2021 (12) TMI 1124 - AT - Income Tax

Tribunal affirms MAT credit includes surcharge & education cess in tax calculation

The Tribunal upheld the decision of the ld. CIT(A) regarding the set off of MAT credit u/s.115JAA against tax on total income, including surcharge and ... Set off of MAT credit u/s.115JAA of brought forward from earlier years against tax on total income including surcharge and education cess instead of adjusting the same from tax on total income before charging such surcharge and education cess - HELD THAT:- We find that this issue is no longer res integra in view of the decision of the Hon’ble Calcutta High Court in the case of SREI Infrastructure Finance Ltd.,[2016 (8) TMI 967 - CALCUTTA HIGH COURT] and CIT vs. Vacment India [2014 (10) TMI 787 - ALLAHABAD HIGH COURT] wherein it was categorically held that surcharge and education cess are part of income tax. These High Court decisions were followed by series of the Tribunal decisions across the country and hence, this issue is no longer res integra. Respectfully following the aforesaid decisions, we hold that for the purpose of MAT credit to be carried forward to subsequent years, tax portion should include surcharge and education cess. Respectfully following the same, we do not find any infirmity in the order of the ld. CIT(A granting relief to the assessee. Accordingly, the grounds raised by the Revenue are dismissed. Issues:Interpretation of set off of MAT credit u/s.115JAA against tax on total income including surcharge and education cess.Analysis:Issue: Interpretation of set off of MAT credit u/s.115JAAThe appeal in ITA No.5029/Mum/2019 for A.Y.2011-12 questioned the decision of the ld. CIT(A) regarding the adjustment of MAT credit u/s.115JAA against tax on total income including surcharge and education cess. The assessment for the A.Y.2011-12 was completed by the ld. AO under section 143(3) of the Income Tax Act, 1961, accepting the returned income as Nil. However, in the intimation u/s.143(1) of the Act, the CPC, Bangalore computed the income u/s.115JB at a specific amount and determined the total tax payable under MAT, which included surcharge and education cess. The assessee had paid advance tax against this amount. The ld. AO, in a subsequent order u/s.154, identified the MAT credit carried forward by the assessee, including the surcharge and education cess. The ld. AO decided that the surcharge and education cess embedded in the MAT credit would not be eligible for set off, leading to a withdrawal of a specific amount.The ld. CIT(A), relying on judicial precedents, held that surcharge and education cess are part of income tax and should be included in the MAT credit eligible to be carried forward. The Revenue, in its appeal, argued against this decision by the ld. CIT(A), claiming that the reliance on the ITR-6 form and the relevant columns was incorrect. However, the Tribunal found that the decision of the ld. CIT(A) was in line with established legal principles. The Tribunal cited the decisions of the Hon'ble Calcutta High Court and the Hon'ble Allahabad High Court, which explicitly stated that surcharge and education cess are part of income tax. Since this issue was settled by various High Court and Tribunal decisions, the Tribunal upheld the decision of the ld. CIT(A) and dismissed the appeal of the Revenue.In conclusion, the Tribunal affirmed that for the purpose of carrying forward MAT credit to subsequent years, the tax portion should include surcharge and education cess. The Tribunal, in line with established legal principles, found no fault in the decision of the ld. CIT(A) and consequently dismissed the appeal of the Revenue.