Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 5981 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-03-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
18-02-2016
Assessment Year
2012-2013
Appeal Filed On
12-02-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 146/HYD/2015 ASSESSMENT YEAR: 2012-13 M/S VIRTUSA (INDIA) PVT. LTD. (NOW MERGED WITH VIRTUSA CONSULTING SERVICES PVT. LTD., HYDERABAD PAN AACC 6797 VS. DCIT, CIRCLE 17(2), HYDERABAD APPELLANT RESPONDENT ASSESSEE BY: SRI A.V. RAGHURAM & SRI RAVI BHARADWAJ REVENUE BY: SRI Y. RATNAKAR DATE OF HEARING: 18/02/2016 DATE OF PRONOUNCEMENT: 04/03/2016 O R D E R PER S. RIFAUR RAHMAN, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER O- F CIT(A)IV, HYDERABAD DATED 07/11/2014 RELATES TO T HE AY 2012-13. 2. BRIEFLY THE FACTS OF THE CASE ARE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30/11/2012 ADMITTING TOTAL INCO ME OF RS. 42,87,89,690 UNDER THE NORMAL PROVISIONS OF THE INC OME-TAX ACT,1961 (IN SHORT ACT). THE RETURN OF INCOME WAS PROCESSED BY THE CENTRAL PROCESSING CENTRE (CPC), BANGALORE A ND ASSESSED U/S 143(1) RAISING DEMAND OF RS. 32,06,700 /-. THE MAIN DIFFERENCE IN THE COMPUTATION OF TAX BY THE AS SESSEE AND THE AO WAS AS UNDER: I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 2 PARTICULARS REF AS PER ORIGINAL RETURN AS PER THE INTIMATION U/S 143(1) BUSINESS INCOME INTEREST INCOME 38,51,78,940 4,36,10,747 38,51,78,940 4,36,10,747 TOTAL INCOME 42,87,89,687 42,87,89,687 TAX UNDER NORMAL PROVISIONS @ 30% ADD: SURCHARGE 5% ADD: EDUCATION CESS 3% 12,86,36,907 64,31,845 40,52,063 12,86,36,907 A 13,91,20,815 12,86,36,907 BOOK PROFITS AS PER SECTION 115JB 48,41,87,422 48,41,87,422 TAX ON BOOK PROFITS @ 18.5% ADD: SURCHARGE 5% ADD: EDUCATION CESS 5% 8,95,74,673 44,78,734 28,21,602 8,95,74,673 TOTAL TAX LIABILITY UNDER MAT PROVISIONS (INCLUDING SURCHARGE AND CESS) B 9,68,75,009 8,95,74,673 TAX LIABILITY (HIGHER OF A&B) 13,91,20,815 12,86,36,907 LESS: MAT CREDIT SET OFF TAX PAYABLE ADD: SURCHARGE 5% ADD: EDUCATION CESS 3% TOTAL TAX LIABILITY A-B 4,22,45,806 9,68,75,009 9,68,75,009 3,90,62,234 8,95,74,673 64,31,845 40,52,063 10,00,58,581 3. AGGRIEVED WITH ASSESSMENT MADE U/S 143(1),THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND HAS RAI SED TWO GROUNDS IN THIS REGARD, WHICH ARE AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN COMPUTATION OF THE ELIGIBLE MAT CREDIT AVAILABLE OF RS. 3,90,62,234 WITHOUT INCLUDING SURCHARGE AND EDUCATI ON CESS WHILE ARRIVING AT THE AMOUNT OF TOTAL TAX PAYA BLE UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961 AND UNDER SEC. 115JB OF THE ACT. 2. WITHOUT PREJUDICE TO THE GROUND 1 