DCIT, C-4, Ludhiana V. Aarti International Limited, Ludhiana

ITA 1525/CHANDI/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4406 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-05-2018
• Assessment Year: 2016-2017
• Appeal Filed On: 03-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH AGGARWAL
• Keywords: Deemed to accrue or arise in india; TDS
• Section: 154; 115JB; 143(1); 43; 13; 20

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH , ! ' # $ %! , &' BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.1619/CHD/2017 / ASSESSMENT YEAR :2008-09 THE DCIT, CIRCLE - 4, LUDHIANA M/S AARTI STEELS LTD., G.T. RAOD, MILLER GANJ, LUDHIANA. ./PAN NO:AABCA4455D /APPELLANT /RESPONDENT ./ ITA NOS.1524 & 1525/CHD/2017 / ASSESSMENT YEARS : 2015-16 & 2016-17 THE DCIT, CIRCLE - 4, LUDHIANA M/S AARTI INTERNATIONAL LTD., G.T.ROAD, MILLER GANJ, LUDHIANA. ./PAN NO:AABCA4454C /APPELLANT /RESPONDENT /ASSESSEE BY : SMT. CHANDERKANTA, SR.DR ! / REVENUE BY : SH. SUBHASH AGGARWAL, ADVOCATE ' # $ /DATE OF HEARING : 17.07.2018 %&'( $ / DATE OF PRONOUNCEMENT : 11.10.2018 &( / ORDER PERANNAPURNA GUPTA, AM: THE CAPTIONED APPEALS RELATE TO THE SAME ASSESSEE AND HAVE BEEN FILED BY THE REVENUE AGAINST SEPARATE ORDERS P ASSED BY CIT(A)- 2, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)] U/ S 250(6)OF THE ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 2 INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') FOR ASSES SMENT YEARS 2008- 09 AND 2015-16 & 2016-17 RESPECTIVELY. 2. AT THE OUTSET, IT WAS POINTED OUT THAT THE ISSUE INVOLVED IN ALL THE THREE CAPTIONED APPEALS WAS COMMON. THEREFORE, THEY WERE TAKEN UP TOGETHER FOR HEARING. IT WAS POINTED OUT THAT TH E SOLE ISSUE INVOLVED WAS WHETHER THE CREDIT OF MINIMUM ALTERNAT E TAX (IN SHORT MAT), WHICH THE ASSESSEE IS ENTITLED TO AVAIL AGA INST ITS TAX LIABILITY, AS PER THE PROVISIONS OF SECTION 115JAA OF THE ACT, INCLUDES SURCHARGE AND CESS ALSO BESIDES THE NORMAL RATE OF TAX AS PROVIDED. WE SHALL BE DEALING WITH THE FACTS IN THE APPEAL I N ITA NO. 1619/CHD/2017 RELATING TO ASSESSMENT YEAR 2008-09 AND THE DECISION RENDERED THEREIN WILL APPLY MUTATIS-MUTANDIS TO THE REST OF THE APPEALS ALSO. 3. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONS IDERATION DECLARING AN INCOME OF RS.43,70,28,420/- UNDER THE NORMAL PR OVISIONS OF THE ACT, WHEREAS, THE INCOME CHARGEABLE TO TAX UNDER T HE DEEMING PROVISIONS OF SECTION 115JB OF THE ACT I.E. MAT PRO VISIONS WAS DECLARED AT RS.55,23,56,116/-. THE TAX LIABILITY UN DER THE NORMAL PROVISIONS WITHOUT SURCHARGE AND EDUCATION CESS, CA ME AT RS.13,11,08,526/- I.E. @ OF 30% OF THE NORMAL INCOM E, WHEREAS THE TAX LIABILITY WITHOUT SURCHARGE AND CESS UNDER THE DEEMING PROVISIONS OF SECTION115JB OF THE ACT CAME TO RS. 5,52,35,612/ - I.E. @ 10% OF THE BOOK PROFITS OF RS.55,23,56,116/-, AS PER SECT ION115JB OF THE ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 