharge and education cess.
Held by ITAT
ITAT held that as per sec.115JB (2A), the tax credit to be allowed shall be the difference of tax paid for any AY under sub-section (1) of 115JB and the amount of tax payable on his total income computed in accordance with the other provisions of this Act. The important word used is tax paid and as per the Hon’ble Apex Court decision in the case of K. Srinivasan [1972] 83 ITR 346 (SC), the term ‘tax’ includes surcharges. Also as per sec.115JAA (5), “Set off” in respect of brought forward tax credit shall be allowed for any AY to the extent of difference between tax on his total income and the tax which would have been payable u/s 115JB, as the case may be for that AY. On careful reading, the term used is tax not income tax or any other term.
In the given case, sec.115JAA (5), are applied as it is in the ITR ‘6’. The ITR-6 form is designed and approved by the apex body CBDT and this form is universally used by all the company assessees. In Part A of the ITR-6, the assessees are required to fill the balance sheet and P&L A/c. From the data of Part A, all the related calculations are carried out in other parts of the ITR-6 i.e. Part – B and other related schedules. None of the columns in the Part ‘B’ are manually entered, these are auto fills, and the datas are extracted from Part “A”. It is pertinent to analyse the total tax liability calculations designed by the CBDT for the AY 2012-13. The tax liabilities for normal provisions as well as MAT are calculated with surcharge and cess. The MAT credit are calculated automatically using the prescribed algorithm, this is nothing but balancing figure i.e., the difference between tax liability as per normal provisions and MAT provisions. Both the above tax liabilities are calculated with surcharge and cess. Assessing Officer cannot overlook these formats and (interpret it in his own method of calculating tax credit while making assessment u/s 143(1) of the Act.) proceed to calculate the MAT credit to compute assessment u/s 143(1) applying different methods when the proper and correct method as proposed by CBDT in ITR-6. The Assessing Officer is expected to follow the ITR-6 format to complete the assessment u/s 143(1) or 143(3) of the Act.
Further Assessee has relied on the ITR – 6 format to arrive at the total liability as well as the MAT credit calculations and paid tax accordingly. In our view, the assessee had followed the procedure properly and the Assessing Officer had made the calculations applying his own interpretation or relied on the programme, we are not sure whether it is programme hitch or the interpretation of Assessing Officer was not in line with the calculations proposed in ITR-6. Therefore, we delete the addition made..
Accordingly appeal of the assessee allowed.
