2017 (11) TMI 1898 - AT - Income Tax

Tribunal clarifies tax calculation under section 115JAA

Asst. Commissioner of Income-tax, Circle - 17 (1), Hyderabad Versus Divi's Laboratories Ltd.

The Tribunal upheld the CIT(A)'s decision that surcharge and education cess should be calculated after deducting MAT credit. It clarified that 'tax' for ... MAT credit calculations - surcharge and education cess to be calculated after deducting the MAT credit u/s 115JAA from the tax on assessed income or not? - HELD THAT:- Issue decided in M/S VIRTUSA (INDIA) PVT. LTD. VERSUS DCIT, CIRCLE – 17 (2) , HYDERABAD [2016 (3) TMI 245 - ITAT HYDERABAD] Assessing Officer cannot overlook the formats and (interpret it in his own method of calculating tax credit while making assessment u/s 143(1)) 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. Analyzing the provisions of section 115JA and 2(43) of the Act read with relevant clauses of the Finance Act has held that the MAT credit allowable to the assessee is inclusive of surcharge and cess - Decided in favour of assessee. Issues Involved:1. Calculation of surcharge and education cess after deducting MAT credit under section 115JAA.2. Inclusion of surcharge and education cess in the definition of tax for the purpose of tax credit under section 115JAA.Issue-Wise Detailed Analysis:1. Calculation of Surcharge and Education Cess After Deducting MAT Credit:The primary issue addressed in the judgment is whether the surcharge and education cess should be calculated after deducting the MAT credit available under section 115JAA from the tax on assessed income. The assessee argued that the surcharge and education cess should be computed on the tax payable after deducting the MAT credit, relying on the decision of the Hon'ble High Court of Allahabad in CIT Vs. Vacment India. The CIT(A) agreed with the assessee, directing the AO to follow the observations of the Jurisdictional ITAT and decide the issue accordingly.2. Inclusion of Surcharge and Education Cess in the Definition of Tax for MAT Credit:The second issue is whether the term 'tax' under section 115JAA includes surcharge and education cess. The Tribunal referred to the provisions of section 115JB, which requires two parallel computations: one under the normal provisions of the IT Act and another under section 115JB for book profit. If the tax payable on total income is less than 18.5% of the book profit, the book profit is deemed the total income, and tax is paid at 18.5%. The MAT credit is then available to be set off against future tax liabilities. The Tribunal emphasized that the term 'tax' includes surcharge, as upheld by the Hon'ble Apex Court in K. Srinivasan's case. The Tribunal also noted that the ITR-6 form, designed by CBDT, calculates tax liabilities including surcharge and cess, and this format should be followed by the AO.Conclusion:The Tribunal upheld the CIT(A)'s order, affirming that the surcharge and education cess should be calculated after deducting the MAT credit. The Tribunal also clarified that the term 'tax' for the purpose of section 115JAA includes surcharge and education cess. The appeal by the revenue was dismissed, and the CIT(A)'s decision was deemed consistent with the Tribunal's earlier rulings.Result:The appeal of the revenue was dismissed. The judgment was pronounced in the open court on 29th November 2017.