3 ACT. SINCE THE TAX LIABILITY UNDER THE NORMAL PROVI SIONS EXCEEDED THAT UNDER THE DEEMING PROVISIONS, THE ASSESSEE DETERMI NED ITS TAX LIABILITY UNDER THE NORMAL PROVISIONS WITHOUT SURCH ARGE AND CESS AT RS.13,11,08,526/-. AGAINST THE SAME, THE ASSESSEE C LAIMED CREDIT OF MAT IN RESPECT OF TAX PAID IN EARLIER YEARS I.E. AS SESSMENT YEARS 2006-07 AND 2007-08 UNDER SECTION 115JAA OF THE ACT AT RS.4,62,96,497/- WHICH AGAIN DID NOT INCLUDE SURCHA RGE AND CESS. THE NET TAX LIABILITY WAS THUS ARRIVED AT RS. 8,48,03, 029/- (RS. 13,11,08,526 RS.4,62,95,497/-). ON THE SAME SURCH ARGE @ 10% AND EDUCATION CESS @ 3% WAS ADDED AND ALSO INTEREST U/S 234 C WAS LEVIED THUS WORKING OUT THE TOTAL TAX LIABILITY AT RS.9,68,12,403/-. AFTER CLAIMING PRE-PAID TAXES @ RS.9,92,59,948/- WH ICH INCLUDED TDS AND ADVANCE TAXES, REFUND OF RS.24,47,550/- WA S CLAIMED BY THE ASSESSEE. THE ASSESSMENT IN THIS CASE WAS COMPLETED BY THE ASSESSING OFFICER MAKING VARIOUS ADDITIONS TO THE INCOME OF T HE ASSESSEE WHICH WAS DELETED IN APPEALS UPTO THE ITAT, THUS, RESTORI NG THE ASSESSED INCOME TO THAT RETURNED BY THE ASSESSEE ORIGINALLY. THE ASSESSING OFFICER WHILE PASSING THE APPEAL EFFECT ORDER, IN C ONSEQUENCE TO THE ORDER OF THE ITAT PASSED IN THE CASE OF THE ASSESS EE, RE-WORKED THE CALCULATION OF TAX LIABILITY OF THE ASSESSEE. THE A SSESSING OFFICER DETERMINED THE TAX PAYABLE UNDER NORMAL PROVISIONS OF THE ACT INCLUDING SURCHARGE AND CESS THEREON, THEREAFTER IN TEREST U/S 234C WAS ALSO LEVIED. AGAINST THE TOTAL TAX LIABILITY S O DETERMINED, THE MAT CREDIT U/S 115JAA OF THE ACT WAS GIVEN TO THE A SSESSEE EXCLUDING SURCHARGE AND CESS THEREON. THE CALCULATI ON OF THE TAX ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 4 LIABILITY COMPUTED BY THE ASSESSING OFFICER IS REPR ODUCED IN PARA 3.5 OF THE CIT(A) ORDER, AS UNDER:- 3.5 ON RECEIPT OF ORDER OF HON'BLE ITAT, CHANDIGA RH THE ASSESSING OFFICER HAD GIVEN EFFECT TO THE ORDER OF HON'BLE ITAT, CHANDIGARH AND DETERMINED TAX REFUNDABLE TO THE ASSESSEE COMPANY AT RS. 46,82,920/- AS UNDER:- ASSESSED INCOME AFTER GIVING EFFECT TO THE ORDER OF ITAT RS. 43,70,28,420/- TAX PAYABLE BY THE ASSESSEE COMPANY UNDER NORMAL PROVISIONS OF THEACT @ 30% ON INCOME OF RS. 43,70,28,420/- RS. 13,11,08,526/- ADD: SURCHARGE @ 10% OF RS. 13,11,08,526/- RS. 13,11,0853/- TOTAL TAX AND SURCHARGE PAYABLE RS. 14,42,19,379/- ADD: EDUCATION CESS @ 3% OF RS. 14,42,19,379/- RS.43,26,581/- TOTAL TAX PAYABLE BY THE ASSESSEE COMPANY INCLUDING SURCHARGE AND EDUCATION CESS BEFORE INTEREST U/S 234C OF THE ACT RS. 14,85,45,960/- ADD:INTEREST PAYABLE U/S 234C OF THE ACT RS. 9,98,521/- TOTAL TAX LIABILITY OF THE ASSESSEE INCLUDING TAX RS. 14,95,44,481/- LESS : MAT CREDIT RS. 4,62,95,497/- BALANCE TAX PAYABLE RS. 10,32,48,984/- LESS: PRE-PAID TAXES RS. 10,79,31,906/- AMOUNT REFUNDABLE TO THE ASSESSEE RS. 46,82,922/- ROUNDED OFF TO