DCIT, C-4, Ludhiana V. M/s Aarti Steels Limited, Ludhiana

ITA 1523/CHANDI/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4980 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 03-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: TDS
• Section: 154; 2; 234B; 115JB; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHA, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NOS. 1523/CHD/2017 (ASSESSMENT YEAR : 2015-16) THE DCIT VS. M/S AARTI STEELS LTD. CIRCLE-4, G.T. ROAD, MILLER GANJ LUDHIANA LUDHIANA PAN: AABCA4455D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. SUBHASH AGGARWAL DEPARTMENT BY : SMT. CHANDRAKANTA DATE OF HEARING : 26.02.2018 DATE OF PRONOUNCEMENT : 24/04/2018 O R D E R PER DR.B.R.R.KUMAR, A.M . : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF THE LD. CIT(A)-2, LUDHIANA DT. 09/08/2017. 2. THE REVENUE HAS RAISED ONLY ONE GROUND IN THIS A PPEAL WHICH READS AS UNDER: 1. WHETHER UPON FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) IS JUSTIFIED IN LAW IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE MAT CREDIT INCLUDING SURCHARGE & EDU. CESS AGAINST THE TAX LIABILITY DET ERMINED BY THE REVENUE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS IN THE BUSINESS OF COTTON AND POLYESTER YARN MANUFACTURING. DURING THE YEAR THE ASSESSEE HAS DECLARED INCOME OF RS. 309691560/- UNDER NORMAL PRO VISIONS OF THE INCOME TAX ACT, 1961 AND OF RS. 26,39,75,941/- UNDER THE DEEMI NG PROVISIONS OF SECTION 115JB OF THE ACT, (MAT PROVISIONS). THE GROSS LIAB ILITY UNDER NORMAL PROVISIONS ERRED BY THE ASSESSEE IS RS. 10,52,64,161/- WHICH I NCLUDES SURCHARGE OF RS. 92,90,747/- AND EDUCATION CESS OF RS. 30,65,946/-. WHEREAS THE TAX LIABILITY UNDER DEEMING PROVISIONS OF 115JB HAS BEEN ARRIVED BY THE ASSESSEE AT RS. 55330677 /- WHICH INCLUDES SURCHARGE OF RS.48,83,555/- AND EDUC ATION CESS OF RS. 16,11,570/-. THE GROSS TAX OF THE ASSESSEE UNDER THE NORMAL PROV ISION EXCLUDING SURCHARGE AND EDUCATION CESS WAS RS. 9,29,07,468/- WHEREAS UN DER THE DEEMING PROVISIONS IT WAS RS. 4,88,35,549/-. 4. THE ASSESSEE HAS CLAIMED MAT CREDIT IN RESPECT OF TAXES PAID IN EARLIER YEARS UNDER SECTION 115JAA OF THE INCOME TAX ACT,19 61 OF RS. 4,99,33,484/. AFTER CLAIMING MAT CREDIT THE ASSESSEE DETERMINED NET TAX LIABILITY OF RS.5,53,30,670/-. 5. THE RETURN WAS PROCESSED AT CPC ALLOWING MAT CRE DIT OF RS. 4,40,71,913/- ONLY. 6. THIS DOES NOT INCLUDE THE DIFFERENCE IN THE SURC HARGE AND THE EDUCATION CESS PAYABLE BY THE ASSESSEE UNDER NORMAL PROVISION S AND UNDER DEEMING PROVISIONS OF THE ACT. 7. THUS THE CPC DID NOT ALLOW MAT CREDIT TO THE TUN E OF RS. 58,61,565/- WHICH IS THE DIFFERENCE BETWEEN THE SURCHARGE AND EDUCATI ON CESS PAYABLE BY THE ASSESSEE UNDER THE NORMAL PROVISIONS AND UNDER THE MAT PROVISIONS. 8. ON APPEAL, THE LD. CIT(A) ALLOWED MAT CREDIT TO THE TUNE OF RS. 58,61,565/- WHICH IS THE DIFFERENCE BETWEEN THE SUR CHARGE AND THE EDUCATION CESS. 9. