Issue/Justification

There is no ambiguity with regard to the method of computation of tax liability in view of the fact that income tax e-filing return Form ITR 6 allows deduction for credit under Section 115JAA from the gross tax payable excluding surcharge and education cesses and specifically instructs an assessee to compute surcharge and education cess on the tax payable after reduction of  MAT Credit brought forward u/s 115JAA. The manner of set off of brought forward MAT Credit is nowhere prescribed in the Income tax Act, 1961. But the issue is squarely covered by the decision of the Hon’ble Allahabad High Court in CIT v Vacment India (2014) 369 ITR 304.

Suggestion

It is suggested that Setoff of B/f MAT Credit as per Section 115JAA may be allowed against tax on total income before charging any surcharge and education cesses.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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