RS. 46,82,920/- ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 5 4. THE ASSESSEE MOVED AN APPLICATION U/S 154 OF TH E ACT STATING THEREIN THAT MAT CREDIT HAD NOT BEEN ALLOWED CORREC TLY WHILE GIVING EFFECT TO THE ORDER OF THE ITAT AND THAT THE MAT CR EDIT SHOULD HAVE BEEN INCLUDED SURCHARGE AND CESS. HOWEVER, THE ASSE SSING OFFICER REJECTED THE APPLICATION FILED BY THE ASSESSEE. THE MATTER WAS CARRIED IN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE ASSESSE ES APPEAL STATING THAT IDENTICAL ISSUE HAD BEEN DECIDED IN TH E CASE OF THE ASSESSEE IN ASSESSMENT YEAR 2015-16 IN FAVOUR OF T HE ASSESSEE ALLOWING MAT CREDIT AFTER INCLUDING SURCHARGE AND C ESS THEREIN. THE CIT(A) ALSO NOTED THAT THE ISSUE WAS COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THE ITAT IN THE CASE O F M/S VARDHMAN TEXTILES LTD., ITA NO. 06/CHD/2015 AND VARDHMAN YAR N & THREADS LTD., ITA NO. 07/CHD/2015. 5. AGGRIEVED BY THE SAME, THE REVENUE HAS COME IN A PPEAL BEFORE US RAISING THE FOLLOWING GROUND:- WHETHER UPON THEFACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) S JUSTIFIED INLAW IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE MAT CREDIT INCLUDING SURCHARGE &EDU.CESS AGAINST THE TAX LIABILITY DETERMINED BY THE REVENUE? 6. DURING THE COURSE OF HEARING, BEFORE US, THE LD. DR POINTED OUT THAT THE APPEAL OF THE REVENUE FOR THE PRECEDI NG YEAR I.E. 2015- 16 HAD BEEN ALLOWED BY THE ITAT AND THE ISSUE HAD C ONSEQUENTLY BEEN DECIDED AGAINST THE ASSESSEE. COPY OF THE ORDE R PASSED IN ITA ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 6 NO. 1523/CHD/2017 DT.24.04.18 WAS PLACED BEFORE US. IT WAS POINTED OUT FROM THE SAID ORDER THAT THE ITAT HAD DECIDED THE ISSUE AGAINST THE ASSESSEE FOLLOWING THE DECISION OF ITAT, DELHI IN THE CASE OF M/S RICHA GLOBAL EXPORT PVT LTD IN ITA NO. 2303/201 2 DATED 31.8.2012.OUR ATTENTION WAS DRAWN TO THE FINDINGS O F THE ITAT AT PARA 15 TO 18 OF THE ORDER AS UNDER:- 15. WE HAVE GONE THROUGH THE ISSUE BEFORE US AND A LSO PERUSED THE CASE LAWS RELIED BY THE ASSESSEE AND WH ICH HAVE BEEN ARGUED 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 T HE ORDER OF THE ENTRY AND HENCE NOT APPLICABLE TO THE PRESENT C ASE. WE FIND THAT THE GROUND TAKEN IN THAT CASE PERTAINS TO THE METHODOLOGY TO BE ADOPTED WHILE ALLOWING CREDIT OF MAT. THE COO RDINATE BENCH OF ITAT IN PARA 11 OF THE ABOVE MENTIONED ORD ER EXAMINED THE ISSUE WHETHER ADJUSTMENT ON ACCOUNT OF MAT CREDIT IS TO BE MADE AGAINST THE TAX DETERMINED UND ER THE NORMAL PROVISIONS OF THE INCOME TAX ACT,1961, BEFOR E LEVYING SURCHARGE AND EDUCATION CESS OR OTHERWISE. IT WAS F OUND TO BE BASED ON THE JUDGMENT OF HONBLE ALLAHABAD HIGH COU RT IN THE CASE OF DCIT VS. VACMENT INDIA LTD. 369 ITR 304 WHE REIN THE HONBLE HIGH COURT AFTER GOING THROUGH 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 GROSS TAX LIABILITY HELD THAT THERE WAS NO AMBIGUITY