TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 1900
X X X X Extracts X X X X
X X X X Extracts X X X X
....rspective. Plea was also raised that tax includes surcharge, cess so far as section 115JB and 115JAA is concerned and placed reliance upon the decision in the case of M/s Eastern Jewels Pvt. Ltd. vs ACIT (ITA No.163/Jp/2017) and CIT vs K. Srinivasan 83 ITR 346 (Supreme Court). On other hand, the ld. DR, Chaudhary Arun Kumar Singh, contended that assessee filed two applications under section 154 of the Act and defended the impugned orders. 2.1. We have considered the rival submissions and perused the material available on record. In view of the above arguments from both sides, we are reproducing hereunder the relevant portion from the order of the Jaipur Bench of the Tribunal in the case of M/s Eastern Jewels Pvt Ltd. vs ACIT for ready reference and analysis:- "This is an appeal filed by the assessee against the order of ld. CIT(A)- 01, Jaipur dated 14.12.2016 pertaining to assessment year 2011-12 wherein the assessee has challenged the action of ld. CIT(A) in confirming the action of the Assessing Officer in restricting the MAT credit of AY 2010-11 to Rs. 6,59,098/- as against Rs. 10,41,894/- claimed by the assessee company. 2. Briefly stated, the facts of case are that in its r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt in case of CIT v. Vacment India [2014] 369 ITR 304 (All) has been distinguished and it has been held that both the surcharge and education cess are part of income tax. 5. The question of law which came up for consideration before the Hon'ble Calcutta High Court (supra) was whether on the facts and in the circumstances of the case and in law, the Tribunal was right in confirming the set-off of MAT Credit under section 115JAA 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 education cess" and the relevant findings are contained as under:- "...7. We have not been impressed by the submissions advanced by Mr. Khaitan for the following reasons:- (b) We are inclined to think that both surcharge and cess are part of the income tax though payable in addition to the Income Tax calculated at the rate provided in Section 115JB. 8. We are supported in our view by Sub-section (1), the second proviso to Sub-section (3); Sub-section (11) and Subsection (12) of Section (2) of the Finance Act, 2008, which provides as follows:- ........ Second pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT (2016) 157 ITD 1160 (Hyd) and in the case of Bhagwati Oxegen Ltd. vs. ACIT (2017) 51 CCH 0368 Kol Trib. It was accordingly submitted that the assessee has rightly claimed the MAT credit well within the four corners of provisions of section 115JAA. The relief may kindly be granted by allowing the MAT credit to the extent of Rs. 10,41,894/- as against Rs. 6,59,098/- allowed by the Assessing Officer. 7. The ld. DR is heard who has relied on the order of the lower authorities. 8. We have heard the rival contentions and perused the material available on record. The limited issue under consideration is whether for the purposes of computing the MAT credit u/s 115JAA of the Act, whether tax include surcharge and education cess or not. 9. In this regard, we refer to the provisions of section 115JB of the Act and in particular Explanation - 2 wherein the amount of income tax has been defined to include surcharge and education cess and the same is reproduced as under:- "[Explanation 2.- For the purposes of clause (a) of Explanation 1, the amount of income-tax shall include- (i) any tax on distributed profits under section 115-O or on distributed income under section 115R; (ii) a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of eighteen and one-half per cent. (2) Every assessee,- (a) being a company, other than a company referred to in clause (b), shall, for the purposes of this section, prepare its 76[statement of profit and loss] for the relevant previous year in accordance with the provisions of 76[Schedule III] to the 76b[Companies Act, 2013 (18 of 2013)]; or (b) being a company, to which the 76c[second proviso to sub-section (1) of section 129] of the 76d[Companies Act, 2013 (18 of 2013)] is applicable, shall, for the purposes of this section, prepare its 76e[statement of profit and loss] for the relevant previous year in accordance with the provisions of the Act governing such company: Provided that while preparing the annual accounts including 76e[statement of profit and loss],- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including 76e[statement of profit and loss]; (iii) the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce with the provisions of this Act, other than the provisions of this Chapter, is at a rate less than the rate specified in sub-section (1); or (fc) the amount representing notional loss on transfer of a capital asset, being share of a special purpose vehicle, to a business trust in exchange of units allotted by the trust referred to in clause (xvii) of section 47 or the amount representing notional