TaxTMI 
TaxTMI 
2017 (9) TMI 1807
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee has noticed from the intimation received u/s. 143(1) of the act that the tax liability has been determined after providing MAT credit for Rs. 4,61,81,503/- as against MAT credit of Rs. 8,28,19,589/- claimed by the assessee. Therefore, the assessee had applied for necessary rectification as per the provision of section 154 of the act. Subsequently, the assessing officer has passed Rectification order u/s. 154 of the act on 01-05-2012 and provided MAT credit of Rs. 8,28,19,589/- as claimed by the assessee. Thereafter, the assessee preferred appeal before the ld. CIT (A) against the order of the assessing officer on the ground that surcharge and education cess has been computed on the tax payable before reducing the MAT credit and claimed that same should have been computed after allowing the MAT credit. The ld. CIT(A) has allowed the appeal of the assessee by observing as under:- "9.3. It is seen that assessment year involved in present year is A.Y. 2010-2011 and appellant company is required to file its return of income in ITR-6 wherein computation of tax liability on total income at Part B-TTI was prescribed as under: Part BTTI Computation of tax liability on total ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....puting tax liability adopting formula different than as stated herein above. Considering the same, Assessing Officer is directed to first reduce basic tax liability by MAT credit u/s 115JAA of the Act and only on balance amount, surcharge and education cess is required to be computed. Thus, grounds of appeal raised by appellant are allowed." 4. During the course of appellate proceedings before us, ld. departmental representative has vehemently contended that the ld. CIT has committed error in holding that surcharge and education cess is to be computed after reduction of MAT credit u/s. 115JAA out of the gross tax payable in the case of the assessee. He has referred the provision of section 2(43) and section 4 of the act relating to charging of income tax. He has also contended that the Finance Act is a part of the Income Tax Act in which rate of income tax are mentioned in the chapter II. He has also placed reliance on the judicial pronouncement of the Hon'ble supreme court in the case of CIT vs. K. Srinivasan 83 ITR 346 wherein the Supreme Court held that surcharge is to be treated as part of the Income Tax. On the other hand, ld. counsel has supported the order of the ld. CIT(A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry and Higher Education Cess on income-tax", calculated at the rate of one per cent of such income-tax and surcharge so as to fulfil the commitment of the Government to provide and finance secondary and higher education" We have also perused the decision of apex court in the case of CIT vs. K. Srinivasan 83 ITR 346 wherein the Hon'ble Supreme Court has held that the surcharge is to be treated as part of income tax. We reproduced the relevant part of the decision of the Hon'ble court as under:- "The meaning of the word "surcharge" as given in the Webster's New International Dictionary includes, among others, "to charge (one) too much or in addition................"; also "additional tax". Thus, the meaning of surcharge is to charge in addition or to subject to an additional or extra charge. If that meaning is applied to section 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 I of the First Schedule); (ii) surcharge ; (iii) special surcharge ; and (iv) additional surcharge calculated in the manner provid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Tax Payable on total income in item 11 of Part B-TI A Tax at normal rates 2 a B Tax at special rates (11 of Schedule-SI) 2 b C Tax Payable on Total Income in item 11 of Part B-TI (2a + 2b) 2c 3 Gross tax payable (enter higher of 2c and 1) 3 4 Credit under section 115JAA of tax paid in earlier years (if 1 is more than 2c) (7 of Schedule MATC) 4 5 Tax payable after credit under section 115JAA [(3 - 4)] 5 6 Rebate under section 88E (4 of Schedule-STTR) 6 7 Balance Tax Payable (5-6) 7 8 Surcharge on 7 8 9 Education cess, including secondary and higher education cess on (7+8) 9 10 Gross tax liability (7+8+9) 1 0 Portion of the form set out herein above suggest that the credit under section 115JAA has to be allowed before addition is made on account of surcharge and cess. The assessee wants that it should be allowed to do so. The learned Tribunal, however, has held that:- "we find no merit in the contention of the assessee that MAT credit should first be reduced from the tax payable and thereafter on the residual amount the surcharge and educational cess be levied." 4. Mr. Khaitan, learned seni....