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE RE VENUE FILED APPEAL BEFORE US. BEFORE US, THE LD. DR ARGUED THAT THE LD. CIT( A) HAS FAILED TO APPRECIATE THAT THE ISSUE INVOLVED IS THE QUANTUM OF CREDIT AND NOT THE ORDER OF ENTRY FOR SETOFF AND HAS HENCE WRONGLY APPLIED THE DECISION OF M/S V ARDHAMAN YARNS AND THREADS LTD (ITA NO 7/2015) AND M/S VARDHAMAN TEXTI LES LTD (ITA NO 6/2015). INFACT IN THESE DECISIONS, THE HON'BLE ITAT CHANDIG ARH HAS CLEARLY BROUGHT THE DIFFERENCE IN ORDER OF ENTRY OF MAT CREDIT FOR SETO FF AND THE QUANTUM OF MAT CREDIT IN PARA 11 OF ITS JUDGEMENT. 10. THE LD. DR ARGUED THAT THE ISSUE IN THE PRESENT CASE IS THE QUANTUM OF MAT CREDIT ELIGIBLE TO THE ASSESSEE ONLY AND NOT W HETHER THIS QUANTUM HAS TO BE COMPUTED AFTER TAKING INTO CONSIDERATION THE SURCHA RGE AND CESS OR NOT? SHE ARGUED THAT THE ORDER OF ENTRY OF MAT CREDIT AS PER THE COLUMNS IN THE INCOME TAX RETURN WHETHER BEFORE OR AFTER SURCHARGE/ CES S FOR ITS SETOFF IS NOT THE ISSUE HERE. 11. FURTHER SHE ARGUED THAT THE DECISION OF M/S VAR DHAMAN YARNS AND THREADS LTD (ITA NO 7/2015) AND M/S VARDHAMAN TEXTI LES LTD (ITA NO 6/2015) DEALS WITH THE ORDER OF ENTRY AND ARE HENCE NOT APP LICABLE TO THE PRESENT FACTS AND CIRCUMSTANCE OF THE CASE. 12. SHE STRONGLY RELIED ON THE FACTS AND RATIO OF T HE DECISION OF HON'BLE ITAT DELHI IN CASE OF M/S RICHA GLOBAL EXPORTS PVT LTD , ITA NO 2303/2012 WHICH DEALT WITH THE QUANTUM OF MAT CREDIT. 13. AGAINST THE ARGUMENT OF THE LD. DR, THE LD. AR SUBMITTED HIS ARGUMENTS IN THE FORM OF A CHART WHICH IS DEPICTED AS UNDER: 14. THE APPEAL BEFORE THE CIT(A) WAS AGAINST THE DC IT CPC ORDER IN ALLOWING THE MAT CREDIT AT RS.4,40,71,919/- AS AGAINST RS. 4 ,99,33,484/- . THE LEVY OF INTEREST U/S 234 B AND 234 C WAS HOWEYER, CONSEQUENTIAL. THE DCIT ALLOWED THE MAT CREDIT ONLY OF THE TAX COMPONENT WITHOUT INCLUDING THE SURCHARGE AND EDUCATION CESS AMOUNTING TO RS.64,95,128/- ( SURCHA RGE RS. 48,83,555+ EDUCATION CESS RS 16,11,573/-) THE FOLLOWING CHART CLARIFIES THE ISSUE. TAX AS PER NORMAL PROVISIONS AS PER 115JB INTIMATION U/S 143(1) DATED 05.08.2016 BOOK PROFITS TAXABLE INCOME 30,96,91,560/- 26,39,75,941/- 26,39,75,941/- INCOME TAX 18.5% 30% 9,29,07,468/- 4,88,35,549/- 4,88,35,549/- SURCHARGE 10% 10% 92,90,747/- 48,83,555/- 48,83,555 /- ED. CESS 3% 3% 30,65,946/- 16,11,573/- 16,11,573/- TOTAL 10,52,64,161/- 5,53,30,677/- 5,53,30,677/- INTEREST U/S 234C 1,97,549/- 4,26,501/- INTEREST U/ S 234B 14,96,612/- TOTAL TAX 5,55,28,226/- 5,72,53,790/- MAT CREDIT 4,99,33,484/- 4,40,71,919/- CALCULATION OF DEMAND BY CPC IS AS UNDER:- ASSESSEE CLAIMED MAT OF RS. 4,99,33,484/- (RS. 10, 52,64,161/-- RS. 5,53,30,677/- MAT CREDIT ALLOWED BY CPC RS. 4,40,71,919/- BALANCE TAX RS. 58,61,565/- ADD INTEREST U/S 234 B RS. 14,96,612/- ADD. INTEREST U/S 234 C RS. 2,28,952/- RS. 75,87,129/- ADD: TDS CREDIT LESS GIVEN RS. 1,80,000/- TOTAL RS. 77,67,129/- 15. WE HAVE GONE THROUGH THE ISSUE BEFORE US AND AL SO PERUSED THE CASE LAWS RELIED BY