loss resulting from any change in carrying amount of said units or the amount of loss on transfer of units referred to in clause (xvii) ofsection 47; or 78[(fd) the amount or amounts of expenditure relatable to income by way of royalty in respect of patent chargeable to tax under section 115BBF; or] (g) the amount of depreciation, (h) the amount of deferred tax and the provision therefor, (i) the amount or amounts set aside as provision for diminution in the value of any asset, (j) the amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such asset, (k) the amount of gain on transfer of units referred to in clause (xvii) of section 47 computed by taking into account the cost of the shares exchanged with units referred to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or rates specified in Chapter XII, if such income is credited to the 80[statement of profit and loss] and the income-tax payable thereon in accordance with the provisions of this Act, other than the provisions of this Chapter, is at a rate less than the rate specified in sub-section (1); or (iie) the amount representing,- (A) notional gain on transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust referred to in clause (xvii) of section 47; or (B) notional gain resulting from any change in carrying amount of said units; or (C) gain on transfer of units referred to in clause (xvii) of section 47, if any, credited to the 80a[statement of profit and loss]; or (iif) the amount of loss on transfer of units referred to in clause (xvii) of section 47 computed by taking into account the cost of the shares exchanged with units referred to in the said clause or the carrying amount of the shares at the time of exchange where such shares are carried at a value other than the cost through 81[statement of profit and loss], as the case may be; 82[or] 82 [(iig) the amount of income by way of royalty ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Central Acts from time to time. Explanation 3.-For the removal of doubts, it is hereby clarified that for the purposes of this section, the assessee, being a company to which the 86[second proviso to sub-section (1) of section 129 of the Companies Act, 2013 (18 of 2013)] is applicable, has, for an assessment year commencing on or before the 1st day of April, 2012, an option to prepare its 87[statement of profit and loss] for the relevant previous year either in accordance with the provisions of 88[Schedule III to the Companies Act, 2013 (18 of 2013)] or in accordance with the provisions of the Act governing such company.] 89[Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section shall not be applicable and shall be deemed never to have been applicable to an assessee, being a foreign company, if- (i) the assessee is a resident of a country or a specified territory with which India has an agreement referred to in sub-section (1) of section 90 or the Central Government has adopted any agreement under subsection (1) of section 90A and the assessee does not have a permanent establishment in India in accordance with the provisions of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Accounting Standards 38; or (ii ) gains or losses from investments in equity instruments designated at fair value through other comprehensive income in accordance with the Indian Accounting Standards 109: Provided further that the book profit of the previous year in which the asset or investment referred to in the first proviso is retired, disposed, realised or otherwise transferred shall be increased or decreased, as the case may be, by the amount or the aggregate of the amounts referred to in the first proviso for the previous year or any of the preceding previous years and relatable to such asset or investment. (2B) In the case of a resulting company, where the property and the liabilities of the undertaking or undertakings being received by it are recorded at values different from values appearing in the books of account of the demerged company immediately before the demerger, any change in such value shall be ignored for the purpose of computation of book profit of the resulting company under this section. (2C) For a company referred to in sub-section (2A), the book profit of the year of convergence and each of the following four previous years, shall be further increase....