WITH REGARD TO COMPUTATION OF TAX LIABILITY. THE MA IN ISSUE DEALT IN THAT CASE WAS WHETHER ADJUSTMENT CAN BE RE CTIFIED UNDER SECTION 154 OR NOT AND THE TRIBUNAL HELD THAT THE PROCEEDINGS 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 WI TH THE ISSUE WHETHER SURCHARGE AND EDUCATION CESS SHOULD BE LEVIED AFTER GIVING MAT CREDIT OR NOT WHICH IS ALSO NOT TH E 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 CA SE DEALS ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 7 WITH WHETHER THE AMOUNT OF MAT CREDIT UNDER SECTION 115JA WOULD INCLUDE SURCHARGE AND CESS ON THE TAX PAYABLE ON THE BOOK PROFITS WHICH IS THE SIMILAR GROUND IN THE PRE SENT 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 REC ORD. FOR UNDERSTANDING THE AMOUNT OF TAX CREDIT AVAILABL E 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 115JBREADS AS UNDER:- 'SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COMPANIES. 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN AN Y OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF A N 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 RELE VANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2010, IS LESS THAN FIFTEEN PER CENT OF IT S BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT O F 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 LO SS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANC E 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 ASSESSEE ON SUCH TOTAL INCOME SH ALL BE THE AMOUNT OF INCOME TAX AT SPECIFIED RATE OF TAX W HICH WAS 15% FOR THE RELEVANT YEAR UNDER CONSIDERATION. THE SECTION DOES NOT TALK ABOUT THE INCOME TAX AS INCRE ASED BY SURCHARGE & EDUCATION TAX. IT TALKS ABOUT ONLY I NCOME TAX. WHEREVER STATUTE HAS REQUIRED INCOME TAX TO IN CLUDE SURCHARGE AND EDUCATION TAX, IT HAS SPECIFICALLY DO NE IT LIKE IN EXPLANATION 2 TO SECTION 115JB. SIMILARLY F ORM 29B WHICH IS FILED ALONG WITH RETURN OF INCOME WHER E MAT IS APPLICABLE AT POINT 14 IT STATES THAT THE AM OUNT OF INCOME TAX PAYABLE BY THE COMPANY WOULD BE 15% OF C OL. 12 I.E. BOOK PROFITS, IT DOES NOT STATE SURCHARGE O R ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 8 EDUCATION CESS. THEREFORE, IT EMERGES THAT MAT PAYA BLE U/S 115JB IS ONLY INCOME TAX AND DOES NOT INCLUDE SURCHARGE OR EDUCATION CESS. THEREFORE, IF ONLY INC OME TAX IS PAID UNDER THE PROVISIONS OF SECTION 115JB I T IS NATURAL THAT TAX CREDIT U/S 115JAA WILL ONLY BE OF INCOME TAX AND NOT OF SURCHARGE AND EDUCATION CESS. THIS P OINT IS FURTHER CLARIFIED BY INTIMATION U/S 143(1) SENT TO ASSESSEE WHEREIN TAX PAYABLE U/S 115JB HAS BEEN CALCULATED AS ONLY INCOME TAX 7 ITA NO2303/DEL/2012 AND NO SURCHARGE OR EDUCATION CESS HAS BEEN INCLUDE D IN THE AMOUNT OF INCOME 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 W AS INSERTED TO CLARIFY THE MEANING OF TAX AS CONTEMPLA TED IN CLAUSE (A) OF EXPLANATION (1) WITH RESPECT TO