2018 (10) TMI 1836 - AT - Income Tax

ITAT: MAT Credit Includes Surcharge & Cess

The DCIT, Circle-4, Ludhiana Versus M/s Aarti Steels Ltd., M/s Aarti International Ltd.,

The Income Tax Appellate Tribunal (ITAT) held that the Minimum Alternate Tax (MAT) credit under section 115JAA of the Income-tax Act, 1961, includes ... MAT credit including Surcharge & Edu.Cess - Tax credit in respect of tax paid on deemed income relating to certain companies u/s 115JAA - HELD THAT:- On careful reading, the sub-section 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 [1971 (11) TMI 2 - SUPREME COURT] the term ‘tax’ includes surcharge. Sub-section (5) of section 115JAA. “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 are tax not income tax or any other term. Needless to say the term tax includes surcharge. Issues Involved:1. Whether the Minimum Alternate Tax (MAT) credit under section 115JAA of the Income-tax Act, 1961, includes surcharge and cess besides the normal rate of tax.Issue-wise Detailed Analysis:1. MAT Credit Inclusion of Surcharge and Cess:The sole issue in all three appeals was whether the credit of Minimum Alternate Tax (MAT) under section 115JAA of the Income-tax Act, 1961, includes surcharge and cess besides the normal rate of tax.The assessee filed returns declaring income under normal provisions and MAT provisions. The tax liability under normal provisions was higher, and the assessee claimed MAT credit for taxes paid in earlier years, excluding surcharge and cess. The Assessing Officer, while giving effect to the ITAT's order, recalculated the tax liability including surcharge and cess, but excluded them from MAT credit.The assessee filed an application under section 154, which was rejected by the Assessing Officer. The CIT(A) allowed the appeal, stating that the issue was decided in favor of the assessee in previous assessments and referenced ITAT decisions in similar cases.The Revenue appealed, arguing that the ITAT had previously decided the issue against the assessee, referencing the ITAT Delhi decision in M/s Richa Global Export Pvt Ltd.The ITAT analyzed the relevant provisions, including section 115JAA and section 115JB, and the definition of 'tax' under section 2(43). The ITAT referred to the Finance Act provisions, which specify that the tax rate under section 115JB includes surcharge and cess. The ITAT also cited the Supreme Court decision in CIT vs K. Srinivasan, which held that 'tax' includes surcharge and cess.The ITAT concluded that MAT credit under section 115JAA includes surcharge and cess. The ITAT distinguished the decision in M/s Richa Global Export Pvt Ltd, noting that the Supreme Court decision in K. Srinivasan was not considered in that case.Consequently, the ITAT dismissed the Revenue's appeals, upholding the CIT(A)'s decision to allow MAT credit inclusive of surcharge and cess.Order pronounced in the Open Court on 11.10.2018.