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng to cumulative translation differences of a foreign operation in accordance with paragraph D13 of the Indian Accounting Standards 101 on the convergence date.] (3) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of subsection (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or subsection (3) of section 74A. (4) Every company to which this section applies, shall furnish a report in the prescribed form93 from an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under sub-section (1) of section 139 or along with the return of income furnished in response to a notice under clause (i) of sub-section (1) of section 142. (5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section. (5A) The provisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....income of the assessee and tax payable by the assessee on such total income shall be the amount of income tax at specified rate of tax, which was 7.5% for Assessment Year 2006-07. Thus, section 115JAA does not talk about the income tax as increased by surcharge or education cess and it talks about only income tax. This issue has been clarified by Hon'ble Apex Court in CIT vs K. Srinivasan (1972) 83 ITR 346 (Supreme Court) whether income tax include sur-charge, which is reproduced hereunder:- "This is an appeal by special leave from a judgment of the Kerala High Court in an income-tax reference. Originally C. A. No. 1111 of 1969 had been brought by certificate but the same has been found to be defective for want of reasons and has, therefore, to be revoked. Special leave was sought and has been granted. income was salary from a limited company (A. V. Thomas & Co. Ltd.). In the previous year ending on 30th March, 1964, his total income from salary amounted to Rs. 42,900. In making the assessment the Income-tax Officer levied surcharge and additional surcharge in accordance with the rates prescribed by the Finance Act, 1963. The assessee preferred an appeal to the Appellate As....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of the Union and a special surcharge. It will be noticed that section 2(2) of the Finance Act, 1964, did not contain mention of any of the surcharges. This led to the controversy which resulted in the reference. Before the High Court the assessee relied on sections 4 and 95 of the Income-tax Act, 1961, hereinafter called "the Act". These sections provide for charge of income-tax and super-tax. It was pointed out that surcharge was treated in the Finance Acts as a tax different from the income-tax and super-tax and that surcharge was levied by the Finance Act while the income and super-taxes were levied by the Act. Reference was made in this connection to the First Schedule to the Finance Act, 1963. Part I of that Schedule dealt with "income-tax and surcharge on income-tax". Under that heading were given the rates of income-tax as also the rates of surcharge. Similarly, Part II of the Schedule dealt with super-tax and surcharge on super-tax and under that heading the rates of super-tax and the rates of surcharge on super-tax were given. Among the surcharges in the case of income-tax were mentioned: (a) a surcharge for the purpose of the Union, (b) a special surcharge and (c) an ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....troduced in the Finance Act of 1951 and the same has been continued in the Finance Acts of subsequent years. Special surcharge came to be levied in the Finance Acts of 1958 to 1964 and 1966 to 1971 and the additional surcharge was levied only by the Finance Act of 1963. In the Finance Act of 1951, section 2 relating to income-tax and super-tax provided that these taxes would be levied at the rates specified in Parts I and II of the First Schedule increased in each case by a surcharge for the purpose of the Union. The Finance Act of 1952 was a short document and section 2 thereof simply provided : "The provisions of section 2 of, and the First Schedule to, the Finance Act, 1951, shall apply in relation to income-tax and supertax for the financial year 1952-53 as they apply in relation to income-tax and super-tax for the financial year 1951-52.........." There was no specific mention whatsoever of surcharge in section 2 nor was there any modification of the First Schedule to the Finance Act of 1951 which contained the rates, etc., relating to the surcharge. Similar state of affairs existed with regard to the Finance Acts of 1953, 1954 and 1957. Section 2 of the Finance Act, 197....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd collected by the Union but assigned to the States. The provisions of article 268 which is the first one under the heading "Distribution of revenue between the Union and the States" relate to duties levied by the Union but collected and appropriated by the States. Thus, these articles deal with the levy, collection and distribution of the proceeds of the taxes and duties mentioned therein between the Union and the States. The legislative power of Parliament to levy taxes and duties is contained in articles 245 and 246(1) read with the relevant entries in List I of the Seventh Schedule. As mentioned before, the legislative entry 82 in List I relates to taxes on income other than agricultural income; income-tax, super-tax and surcharge would all fall under this entry. It is in exercise of the legislative power conferred by that entry that the Union Parliament enacts the provision in the Finance Act each year relating to them. It is that Act which authorises these taxes to be charged and prescribes the rates at which they can be charged. Section 4 of the Act simply provides that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or ra....