ABOVE, THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. ASSESS ING OFFICER HAS ERRED IN COMPUTATION OF THE TAX LIABILI TY (EXCLUDING INTEREST U/S234C OF THE ACT) BY INCREASI NG THE I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 3 TAX LIABILITY WITH SURCHARGE AND EDUCATION CESS AND THEN GRANTING THE MAT CREDIT INSTEAD OF GRANTING THE MAT CREDIT AND THEN INCREASING THE BALANCE TAX LIABILIT Y WITH SURCHARGE AND EDUCATION CESS. 4. THE CIT(A) HAS REJECTED GROUND NO. 1 OF THE ASSE SSEE BY OBSERVING AS UNDER: 4.5 THE DECISION OF THE ITAT IS SQUARELY APPLICABLE TO THE ISSUE IN APPEAL. FOLLOWING THE DECISION OF THE ITAT IN THE CASE OF RICHA GLOBAL EXPORTS PVT. LTD., IT IS HELD THAT SURCHARGE AND EDUCATION CANNOT BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF SET OFF OF BROUGHT FORW ARD MAT CREDIT. 5. THE CIT(A) ALSO DISMISSED GROUND NO. 2 OF ASSESS EE BY MAKING FOLLOWING OBSERVATIONS: 5.5 THE TERM 'INCOME-TAX' USED IN THE FINANCE ACT A S THE BASIS FOR LEVY OF SURCHARGE AND EDUCATION CESS IS D EFINED IN THE FINANCE ACT UNDER PARAGRAPH E AS 30 PER CENT OF THE TOTAL INCOME' AND DOES NOT REFER TO ANY DEDUCTI ONS THERE FROM. THOUGH THE PROVISIONS OF SEC.115JB APPL Y TO THE APPELLANT, IN VIEW OF THE FACT THAT TAX UNDER T HE REGULAR PROVISIONS WAS HIGHER THAN THE TAX U/S 115J B, THE INCOME-TAX WAS LEVIED UNDER THE REGULAR PROVISIONS OF THE ACT. THE INCOME-TAX PAYABLE WAS, ACCORDINGLY, AS PE R PARAGRAPH E OF THE FIRST SCHEDULE OF THE FINANCE AC T, 30 PER CENT OF THE TOTAL INCOME, AMOUNTING TO RS. 12,86,36,907. AS PER THE FINANCE ACT, IT WAS 'THE I NCOME- TAX', I.E. THIS SUM OF RS. 12,86,36,907 ON WHICH TH E SURCHARGE OF 5 PER CENT WAS TO BE LEVIED. SIMILARLY , U/S 11 OF THE FINANCE ACT, THE BASIS FOR COMPUTATION OF ED UCATION CESS WAS ALSO THE INCOME-TAX. 5.6 FURTHER, MAT CREDIT IS TREATED UNDER THE ACT ON PAR WITH PREPAID TAXES. THIS IS CLEAR FROM SEC.140A WHE RE THE SELF- ASSESSMENT TAX IS REQUIRED TO BE DETERMINED A FTER DEDUCTING ADVANCE TAX, TDS AND OTHER RELIEF U/S 90, 90A AND 91. IT FOLLOWS THAT SURCHARGE AND EDUCATION CES S ARE LEVIED ON THE GROSS AMOUNT OF INCOME TAX AND NOT TH E NET FIGURE AFTER DEDUCTING ADVANCE TAX, TDS ETC. IN FAC T, THOUGH THE APPELLANT HAD CLAIMED CREDIT FOR TDS OF ~2.36 CRORES AND ADVANCE TAX OF RS. 6.95 CRORES, THESE SU MS WERE NOT DEDUCTED FOR THE PURPOSE OF LEVY OF SURCHA RGE AND EDUCATION CESS. FOR THE SAME REASON, DEDUCTION OF MAT CREDIT IS NOT WARRANTED BEFORE CALCULATING SURC HARGE AND EDUCATION CESS. I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 4 5.7 IN VIEW OF THE ABOVE, IT IS HELD THAT COMPUTATI ON OF TAX LIABILITY BY INCREASING THE TAX LIABILITY WITH SURC HARGE AND EDUCATION CESS AND THEN GRANTING MAT CREDIT IS IN O RDER AND CORRECT. THE SECOND GROUND OF APPEAL IS ACCORDI NGLY DISMISSED. