AI Drafter 
TaxTMI 
TaxTMI 
2017 (5) TMI 1650
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....sequently, the Coordinate Bench disposed off the said misc. petition filed by the Revenue and by its order dated 28.03.2017 recalled the earlier order passed by the Coordinate Bench dated 29.01.2016 to decide on the issue of maintainability of the appeal in view of CBDT Circular No. 21 of 2015 dated 10.12.2015. Hence, the present appeal before us. 3. The issue under consideration is whether the tax effect has to be computed taking into account the surcharge and education cess or not. In the instant case, where tax effect is calculated including surcharge and education cess, the tax effect comes to Rs. 10,06,362/- which exceeds the threshold of Rs. 10 lacs as stated in the CBDT Circular No. 21 of 2015 dated 10.12.2015 and the appeal of the Revenue will thus become maintainable. In the alternate, whether tax effect is calculated excluding the surcharge and education cess, it comes to Rs. 8,96,935/- which is below the prescribed limit of 10 lacs and the appeal of the Revenue will not be maintainable. 4. The ld. AR in this regard relied on decisions passed by the Coordinate Bench in the case of DCIT vs. Dome Bell Electronics India Ltd. In ITA No. 2480/Mum/2012 vide order dated 22....
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....0 and 1941 showed that only the rates of income tax and super tax were to be increased by a surcharge for the purpose of the Central Government. In the Finance Act of 1958 the language used showed that income tax which was to be charged was to be increased by a surcharge for the purpose of the Union. The word "surcharge" has thus been used to either increase the rates of income tax and super tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term " income tax" as used in s. 2 includes surcharge. According to Article 271 notwithstanding anything in Arts. 269 and 270, Parliament may at any time increase any of the taxes or taxes referred to in those articles by a surcharge for the purpose of the Union and the whole proceeds of any such surcharge shall form part of the Consolidated fund of India. Article 270 provides for taxes levied and collected by the Union and distributed between the Union and the States. Clause (1) says that tax on income other than agricultural income shall be levied and collected by the Government of India and distributed between the Union and the States in the manner provided in clause (2). Article....
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....an additional or extra charge. If that meaning is applied to S. 2 of the Finance Act 1963 it would lead to the result that income tax and super tax were to be charged in four different ways or at four different rates which may be described as (i) the basic charge or rate (In part 1 of the First Schedule); (ii) Surcharge; (iii) special surcharge and (iv) additional surcharge calculated in the manner provided in the Schedule. Read in this way the additional charges form a part of the income tax and super tax. It is possible to argue and that argument has been commended on behalf of the Revenue that the word "surcharge'' has been used in Art. 271 for the purpose of separating it from the basic charge of a tax duty for the purpose of distributing the proceeds of the same between the Union and the States. The proceeds of the surcharge are exclusively assigned to the Union. Even in the Finance Act itself it is expressly stated that the surcharge is meant for the purpose of the Union. It would appear that since the Finance Act 1943 upto the Finance Act 1967 a provision was made for taxing the income under the head "salaries'' according to the provisions of the Finance Act of the preceding....
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.... tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act." 6.3 We now refer to the Finance Act 2005 which reads as under: FINANCE ACT, 2005 CHAPTER II RATES OF INCOME-TAX Income-tax. 2. (1)Subject to the provisions of sub-sections (2) and (3), for the assessment year commencing on the 1st day of April, 2005, income-tax shall be charged at the rates specified in Part I of the First Schedule and such tax as reduced by the rebate of income-tax calculated under Chapter VIII-A of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act) shall be increased by a surcharge for purposes of the Union calculated in each case in the manner provided therein. (2)In the cases to which Paragraph A of Part I of the First Schedule applies, where the assessee has, in the previous year, any net agricultural income exceeding five thousand rupees, in addition to total income, and the total income exceeds fifty thousand rupees, then,- (a) the net agricultural income shall be taken into account, in the manner provided in clause (b)[that is to say, as if the net agricul....
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....puted under this sub-section shall be increased by a surcharge for purposes of the Union, calculated,- (a) in the case of every individual, Hindu undivided family, association of persons and body of individuals, whether incorporated or not, at the rate of ten per cent of such income-tax where the total income exceeds eight hundred and fifty thousand rupees; (b) in the case of every co-operative society, firm, local authority and company, at the rate of two and one-half per cent of such income-tax; (c) in the case of every artificial juridical person referred to in subclause (vii)of clause (31)of section 2 of the Income-tax Act, at the rate of ten per cent of such income-tax. (4) In cases in which tax has to be charged and paid under section 115-O or sub-section (2)of section 115R of the Income-tax Act, the tax shall be charged and paid at the rate as specified in those sections and shall be increased by a surcharge for purposes of the Union, calculated at the rate of ten per cent of such tax. (5) In cases in which tax has to be deducted under sections 193, 194, 194A, 194B, 194BB, 194D and 195 of the Income-tax Act, at the rates in force,....