CALCU LATION 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 FO R 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 EXPLANATION 2 TO SECTION 115JB WAS INSERTED TO DEFI NE THE MEANING OF TAX (WHICH OF COURSE INCLUDES EDUCATION TAX AND SURCHARGE) FOR THE PURPOSE OF CALCULATING BOOK PROFITS LIABLE TO TAX U/S 115JB AND IT CANNOT BE EX TENDED 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 GIVE N 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 SQUARE LY COVERED BY THE JUDGMENT BY THE COORDINATE BENCH, THE APPEAL OF THE REVENUE IS HEREBY ALLOWED ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 9 7. LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, CONTENDED THAT THE ISSUE HAD BEEN DECIDED IN FAVOUR OF THE ASSESSE E IN A NUMBER OF DECISIONS AS UNDER: 1. VIRTUSA (INDIA) PVT LTD VS. DCIT (2016) 3 TMI 245 (HYD) DATED 4.3.2016 2 WYETH LTD VS. ACIT,ITA NO. 6682/2011 ASSESSMENT YEAR 2007-08 DATED 9.1.2015 (MUMBAI) 3 AMQ AGRO INDIA PVT LTD VS. ACIT (2016) 5 TMI 485 (DELHI) DATED 29.4.2016 4 GARWARE WALL ROPES LTD V ADDL. CIT AND VICE VERSA 92016) 8 TMI 906 (MUM) DATED 13.7.2016 5 DCIT VS. VACMET INDIA LTD ITA NO.94/2014 A.Y. 2011 - 12 (AGRA) DATED 22.5.2014 6 ACIT V DIVIS LABORATORIES LTD, ITA NO. 596/2017 A.Y. 2011-2 (HYD) DATED 29.11.2017 7 DCIT VS. GODREJ OIL PALM LTD ITA NO. 5098/2013 A.Y. 2011-12 (MUMBAI) DATED 14.1.2015 8 DCIT VS. SAINT GOBAINGYPROC INDIA LTD ITA NO. 2122/2015 A.Y. 2013-14 (CHENNAI) DATED 3.2.2016 9 VALUE SOURCE TECHNOLOGIES PVT LTD VS. DCIT ITA NO.449/2016 A.Y. 2011-12 (CHENNAI) DATED 19.5.2016 10 VARDHMAN TEXTILES LTD VS. ACIT ITA NO.6/2015, A.Y. 2010-11 & 7/2015 A.Y. 2009-10 (CHD) DATED 12.7.2016 8. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HE DECISION RENDERED IN THE CASE OF M/S RICHA GLOBAL EXPORT PV T. LTD HAD BEEN CONSIDERED IN THE AFORESAID DECISIONS WHILE DECIDIN G THE ISSUE IN FAVOUR OF THE ASSESSEE AND THEREFORE, THE RATIO LAI D DOWN IN THE SAID DECISIONS WOULD APPLY IN THE PRESENT CASE ALSO. ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 10 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFUL LY AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AS POINTED OUT ABOVE TO US, THE SOLE ISSUE BEFORE US IS WHETHER THE MAT CREDIT ALLO WABLE TO THE ASSESSEE AS PER THE PROVISIONS OF SECTION 115JAA OF THE ACT, INCLUDES BESIDES THE BASIC SPECIFIED RATE OF TAX, SURCHARGE AND CESS ALSO. THE RELEVANT SECTION, THEREFORE, FOR THE PURPOSE OF ADJ UDICATING THE ISSUE BEFORE US, IS SECTION 115JAA AND MORE SPECIFICALLY SUB SECTION (1A) AND (2A), SINCE THEY RELATE TO CREDIT OF TAXES PAID EARLIER U/S 115JB OF THE ACT, WHICH IS THE FACT IN THE PRESENT CASE, WHILE SUB-SECTION (1) & (2) RELATE TO CREDIT OF TAXES PAID U/S 115JA OF T HE ACT. THE PROVISIONS OF SECTION 115JAA (1A) AND (2A) ARE REPR ODUCED HEREIN UNDER FOR CLARITY : TAX CREDIT IN RESPECT OF TAX PAID ON DEEMED INCOME RELATING TO CERTAIN COMPANIES. 