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF A PPEAL: BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LEARNED ('LD.') AO AND THE LD. CIT (A), HYDERABAD HAVE: 1. ERRED IN COMPUTING THE ELIGIBLE MINIMUM ALTERNAT E TAX ('MAT') CREDIT U/S 115JAA OF THE ACT AT RS. 3,90,62 ,234/- BY NOT INCLUDING SURCHARGE AND EDUCATION CESS WHILE ARRIVING AT THE AMOUNT OF TOTAL TAX PAYABLE UNDER T HE NORMAL PROVISIONS OF THE ACT AND UNDER SECTION 115J B OF THE ACT. 2. WITHOUT PREJUDICE TO THE GROUND 1 ABOVE, THE LD. CIT(A) HAS ERRED IN COMPUTATION OF THE TAX LIABILIT Y (EXCLUDING INTEREST UNDER SECTION 234C OF THE ACT) BY INCREASING THE TAX LIABILITY WITH SURCHARGE AND EDU CATION CESS AND THEN GRANTING THE MAT CREDIT INSTEAD OF GR ANTING THE MAT CREDIT AND THEN INCREASING THE BALANCE TAX LIABILITY WITH SURCHARGE AND EDUCATION CESS. 3. ERRED IN DISREGARDING THE JUDICIAL PRECEDENT IN THE CASE OF K. SRINIVASAN VS CIT (1972) 83 ITR 346 (SC) SUBM ITTED BY THE APPELLANT WHICH HAS HELD THAT THE TERM 'TAX' INCLUDES SURCHARGE AND EDUCATION CESS. 4. HAVING ACCEPTED THE INCOME RETURNED BY THE APPEL LANT, THE LD. ASSESSING OFFICER/ LD. CIT (A) ERRED IN LEV YING INTEREST UNDER SECTION 234C OF THE ACT AT RS. 68,87 8 AS AGAINST THE CORRECT AMOUNT OF INTEREST UNDER SECTIO N 234C OF THE ACT OF RS. 37,042 RETURNED BY THE APPELLANT. 5. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE TAX D EMAND OF RS. 32,06,697 RAISED ON THE APPELLANT UNDER SECT ION 156 OF THE ACT, HENCE, THE SAME IS UNJUSTIFIED, BAD IN LAW AND SHOULD BE COMPLETELY VACATED. THE APPELLANT ALSO SUBMITS THAT EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE APPELLANT. I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 5 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE, AMEND OR WITHDRAW THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TIME OF HEARI NG, OF THE APPEAL, SO AS TO ENABLE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, HYDERABAD TO DECIDE THIS APPEAL IN ACCORDANCE WITH LAW AND ON THE FACTS AND CIRCUMSTAN CES OF THE CASE. 7. WITH REGARD TO GROUND NOS. 1, 2 & 3: LD. AR SUBM ITTED THAT IT IS CLEAR FROM THE RETURN OF INCOME FILED BY THE ASSESSEE THAT THE DIFFERENCE BETWEEN THE TAX PAYABLE UNDER N ORMAL PROVISIONS AND AS PER MAT PROVISIONS IS RS 4,22,45, 804 (I.E. RS. 13,91,20,812 LESS RS 9,68,75,009). ON THE OTHER HAND, AS PER INTIMATION U/S 143(1) OF THE ACT, IT IS RS. 3,9 0,62,234 (I.E. RS 12,86,36,907 LESS RS 8,95,74,673). HENCE, IN THE INTIMATION, THE ELIGIBLE MAT CREDIT CONSIDERED FOR SET OFF HAS BEEN ERRONEOUSLY CALCULATED, EXCLUSIVE OF SURCHARGE AND EDUCATION CESS AT RS. 3,90,62,234 AS AGAINST THE CO RRECT ELIGIBLE MAT CREDIT AVAILABLE FOR SET OFF OF RS. 4, 22,45,803, INCLUSIVE OF SURCHARGE AND EDUCATION CESS AS CONSID ERED IN THE RETURN OF INCOME FILED BY THE COMPANY. 