THE ASSESSEE AND WHICH HAVE BEEN ARG UED AS WRONGLY APPLIED TO THE INSTANT CASE BY THE LD. DR. IN THE CASE OF VARDHMAN TEXTILES LTD. IN ITA NO. 06 /CHD/2015, THE LD. DR ARGUED THAT IT DEALS WITH THE ORDER OF THE ENTRY AND HENCE NOT APPLICABLE TO THE PRESENT CASE. WE FIND THAT THE GROUND TAKEN IN THAT CASE PE RTAINS TO THE METHODOLOGY TO BE ADOPTED WHILE ALLOWING CREDIT OF MAT. THE COO RDINATE BENCH OF ITAT IN PARA 11 OF THE ABOVE MENTIONED ORDER EXAMINED THE I SSUE WHETHER ADJUSTMENT ON ACCOUNT OF MAT CREDIT IS TO BE MADE AGAINST THE TAX DETERMINED UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT,1961, BEFOR E LEVYING SURCHARGE AND EDUCATION CESS OR OTHERWISE. IT WAS FOUND TO BE BAS ED ON THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF DCIT VS . VACMENT INDIA LTD. 369 ITR 304 WHEREIN THE HONBLE HIGH COURT AFTER GOING THRO UGH THE RELEVANT ENTRIES IN THE FORM ITR-6 AND BASED ON THE SEQUENCE OF GROSS TAX PAYABLE, CREDIT UNDER 115JAA, SURCHARGE, EDUCATION CESS AND THEN THE GROS S TAX LIABILITY HELD THAT THERE WAS NO AMBIGUITY WITH REGARD TO COMPUTATION O F TAX LIABILITY. THE MAIN ISSUE DEALT IN THAT CASE WAS WHETHER ADJUSTMENT CAN BE RECTIFIED UNDER SECTION 154 OR NOT AND THE TRIBUNAL HELD THAT THE PROCEEDIN GS UNDER SECTION 154 IN THAT CASE WERE NOT LEGALLY VALID. SIMILARLY THE JUDGMENTS IN THE CASE OF DCIT VS. VAC MET INDIA PVT. LTD. ITA NO. 93/AGRA/2014. AND DCIT VS. GODREJ OIL PALM LTD. ITA NO. IN ITA NO. 5098/MUM/2013 DEALT WITH THE ISSUE WHETHER SURCHAR GE AND EDUCATION CESS SHOULD BE LEVIED AFTER GIVING MAT CREDIT OR NOT WHI CH IS ALSO NOT THE ISSUE BEFORE US IN THE INSTANT CASE. 16. WITH REGARD TO THE CASE OF M/S RICHA GLOBAL EXP ORT PRIVATE LTD. ITA NO. 2303/2012, WE FIND THAT THE CASE DEALS WITH WHETHER THE AMOUNT OF MAT CREDIT UNDER SECTION 115JA WOULD INCLUDE SURCHARGE AND CES S ON THE TAX PAYABLE ON THE BOOK PROFITS WHICH IS THE SIMILAR GROUND IN THE PRESENT APPEAL. 17. THE COORDINATE BENCH OF ITAT DELHI IN ITS JUDGM ENT DT. 31/08/2012 HELD AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FOR UNDERSTANDING THE AMOUNT OF TAX CREDIT AVAILABLE U/S 115JAA FIRST OF ALL, IT IS NECESSARY TO UNDERSTAND THE MEANING OF INCOME TAX AS CONTEMPLATED BY SECTION 115JB OF THE ACT. SECTION 115JB READS AS UNDER:- 'SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN CO MPANIES. 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN AN Y OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSESSEE, BEING A COMPANY, THE INCOME-TAX, PAYABLE ON THE TOTAL INCOME AS 6 ITA NO2303/DEL/2012 COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR C OMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2010, IS LESS THAN FIFTEEN PER CE NT OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSES SEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOU NT OF INCOME-TAX AT THE RATE OF FIFTEEN PER CENT. (2) EVERY ASSESSEE, BEING A COMPANY, SHALL, FOR THE PURPOSES OF THIS