115JAA. (1A) WHERE ANY AMOUNT OF TAX IS PAID UNDER SUB-SECTION (1) OF SECTION 115JB BY AN ASSESSEE, BEING A COMPANY FOR T HE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2006 AND ANY SUBSEQUENT ASSESSMENT YEAR, THEN, CREDIT IN RES PECT OF TAX SO PAID SHALL BE ALLOWED TO HIM IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION.] . . . (2A) THE TAX CREDIT TO BE ALLOWED UNDER SUB-SECTIO N (1A) SHALL BE THE DIFFERENCE OF THE TAX PAID FOR ANY ASS ESSMENT YEAR UNDER SUB-SECTION (1) OF SECTION 115JB AND THE AMOUNT OF TAX PAYABLE BY THE ASSESSEE ON HIS TOTAL INCOME COMPUTE D IN ACCORDANCE WITH THE OTHER PROVISIONS OF THIS ACT: 10. AS PER THE ABOVE, SUB SECTION (1A) ALLOWS CREDI T OF TAXES PAID UNDER THE DEEMING PROVISIONS OF SECTION 115JB.THE Q UANTUM OF TAX ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 11 CREDIT SO ALLOWED IS SET OUT IN SUB-SECTION (2A) WH ICH STATES THE SAME TO BE THE DIFFERENCE OF THE TAX PAID U/S 115JB AND THE TAX PAYABLE AS PER NORMAL PROVISIONS I.E. CREDIT TO THE EXTENT OF EXCESS/SURPLUS TAX PAID UNDER THE SPECIAL PROVISION S OF SECTION 115JB OF THE ACT AS COMPARED TO THE NORMAL TAX PAYABLE B Y THE ASSESSEE IS ALLOWED. NOW, FOR THE PURPOSE OF DETERMINING THE MA T CREDIT ALLOWABLE TO THE ASSESSEE AS PER SUB SECTION (2A) OF SECTION 115JAA OF THE ACT, IT IS IMPORTANT TO DETERMINE TWO THINGS - TAX PAID U/S 115JB OF THE ACT AND TAX PAYABLE UNDER THE NORMAL PROVISIONS OF THE ACT. TAX HAS BEEN DEFINED UNDER SECTION 2(43) OF THE AC T AS UNDER: 2.IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRE S:- . . . ][( 43 ) TAX IN RELATION TO THE ASSESSMENT YEAR COMMENCI NG ON THE 1ST DAY OF APRIL, 1965, AND ANY SUBSEQUENT ASSESSMENT YEAR MEA NS INCOME-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT, AND IN RELATION T O ANY OTHER ASSESSMENT YEAR INCOME-TAX AND SUPER-TAX CHARGEABLE UNDER THE PROVI SIONS OF THIS ACT PRIOR TO THE AFORESAID DATE [AND IN RELATION TO THE ASSESSMENT Y EAR COMMENCING ON THE 1ST DAY OF APRIL, 2006, AND ANY SUBSEQUENT ASSESSMENT Y EAR INCLUDES THE FRINGE BENEFIT TAX PAYABLE UNDER SECTION 115WA];] 11. THUS TAX MEANS THE INCOME TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT. THE RATE OF INCOME TAX CHAR GED /CHARGEABLE EACH YEAR IS PROVIDED IN THE FINANCE ACT OF EACH YE AR,WHICH IS AN ACT GIVING EFFECT TO THE FINANCIAL PROPOSALS OF THE CEN TRAL GOVERNMENT FOR EACH YEAR. ,SINCE IN THE PRESENT CASE, CREDIT IS B EING CLAIMED OF TAXES ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 12 PAID U/S 115JB RELATING TO A.Y 2006-07 & 2007-08 , FINANCE ACT 2006 & 2007 NEED TO BE REFERRED TO ,FOR DETERMININ G THE TAX PAYABLE U/S 115JB OF THE ACT. CHAPTER II OF THE FINANCE AC T OUTLINES THE RATE OF TAX APPLICABLE FOR THE RELEVANT YEARS. CLAU SE (3) OF THE SAME PROVIDES THAT TAX RATE FOR THE PURPOSE OF SECTION 1 15JB ARE THAT SPECIFIED IN THE SECTION. THE