7.1 THE LD. AR FURTHER SUBMITTED THAT THE BROUGHT F ORWARD MAT CREDIT FOR A Y 2008-09 IS RS 3,86,45,182/- AND FOR A Y 2009-10 IS RS. 5,07,73,030. HENCE, ASSESSEE WOULD B E ELIGIBLE TO SET OFF THE DIFFERENCE BETWEEN THE TAX LIABILITY AS PER NORMAL PROVISIONS AND TAX LIABILITY AS PER MAT AMOU NTING TO RS 4,22,45,803. 7.2 HE SUBMITTED THAT AS PER SECTION 115JAA(5) OF THE ACT, SET OFF IN RESPECT OF BROUGHT FORWARD TAX CREDIT SH ALL BE ALLOWED FOR ANY ASSESSMENT YEAR TO THE EXTENT OF THE DIFFER ENCE BETWEEN THE TAX ON ITS TOTAL INCOME AND THE TAX WHI CH WOULD HAVE BEEN PAYABLE UNDER THE PROVISIONS OF SECTION 1 15JB OF I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 6 THE ACT FOR THAT ASSESSMENT YEAR. ACCORDINGLY, THE ELIGIBLE MAT CREDIT AVAILABLE TO SETOFF FOR THE COMPANY DURI NG THE CAPTIONED A Y, NEEDS TO BE ARRIVED AT BY COMPARING THE DIFFERENCE BETWEEN THE TAX LIABILITY (INCLUSIVE OF SURCHARGE AND CESS) COMPUTED UNDER THE NORMAL PROVISIONS OF THE A CT AND THE TAX LIABILITY (INCLUSIVE OF SURCHARGE AND CESS) COM PUTED UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. (B) CALCULATION OF SURCHARGE 7.3 LD. AR SUBMITTED THAT AS PER INTIMATION, THE S URCHARGE HAS BEEN CALCULATED AT RS. 64,31,845 AS AGAINST THE SURCHARGE OF RS. 44,78,734. LD. AR ALSO SUBMITTED THAT THE AS SESSED TAX LIABILITY (EXCLUDING SURCHARGE AND EDUCATION CESS) ARRIVED AT IN THE INTIMATION IS THE SAME AS THE RETURNED TAX LIAB ILITY (EXCLUDING SURCHARGE AND EDUCATION CESS). THEREFORE , AS THERE HAS BEEN NO CHANGE IN THE ASSESSED TAX LIABILITY, T HE SURCHARGE CALCULATED IN THE INTIMATION SUFFERS FROM ERROR AND NEEDS RECTIFICATION. (C) CALCULATION OF EDUCATION CESS 7.4 LD. AR SUBMITTED THAT AS PER INTIMATION INTIMA TION, THE EDUCATION CESS HAS BEEN CALCULATED AT RS. 40,52,063 AS AGAINST THE EDUCATION CESS OF RS. 28,21,602. LD. AR ALSO SUBMITTED THAT THE ASSESSED TAX LIABILITY (EXCLUDIN G SURCHARGE AND EDUCATION CESS) ARRIVED AT IN THE INTIMATION IS THE SAME AS THE RETURNED TAX LIABILITY (EXCLUDING SURCHARGE AND EDUCATION CESS). THEREFORE, AS THERE HAS BEEN NO CHANGE IN TH E ASSESSED TAX LIABILITY, THE EDUCATION CESS CALCULAT ED IN THE INTIMATION SUFFERS FROM ERROR AND NEEDS RECTIFICATI ON. I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 7 (D) INTEREST UNDER SECTION 234C OF THE ACT 7.5 LD. AR SUBMITTED THAT IN THE INTIMATION ISSUED UNDER SECTION 143(1) OF THE ACT, INTEREST UNDER SECTION 2 34C OF THE ACT IS LEVIED AT RS. 68,878 