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e which reads as follows:- "Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and [subject to the provisions (including provisions for the levy of additional income-tax) of, this Act] in respect of the total income of the previous year [***] of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly." On the basis of Sub-section (1) of Section 4, Mr. Khaitan contended, that the Central Act can only provide the rate or rates of applicable income tax. It cannot also provide for payment of surcharge and cess which is not contemplated by the Income Tax Act. The surcharge and cess have been imposed by the Finance Act and, therefore do not amount to income tax. 5.2 He then drew our attention to section 115JAA. He relied upon Sub-sections (1A), (2A), (4), (5) and (6). "(1A) Where any amount of tax is paid under sub-section (1) of section 115JB by an assessee, being a company for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....provide for any payment on account of surcharge or cess. Similarly, section 115JAA, in particular, the sub-sections quoted above provide for tax credit to be allowed to the extent of the difference of the tax paid for any assessment year under section 115JB and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of the Act. By the expression "computed in accordance with the other provisions of the Act" what is meant is the normal computation. 5.3 Mr. Khaitan, on the basis of the aforesaid provisions contended that section 115JB provides for payment of income tax at the rate of 10% and section 115JAA provides for credit computed on the basis of tax paid and tax payable. He contended that tax paid has to be the tax calculated under Sub-section (1) of Section 115JB and payable has to be assessed on the basis of normal computation without taking into account any surcharge because surcharge is not chargeable under the provisions of the Income Tax Act. 6. In support of his submission he relied upon Clause 43 of section 2 which provides a definition of the word "tax" and does not contain any reference to any surcharge or ces....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded therein, shall be further increased by an additional surcharge, for purposes of the Union, to be called the "Education Cess on income-tax", calculated at the rate of two per cent of such income-tax and surcharge so as to fulfil the commitment of the Government to provide and finance universalised quality basic education." "Sub-section (12). 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 also be increased by an additional surcharge, for purposes of the Union, to be called the Secondary and Higher "Education Cess on income-tax", calculated at the rate of one per cent of such income-tax and surcharge so as to fulfil the commitment of the Government to provide and finance secondary and higher education.' The underlined portions of the statute indicated above may be collated as follows:- (a) Sub-section (1) of Section 2 of the Finance Act, 2008 provides inter alia as follows:- "........ 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 Inco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an 181/[2010] 8 taxmann.com 228. Mr. Khaitan may be right in contending that the point raised in this appeal did not fall for consideration by Their Lordships in that judgement. The question which Their Lordships were considering was whether interest under Sections 234A, 234B and 234C has to be added to the amount of tax before granting credit under Sections 115JA and 115JAA? Their Lordships answered that question in the negative. The reason is very obvious. In determining the liability of the assessee the first step has to be determination of tax payable. The Income Tax Act contemplates selfassessment by the assessee and quarterly payment of tax in advance and the rest with the filing of the return. Interest can be realised only for the amount in default. Interest cannot be charged for an amount which has already been paid or for which the assessee is entitled to a credit. Before any question of realising interest may arise the amount of liability on account of income tax has to be ascertained. In ascertaining the liability, necessarily the amounts of surcharge and cess have to be taken into account. Once that is done the amount of tax payable has been ascertained. Then the questi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was it contended that the corrected form is contrary to law. Both the forms, viz. the one which was prevalent at the relevant period of time and which was corrected for the assessment year 2012-13, could not be the correct forms. If the form of 2012-13 was correct, then the form of 2008-09 was wrong, and naturally contrary to law. 13. We, as such, answer the question in the affirmative and against the assessee. We have observed that the ld. CIT(A) has decided the matter on the basis from no. ITR-6 by presuming that income tax payable is to be arrived at by deducting the credit under section 115JAA of the act (under entry 3) from the gross tax payable (under entry 4). We are not inclined with decision of the Ld.CIT(A) in view of specific provision of the Finance Act, 2010 which has been elaborated as supra in this order. The rate of income tax and surcharge are charged from year to year as prescribed in the Finance Act. We are of the considered view that the Finance Act is a part of the Income Tax Act for the purpose of determining the rate of income tax to be charged from year to year. The provision of section 2(1) of the Finance Act 2010 read as under:- "2. (1) Subject to....