SECTION, PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVAN T PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT , 1956 (1 OF 1956)}' THE ABOVE SECTION CLEARLY TALKS THAT SUCH BOOK PROF IT SHALL BE DEEMED TO BE TOTAL INCOME OF THE ASSESSEE AND TAX PAYABLE BY THE ASSES SEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME TAX AT SPECIFIED RATE OF TAX WHICH WAS 15% FOR THE RELEVANT YEAR UNDER CONSIDERATION. THE SECTION DOES NOT TALK ABOUT THE INCOME TAX AS INCREASED BY SURCHARGE & EDUCATION TAX. IT T ALKS ABOUT ONLY INCOME TAX. WHEREVER STATUTE HAS REQUIRED INCOME TAX TO INCLUDE SURCHARGE AND EDUCATION TAX, IT HAS SPECIFICALLY DONE IT LIKE IN EXPLANATIO N 2 TO SECTION 115JB . SIMILARLY FORM 29B WHICH IS FILED ALONG WITH RETURN OF INCOME WHER E MAT IS APPLICABLE AT POINT 14 IT STATES THAT THE AMOUNT OF INCOME TAX PAYABLE BY THE COMPANY WOULD BE 15% OF COL. 12 I.E. BOOK PROFITS, IT DOES NOT STATE SUR CHARGE OR EDUCATION CESS. THEREFORE, IT EMERGES THAT MAT PAYABLE U/S 115JB IS ONLY INCOME TAX AND DOES NOT INCLUDE SURCHARGE OR EDUCATION CESS. THEREFORE, IF ONLY INCOME TAX IS PAID UNDER THE PROVISIONS OF SECTION 115JB IT IS NATURAL THAT TAX CREDIT U/S 115JAA WILL ONLY BE OF INCOME TAX AND NOT OF SURCHARGE AND EDUCATION CESS. THIS POINT IS FURTHER CLARIFIED BY INTIMATION U/S 143(1) SENT TO ASSESSEE WHEREIN T AX PAYABLE U/S 115JB HAS BEEN CALCULATED AS ONLY INCOME TAX 7 ITA NO2303/DEL/2012 AND NO SURCHARGE OR EDUCATION CESS HAS BEEN INCLUDED IN THE AMOUNT OF I NCOME TAX. 8. THE SUBMISSION OF LD AR THAT TAX INCLUDES SURCHA RGE AND EDUCATION CESS AS PER EXPLANATION 2 OF SECTION 115JB IS CORRECT TO THE EXTENT THAT EXPLANATION 2 WAS INSERTED TO CLARIFY THE MEANING OF TAX AS CONTEMPLA TED IN CLAUSE (A) OF EXPLANATION (1) WITH RESPECT TO CALCULATION OF BOOK PROFIT WHICH IS READ AS UNDER:- 'EXPLANATION-1 FOR THE PURPOSE OF THIS SECTION BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE P&L ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB SECTION (2) AS INCREASED BY :- A) THE AMOUNT OF INCOME TAX PAID OR PAYABLE AND THE PROVISIONS THEREOF: B) XXXXX C) XXXXX D) XXXXX E) XXXXX F) XXXXX THE ABOVE EXPLANATION 1 CLARIFIES THAT EXP LANATION 2 TO SECTION 115JB WAS INSERTED TO DEFINE THE MEANING OF TAX (WHICH OF COU RSE INCLUDES EDUCATION TAX AND SURCHARGE) FOR THE PURPOSE OF CALCULATING BOOK PROFITS LIABLE TO TAX U/S 115JB AND IT CANNOT BE EXTENDED TO SECTIONS 115JB OR SECTION 115JAA OF THE ACT. IN VIEW OF THE ABOVE PROVISIONS, WE ARE OF THE CONS IDERED OPINION THAT TAX CREDIT U/S 115JAA WAS RIGHTLY GIVEN AND WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A). 18. SINCE WE FIND THE FACTS AND CIRCUMSTANCES OF TH E CASE AND THE GROUNDS BEFORE US TO BE ADJUDICATED ARE SQUARELY COVERED BY THE JUDGMENT BY THE COORDINATE BENCH, THE APPEAL OF THE REVENUE IS HERE BY ALLOWED. 19. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24/04/2018 AG COPY TO: 1.THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT, 5. THE DR