AS AGAINST RS 37,042 CO MPUTED BY ASSESSEE. THIS DEVIATION IN INTEREST IS DUE TO CONS IDERATION OF THE MAT CREDIT BEFORE SURCHARGE & EDUCATION CESS. 7.6 HE SUBMITTED THAT THE MAT CREDIT IS ARRIVED AT BY THE ASSESSEE BASED ON THE ITR 6 FORM, WHICH IS BEING FO LLOWED UNIVERSALLY BY ALL THE ASSESSEES UNDER THE ACT. HE, THEREFORE, SUBMITTED THAT THE AO ALSO BOUND TO FOLLOW THE SAME . HE ALSO SUBMITTED THAT CIT(A) HAS NOT CONSIDERED THE JUDICI AL PRECEDENT IN THE CASE OF K. SRINIVASAN VS. CIT, [19 72] 83 ITR 346 (SC),ON WHICH RELIANCE PLACED BY THE ASSESSEE, TO BRING TO THE KNOWLEDGE OF CIT(A) THAT IN THE ABOVE JUDGMENT, THE APEX COURT HAS HELD THAT THE TERM TAX INCLUDES SURCHAR GE. LD. AR ALSO REFERRED TO THE SECTION 115JAA (2A) OF THE ACT AND THE PROVISIONS OF SUCH ACT DESCRIBES THE TAX CREDIT TO BE ALLOWED SHALL BE THE DIFFERENCE OF THE TAX PAID FOR ANY A Y UNDER SUB- SECTION (1) OF SECTION 115JB AND THE AMOUNT OF TAX PAYABLE BY THE ASSESSEE ON TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE OTHER PROVISIONS OF THE ACT. FROM THE ABOVE, IT IS IMPORTANT THAT THE ASSESSEE HAS PAID THE TAX WHICH INCLUDES S URCHARGE AND EDUCATION CESS, HENCE, THE MAT CREDIT SHOULD IN CLUDE SURCHARGE AND EDUCATION CESS. LD. AR ALSO SUBMITTED ALTERNATE MAT CREDIT CALCULATION BEFORE US TO DEMON STRATE THAT THE METHOD ADOPTED BY THE ASSESSEE AND THE AO WILL GIVE THE SAME TAX LIABILITY IRRESPECTIVE OF THE METHOD ADOPT ED. 8. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF LD. CIT(A). I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 8 9. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND MATERIAL FACTS ON THE RECORD. THE PROVISIONS OF SEC TION 115JB IN BRIEF ARE: EVERY ASSESSMENT YEAR, TWO PARALLEL C OMPUTATIONS ARE CONTEMPLATED. ONE COMPUTATION OF TOTAL INCOME I N ACCORDANCE WITH THE NORMAL PROVISIONS OF THE I.T. A CT AND ANOTHER IS THE COMPUTATION OF BOOK PROFIT AS STIPUL ATED U/S 115JB. IF THE INCOME TAX PAYABLE ON THE TOTAL INCOM E IS LESS THAN 18.5% OF THE BOOK PROFIT COMPUTED U/S 115JB, T HEN THE BOOK PROFIT SO COMPUTED SHALL BE DEEMED TO BE THE T OTAL INCOME, THEN THE BOOK PROFIT SO COMPUTED SHALL BE D EEMED TO BE THE TOTAL INCOME AND THE COMPANY SHALL PAY TAX @ 18.5% THEREON. THE AMOUNT SO PAID AS THE MAT SHALL BE AVA ILABLE TO THE CREDIT OF THE COMPANY TO BE SET OFF AS CONTEMPL ATED U/S 115JAA WITHIN A PERIOD OF 10 AYS. SURCHARGE AT 5% S HALL BE LEVIED IF BOOK PROFIT EXCEEDS 1 CRORE. EDUCATION CE SS @ 3% SHALL BE ADDED ON THE AGGREGATE OF INCOME TAX AND S URCHARGE. AT THE SAME TIME, SECTION 115JAA PROVIDES THAT WHER E ANY AMOUNT OF TAX IS PAID UNDER SECTION 115JB(L) BY A C OMPANY FOR ANY ASSESSMENT YEAR, CREDIT IN RESPECT OF THE