SAID CLAUSE IS REPROD UCED HEREUNDER: (3) IN CASES TO WHICH THE PROVISIONS OF CHAPTER XI I 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-T AX ACT APPLY, THE TAX CHARGEABLE SHALL BE DETERMINED AS PROVIDED IN THAT CHAPTER OR THAT SECTION, AND WITH REFERENCE TO THE RATES IMPOSED BY SUB-SECT ION (1) OR THE RATES AS SPECIFIED IN THAT CHAPTER OR SECTION, AS THE CASE M AY BE TAX RATE SPECIFIED U/S 115JB OF THE ACT, IS AS UN DER:- SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COMPANIES. 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF A N ASSESSEE, BEING A COMPANY, THE INCOME-TAX, PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESP ECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2007, IS LESS THAN TEN PER CENT OF ITS BOOK PROFIT, SUCH BOO K 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 AMOUNT OF INCOME-TAX AT THE RAT E OF TEN PER CENT. THUS THE SPECIFIED RATE OF TAX U/S 115JB OF THE AC T IS 10% OF THE BOOK PROFITS. THE SECOND PROVISO TO CLAUSE 3 OF THE FINANCE ACT, STATES THAT THE AMOUNT OF INCOME TAX SO COMPUTED SHALL BE INCRE ASED BY A SURCHARGE.THE SAID PROVISO IS REPRODUCED HEREUNDER: PROVIDED FURTHER THAT IN RESPECT OF ANY INCOME CHARGEABLE TO TAX UNDER SECTIONS 115A, 115AB, 115AC, 115ACA, 115AD , ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 13 115B, 115BB, 115BBA, 115E AND 115JB OR FRINGE BENEFITS CHARGEABLE TO TAX UNDER SECTION 115WA OF THE INCOME- TAX ACT, THE AMOUNT OF INCOME-TAX COMPUTED UNDER THIS SUBSEC TION SHALL BE INCREASED BY A SURCHARGE FOR PURPOSES OF THE UNION, CALCULATED,- CLAUSE 11 OF THE FINANCE ACT FURTHER INCREASES THE TAX BY AN EDUCATION CESS. THE SAID CLAUSE IS REPRODUCED HEREU NDER: (11) THE AMOUNT OF INCOME-TAX AS SPECIFIED IN SUB-SE CTIONS (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 PURP OSES OF THE UNION, TO BE CALLED THE 'EDUCATION CESS ON INCOME- TAX', SO AS TO FULFILL THE COMMITMENT OF THE GOVERNMENT TO PROV IDE AND FINANCE UNIVERSALISED QUALITY BASIC EDUCATION, CALCULA TED AT THE RATE OF TWO PER CENT, OF SUCH INCOME-TAX AND SURCHARGE. THEREFORE THE INCOME TAX LEVIED U/S 115JB AS SPECIF IED BY THE FINANCE ACT, IS THE TAX RATE AS SPECIFIED IN THE SE CTION INCREASED BY SURCHARGE & EDUCATION CESS. IT IS PERTINENT TO NOTE THAT THE FINANCE ACT SPECIFIES THAT SURCHARGE AND CESS INCREASE T HE TAX LEVIED. IT FOLLOWS THEREFORE THAT SURCHARGE AND CESS ARE PART OF TAX LEVIED. AND IT CAN THEREFORE SAFELY BE CONCLUDED THAT TAXES PAI D U/S 115JB INCLUDE SURCHARGE AND CESS ALONGWITH THE BASIC RATE OF TAX SPECIFIED IN THE SECTION. WE DRAW SUPPORT FROM THE DECISION OF THE H ONBLE APEX COURT IN THE CASE OF CIT VS K. SRINIVASAN 83 ITR 346 (SC) HOLDING THAT TAXES WOULD INCLUDE SURCHARGE AND CESS. THE RELEVAN T FINDINGS OF THE APEX COURT AT PARA OF THE ORDER IS AS UNDER: THE ABOVE LEGISLATIVE HISTORY OF THE FINANCE ACTS, AS ALSO THE PRACTICE, WOULD APPEAR