2016 (3) TMI 245 - AT - Income Tax

Tribunal directs MAT credit computation with surcharge & education cess, emphasizes ITR-6 format

The Tribunal allowed the assessee's appeal, directing the AO to compute the MAT credit by including surcharge and education cess, in accordance with the ... Computation of MAT credit - AO excluded surcharge and education cess while arriving at the amount of total tax payable under the normal provisions of the Income Tax Act, 1961 and under sec. 115JB of the Act - 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. The tax liabilities for normal provisions as well as MAT are calculated with surcharge and cess. The MAT credit in row “7” 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. These are the standard format, which are expected to be followed by all the assessees and also important to note that the above format of ITR 6 was amended w.e.f. AY 2012-13 by CBDT. Moreover, this is more relevant for the department also. These formats are regulated by CBDT. 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. 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. Issues Involved:1. Computation of eligible Minimum Alternate Tax (MAT) credit including surcharge and education cess.2. Calculation of tax liability with surcharge and education cess before granting MAT credit.3. Judicial precedent regarding the inclusion of surcharge and education cess in the term 'tax'.4. Levy of interest under section 234C.5. Confirmation of tax demand under section 156.Detailed Analysis:Issue 1: Computation of Eligible MAT Credit Including Surcharge and Education CessThe assessee argued that the MAT credit should include surcharge and education cess, citing section 115JAA(5) of the Income Tax Act, which allows set off of brought forward tax credit to the extent of the difference between the tax on total income and the tax payable under section 115JB. The assessee contended that the correct eligible MAT credit was Rs. 4,22,45,803, inclusive of surcharge and education cess, contrary to the Assessing Officer's (AO) calculation of Rs. 3,90,62,234, exclusive of these components.Issue 2: Calculation of Tax Liability with Surcharge and Education Cess Before Granting MAT CreditThe AO computed the tax liability by first increasing it with surcharge and education cess and then granting MAT credit. The CIT(A) upheld this method, stating that surcharge and education cess should be levied on the gross amount of income tax, not the net figure after deducting MAT credit. The CIT(A) reasoned that MAT credit is treated similarly to prepaid taxes, and thus, the surcharge and education cess are computed based on the gross tax amount.Issue 3: Judicial Precedent Regarding the Inclusion of Surcharge and Education Cess in the Term 'Tax'The assessee referenced the Supreme Court's decision in K. Srinivasan vs CIT, which held that the term 'tax' includes surcharge and education cess. The assessee argued that this precedent supports their claim that MAT credit should include these components. The CIT(A) did not consider this precedent, leading to the assessee's appeal.Issue 4: Levy of Interest Under Section 234CThe assessee contested the interest levied under section 234C, arguing that the correct amount was Rs. 37,042, not Rs. 68,878 as computed by the AO. The discrepancy arose from the AO's consideration of MAT credit before surcharge and education cess.Issue 5: Confirmation of Tax Demand Under Section 156The assessee challenged the confirmation of the tax demand of Rs. 32,06,697, arguing that it was unjustified and should be vacated.Judgment Analysis:Ground Nos. 1, 2 & 3:The Tribunal noted that section 115JB requires two parallel computations: one under the normal provisions and another under the MAT provisions. If the tax payable under normal provisions is less than 18.5% of the book profit, the company must pay tax at 18.5% of the book profit. This MAT paid can be carried forward for up to ten assessment years as per section 115JAA. The Tribunal emphasized that the term 'tax' includes surcharge, as per the Supreme Court's decision in K. Srinivasan. The Tribunal also highlighted that the ITR-6 form, designed by the CBDT, calculates tax liabilities, including surcharge and education cess, and this format should be followed universally.The Tribunal found that the AO's computation method, which excluded surcharge and education cess from MAT credit calculations, was incorrect. The correct method, as per the ITR-6 form and the Supreme Court precedent, includes these components. Therefore, the Tribunal allowed the assessee's appeal, deleting the addition made by the AO.Other Grounds of Appeal:The Tribunal dismissed the other grounds of appeal as infructuous, given the resolution of the primary issues in favor of the assessee.Conclusion:The appeal of the assessee was allowed, with the Tribunal directing the AO to compute the MAT credit by including surcharge and education cess, in line with the ITR-6 format and the Supreme Court's precedent in K. Srinivasan.Pronouncement:The judgment was pronounced in the open court on 4th March 2016.