TAXES SO PAID FOR SUCH ASSESSMENT YEAR SHALL BE ALLOWED ON THE DIFFER ENCE OF THE TAX PAID UNDER SECTION 115JB AND THE AMOUNT OF TAX PAYABLE BY THE COMPANY ON ITS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE OTHER PROVISIONS OF THE ACT. IN OTHER WORDS, MAT CREDIT SHALL BE COMPUTED AS UNDER: MAT CREDIT AVAILABLE = TAX PAID U/S 115JB - TAX PAY ABLE ON THE TOTAL INCOME UNDER NORMAL PROVISIONS OF THE ACT. 9.1 THE AMOUNT OF TAX CREDIT SO DETERMINED SHALL BE ALLOWED TO BE CARRIED FORWARD AND SET OFF IN A YEAR WHEN TH E TAX BECOMES PAYABLE ON THE TOTAL INCOME COMPUTED UNDER THE REGULAR PROVISIONS. HOWEVER, NO CARRY FORWARD SHALL BE ALLOWED BEYOND THE TENTH ASSESSMENT YEAR IMMEDIATELY SUCCEE DING THE I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 9 ASSESSMENT YEAR IN WHICH THE TAX CREDIT BECOMES ALL OWABLE. THE SET OFF IN RESPECT OF THE BROUGHT FORWARD TAX C REDIT SHALL BE ALLOWED FOR ANY ASSESSMENT YEAR TO THE EXTENT OF TH E DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME AND THE TAX WHICH WOULD HAVE BEEN PAYABLE UNDER SECTION 115JB F OR THAT ASSESSMENT YEAR. 9.2 IN OTHER WORDS, MAT CREDIT WILL BE ALLOWED ONLY IN THAT PREVIOUS YEAR IN WHICH TAX PAYABLE ON THE TOTAL INC OME AS PER NORMAL PROVISIONS OF THE INCOME TAX ACT IS MORE THA N TAX PAYABLE UNDER SECTION 115JB AND IT SHALL BE ALLOWED TO THE EXTENT OF THE FOLLOWING: TAX PAYABLE ON TOTAL INCOME UNDER THE NORMAL PROVIS IONS OF THE ACT TAX PAYABLE UNDER SECTION 115JB = MAT CREDIT TO BE ALLOWED. 9.3 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 PAYA BLE ON HIS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE OTHER PROVISIONS OF THIS ACT. THE IMPORTANT WORD USED IS TAX PAID A ND AS PER THE HONBLE APEX COURT DECISION IN THE CASE OF K. S RINIVASAN (SUPRA), THE TERM TAX INCLUDES SURCHARGE. 9.4 IT IS ALSO IMPORTANT TO EVALUATE SUB-SECTION (5 ) OF SECTION 115JAA. SET OFF IN RESPECT OF BROUGHT FORWARD TAX CREDIT SHALL BE ALLOWED FOR ANY AY TO THE EXTENT OF DIFFER ENCE BETWEEN TAX ON HIS TOTAL INCOME AND THE TAX WHICH W OULD HAVE BEEN PAYABLE U/S 115JB, AS THE CASE MAY BE FOR THAT AY. ON CAREFUL READING, THE TERM USED ARE TAX NOT INCOME T AX OR ANY OTHER TERM. NEEDLESS TO SAY THE TERM TAX INCLUDES S URCHARGE. I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 10 9.5 THE SUB-SECTION (5) OF SECTION 115JAA ARE APPLI ED AS IT IS IN THE ITR 6. THE ITR-6 FORM IS DESIGNED AND A PPROVED BY THE APEX BODY CBDT AND THIS FORM IS UNIVERSALLY USE D BY ALL THE COMPANY ASSESSEES. IN PART A OF THE ITR-6, THE ASSESSEES ARE REQUIRED TO FILL THE BALANCE SHEET AND P&L A/C . FROM THE DATA OF PART A, ALL THE RELATED CALCULATIONS ARE C ARRIED OUT IN OTHER PARTS OF THE ITR-6 