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....provisions of sub-section (10), in cases in which income-tax has to be charged under sub-section (4) of section 172 or sub-section (2)of section 174 or section 174A or section 175 or sub-section (2)of section 176 of the Income-tax Act or deducted from, or paid on, income chargeable under the head "Salaries" under section 192 of the said Act or in which the "advance tax" payable under Chapter XVII-C of the said Act has to be computed at the rate or rates in force, such income-tax or, as the case may be, "advance tax" shall be so charged, deducted or computed at the rate or rates specified in Part III of the First Schedule and such tax as reduced by the rebate of income-tax calculated under Chapter VIII-A of the said Act shall be increased by a surcharge for purposes of the Union, calculated in each case in the manner provided therein: Provided that in cases to which the provisions of Chapter XII or Chapter XII-A or Chapter XII-H or section 115JB or sub-section (1A)of section 161 or section 164 or section 164A or section 167B of the Income-tax Act apply, "advance tax" shall be computed with reference to the rates imposed by this subsection or the rates as specified in that C....
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....s the case may be, "advance tax" shall be so charged or computed as follows:- (i) the total income and the net agricultural income shall be aggregated and the amount of income-tax or "advance tax" shall be determined in respect of the aggregate income at the rates specified in the said Paragraph A, as if such aggregate income were the total income; (ii) the net agricultural income shall be increased by a sum of one lakh rupees, and the amount of income-tax or "advance tax" shall be determined in respect of the net agricultural income as so increased at the rates specified in the said Paragraph A, as if the net agricultural income were the total income; (iii) the amount of income-tax or "advance tax" determined in accordance with sub-clause (i) shall be reduced by the amount of income-tax or, as the case may be, "advance tax" determined in accordance with subITA clause (ii) and the sum so arrived at shall be the income-tax or, as the case may be, "advance tax" in respect of the total income: Provided that in the case of every woman, resident in India and below the age of sixty-five years at any time during the previous year, referred to in item (I....
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....rds and expressions used in this section and the First Schedule but not defined in this sub-section and defined in the Incometax Act shall have the meanings respectively assigned to them in that Act. THE FIRST SCHEDULE (See section 2) PART I INCOME-TAX Paragraph A In the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii)of clause (31)of section 2 of the Income-tax Act, not being a case to which any other Paragraph of this Part applies,- Rates of income-tax (1)where the total income does not exceed Rs. 50,000 Nil; (2)where the total income exceeds Rs. 50,000 but does not exceed Rs. 60,000 10 per cent of the amount by which the total income exceeds Rs. 50,000; (3)where the total income exceeds Rs. 60,000 but does not exceed Rs. 1,50,000 Rs. 1,000 plus 20 per cent of the amount by which the total income exceeds Rs. 60,000; (4)where the total income exceeds Rs. 1,50,000 Rs. 19,000 plus 30 per cent of the amount by which the total income exceeds Rs. 1,50,000. Surcharge on income-tax ....
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....s part of tax. To make the matter clear, we again refer to clause 2 (11) of the Finance Act which reads as under: "The amount of income-tax as specified in sub-sections (1) to (10) and as increased by a surcharge for purposes of the Union calculated in the manner provided therein, shall be further increased by an additional surcharge for purposes of the Union, to be called the "Education Cess on income-tax", so as to fulfill the commitment of the Government to provide and finance universalized quality basic education, calculated at the rate of two per cent of such income-tax and surcharge." (emphasis supplied) 6.6 A similar issue has come up for consideration before the Coordinate Bench (wherein one of us was a party) in case of Chambal Fertilizers & Chemicals Limited (ITA No. 459/JP/12, 558/JP/12) dated 28.10.2016 wherein the question for consideration was whether the education cess is part of tax and not allowable as per the provisions of section 40(a)(ii) of the Act and after discussing at length the legislative history of education cess as introduced through the Finance Bill, 2004 and subsequent finance Bills, and other relevant parameters, it was held that....
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....ct taxes on goods and services, education cess has been defined as tax. The speech of the Finance Minister therefore has to be read and understood in the context of the Finance Bill which we have discussed above. Though the levy has been termed as a education cess, what is relevant to determine is its exact nature rather than its nomenclature. The nature of education cess is clearly tax and nothing else. Now looking at the issue from the angle of recovery of education cess, there is no separate machinery in the Income tax Act for recovery of unpaid education cess and imposition of interest and penalty in case of default in payment of unpaid cess. This also clearly indicates that cess is a part of tax and all recovery mechanisms & consequences pertaining to recovery of tax apply to recovery of cess also without explicit mention of the word "education cess". Infact, clause 83 (3) of the Finance Bill 2004 makes this position crystal clear when it states that "the provisions of the Central Excise Act, 1944 and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the lev....