I.E. PART B AND OTHER RE LATED SCHEDULES. NONE OF THE COLUMNS IN THE PART B ARE MANUALLY ENTERED, THESE ARE AUTO FILLS, AND THE DATAS ARE EX TRACTED FROM PART A. IT IS PERTINENT TO ANALYSE THE TOTAL TAX LIABILITY CALCULATIONS DESIGNED BY THE CBDT FOR THE AY 2012-1 3. THEY ARE AS BELOW: PART B - TTI COMPUTATION OF TAX LIABILITY ON TOTAL INCOME COMPUTATION OF TAX LIABILITY 1 1A TAX PAYABLE ON DEEMED TOTAL INCOME UNDER SECTION 11 5JB (7 OF SCHEDULE MAT) 1A 0 1B SURCHARGE ON (A) ABOVE 1B 0 1C EDUCATION CESS ON (1A+1B) ABOVE 1C 0 1D TOTAL TAX PAYABLE U/S 115JB (1A+1B+1C)MAT) 1D 0 2 TAX PAYABLE ON TOTAL INCOME A TAX AT NORMAL RATES 2A 0 B TAX AT SPECIAL RATES (11 OF SCHEDULE-SI) 2B 0 C TAX PAYABLE ON TOTAL INCOME (2A + 2B) 2C 0 3 SURCHARGE ON 2C 3 0 4 EDUCATION CESS, INCLUDING SECONDARY AND HIGHER ED UCATION CESS ON (2C + 3) 4 0 5 GROSS TAX LIABILITY (2C+3+4) 5 0 6 GROSS TAX PAYABLE (HIGHER OF 5 AND 1D) 6 0 7 CREDIT UNDER SECTION 115JAA OF TAX PAID IN EARLIER YEARS (IF 5 IS MORE THAN 1D) ( 5 OF SCHEDULE MATC) 7 0 8 TAX PAYABLE AFTER CREDIT UNDER SECTION 115JAA [ ( 6 7)] 8 0 9 TAX RELIEF A SECTION 90/90A(1B1 OF SCHEDULE TR) 9A 0 B SECTION 91(1B2 OF SCHEDULE TR) 9B 0 C TOTAL (9A + 9B) 9C 0 10 NET TAX LIABILITY (8 9C) 10 0 11 INTEREST PAYABLE A FOR DEFAULT IN FURNISHING THE RETURN (SECTION 234A) 11A 0 B FOR DEFAULT IN PAYMENT OF ADVANCE TAX (SECTION 234B) 11B 0 C FOR DEFERMENT OF ADVANCE TAX (SECTION 234C) 11C 0 D TOTAL INTEREST PAYABLE (11A+11B+11C) 11D 0 I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 11 9.6 THE TAX LIABILITIES FOR NORMAL PROVISIONS AS WE LL AS MAT ARE CALCULATED WITH SURCHARGE AND CESS. THE MAT CRE DIT IN ROW 7 ARE CALCULATED AUTOMATICALLY USING THE PRESCRIB ED ALGORITHM, THIS IS NOTHING BUT BALANCING FIGURE I.E ., THE DIFFERENCE BETWEEN TAX LIABILITY AS PER NORMAL PROV ISIONS AND MAT PROVISIONS. BOTH THE ABOVE TAX LIABILITIES ARE CALCULATED WITH SURCHARGE AND CESS. THESE ARE THE STANDARD FOR MAT, WHICH ARE EXPECTED TO BE FOLLOWED BY ALL THE ASSESS EES AND ALSO IMPORTANT TO NOTE THAT THE ABOVE FORMAT OF ITR 6 WAS AMENDED W.E.F. AY 2012-13 BY CBDT. MOREOVER, THIS I S MORE RELEVANT FOR THE DEPARTMENT ALSO. THESE FORMATS ARE REGULATED BY CBDT. ASSESSING OFFICER CANNOT OVERLOOK THESE FO RMATS AND (INTERPRET IT IN HIS OWN METHOD OF CALCULATING TAX CREDIT WHILE MAKING ASSESSMENT U/S 143(1) OF THE ACT.) PR OCEED TO CALCULATE THE MAT CREDIT TO COMPUTE ASSESSMENT U/S 143(1) APPLYING DIFFERENT METHODS WHEN THE PROPER AND CORR ECT 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. 9.5 LET US ALSO ANALYSE THE CASE LAW OF RICHA GLOBA L EXPORTS PVT. LTD. WHICH WAS APPLIED BY CIT(A), THE DELHI ITAT OPINED THAT SECTION 115JAA APPLIED ONLY TO INCOME T AX, NOT OF INCOME TAX AS INCREASED BY SURCHARGE AND EDUCATION CESS. WE ARE OF THE VIEW THAT THE APEX COURT DECISION IN THE CASE OF K. 12 AGGREGATE LIABILITY (10 + 11D) 12 0 TAXES PAID 13 TAXES PAID A ADVANCE TAX (FROM SCHEDULE-IT) 13A 0 B TDS (COLUMN 7 OF SCHEDULE-TDS) 13B 0 C TCS (COLUMN 5 OF SCHEDULE-TCS) 13C 0 D SELF ASSESSMENT TAX (FROM SCHEDULE-IT) 13D 0 E TOTAL TAXES PAID (13A+13B+13C + 13D) 13E 0 14 AMOUNT PAYABLE (ENTER IF 12 IS GREATER THAN 13E, ELSE ENTER 0) 14 0 15 REFUND (IF 13E IS GREATER THAN 12, ALSO GIVE THE BA NK ACCOUNT DETAILS IN SCHEDULE-BA) 15 0 I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 12 SRINIVASAN (SUPRA) MAY NOT HAVE BEEN BROUGHT TO TH E KNOWLEDGE OF THE ITAT, DELHI. MOREOVER, THE EXPLANA TION 2 OF SECTION 115JB IS APPLICABLE TO CALCULATE TAX LIABIL ITY U/S 115JB AND THE SAME EXPLANATION SHOULD ALSO BE APPLIED FOR GIVING CREDIT U/S 115JAA. THE TAX LIABILITIES CALCULATED U/S 115JB BY APPLYING THE EXPLANATION 2, THE TAX LIABILITY SO CO MPUTED ARE REMITTED BY THE ASSESSEE AND THEN THE SAME WAS CARR IED FORWARD FOR FUTURE MAT CREDIT. IN OUR VIEW, WHILE C ALCULATING THE MAT CREDIT U/S 115JAA, THE SAME EXPLANATION 2 IN SECTION 115JB MUST BE APPLIED. 9.6 THE EARLIER JUDGMENTS IN THE CASES OF UNIVERSAL MEDICARE, VALMET INDIA AND WYETH LIMITED ARE DECIDE D RELYING ON THE ITR 6 AS APPLICABLE IN THOSE AYS. SIMILARL Y, WE ALSO APPLY THE ITR 6 FORMAT AS APPLICABLE TO AY 2012-13 AS STATED ABOVE. ASSESSEE HAS RELIED ON THE ITR 6 FORMAT TO ARRIVE AT THE TOTAL LIABILITY AS WELL AS THE MAT CREDIT CALCU LATIONS AND PAID TAX ACCORDINGLY. IN OUR VIEW, THE ASSESSEE HAD FOLLOWED THE PROCEDURE PROPERLY AND THE ASSESSING OFFICER HA D MADE THE CALCULATIONS APPLYING HIS OWN INTERPRETATION O R RELIED ON THE PROGRAMME, WE ARE NOT SURE WHETHER IT IS PROGRA MME HITCH OR THE INTERPRETATION OF ASSESSING OFFICER WAS NOT IN LINE WITH THE CALCULATIONS PROPOSED IN ITR-6. THEREFORE, WE DELETE THE ADDITION MADE. 10. WITH REGARD TO OTHER GROUNDS OF APPEAL, THEY BE COME INFRUCTUOUS AND ARE DISMISSED AS SUCH. I.T.A. NO. 146/HYD/2015 M/S VIRTUSA (INDIA) PVT. LTD. 13 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED. PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH, 2016 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD, DATED 4 TH MARCH, 2016 KV COPY FORWARDED TO: 1. VIRTUSA (INDIA) PVT. LTD., (NOW MERGED WITH VIRT USA CONSULTING SERVICES PVT. LTD.) SURVEY NO. 115/PART, PLOT NO. 10, NANAKRAMGUDA VILLAGE, SERILINGAMPALLY, HYD 500 032 2. DCIT, CIRCLE 17(2), 6 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYD 500 004. 3. CIT(A) - IV, HYDERABAD 4 CIT - III, HYDERABAD 5 THE DR, ITAT, HYDERABAD