TO INDICATE THAT THE TERM 'INC OME- TAX' AS EMPLOYED IN S. 2 INCLUDES SURCHARGE AS ALSO THE SPEC IAL AND THE ADDITIONAL SURCHARGE WHENEVER PROVIDED WHICH ARE ALSO SURCHARGES WITHIN THE MEANING OF ART. 271 OF THE CONSTITUTION. THE PHRASEOLOGY EMPLOYED IN THE FINANCE AC TS OF 1940 AND 1941 SHOWED THAT ONLY THE RATES OF INCOME- TAX AND SUPER- TAX WERE TO BE INCREASED BY A SURCHARGE FOR T HE ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 14 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 FO R THE PURPOSES 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 FINANC E ACT OF 1971 APPEARS TO LEAVE NO ROOM FOR DOUBT THAT THE TER M 'INCOME-TAX' AS USED IN S. 2 INCLUDES SURCHARGE. 8. ACCORDING TO ART. 271, NOTWITHSTANDING ANYTHING IN AR TS. 269 AND 270, PARLIAMENT MAY AT ANY TIME INCREASE ANY O F THE DUTIES OR TAXES REFERRED TO IN THOSE ARTICLES BY A S URCHARGE FOR THE PURPOSES OF THE UNION AND THE WHOLE PROCEEDS OF ANY SUCH SURCHARGE SHALL FORM PART OF THE CONSOLIDATED FUND O F INDIA. ART. 270 PROVIDES FOR TAXES LEVIED AND COLLECTED BY THE UNION AND DISTRIBUTED BETWEEN THE UNION AND THE STATES. C LAUSE (1) SAYS THAT TAXES ON INCOME OTHER THAN AGRICULTURAL INC OME SHALL BE LEVIED AND COLLECTED BY THE GOVERNMENT OF INDIA AND DISTRIBUTED BETWEEN THE UNION AND THE STATES IN THE MANNER PROVIDED IN CL. (2). ART. 269 DEALS WITH TAXES LEVIED AND COLLECTED BY THE UNION BUT ASSIGNED TO THE STATES. THE PROVISIONS OF ART. 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 W ITH THE LEVY, COLLECTION AND DISTRIBUTION OF THE PROCEEDS OF TH E TAXES AND DUTIES MENTIONED THEREIN BETWEEN THE UNION AND THE STATES. THE LEGISLATIVE POWER OF PARLIAMENT TO LEVY TAX ES AND DUTIES IS CONTAINED IN ARTS. 245 AND 246(1) READ WITH THE RELEVANT ENTRIES IN LIST I OF THE SEVENTH SCHEDULE. 9. AS MENTIONED BEFORE, THE LEGISLATIVE ENTRY 82 IN LIS T I RELATES TO TAXES ON INCOME OTHER THAN AGRICULTURAL I NCOME; INCOME-TAX, SUPER-TAX AND SURCHARGE WOULD ALL FALL UNDER THIS ENTRY. IT IS EXERCISE OF THE LEGISLATIVE POWER CONFERR ED BY THAT ENTRY THAT THE UNION PARLIAMENT ENACTS THE PROVISION IN THE FINANCE ACT EACH YEAR RELATING TO THEM. IT IS THAT AC T WHICH AUTHORISES THESE TAXES TO BE CHARGED AND PRESCRIBES THE RATES AT WHICH THEY CAN BE CHARGED. SEC. 4 OF THE ACT SIMPLY PROVIDES THAT WHERE ANY CENTRAL ACT ENACTS THAT INCO ME-TAX SHALL BE CHARGED FOR ANY ASSESSMENT YEAR AT ANY RATE OR RATES INCOME-TAX AT THAT RATE OR THOSE RATES SHALL BE CHARG ED IN ACCORDANCE THERETO AND SUBJECT TO THE PROVISIONS OF THE ACT. SEC. 95, WHICH WAS OMITTED BY THE FINANCE ACT OF 1965, CONTAINED SIMILAR PROVISION WITH REGARD TO SUPER-TAX. ALTHOUGH UNDER THE ACT S. 4 IS THE CHARGING SECTION YET INCOM E-TAX CAN BE CHARGED ONLY WHERE THE CENTRAL ACT WHICH, IN THE P RESENT CASE, WILL BE THE FINANCE ACT, ENACTS THAT INCOME- TAX SHALL BE CHARGED FOR ANY ASSESSMENT YEAR AT THE RATE OR RATE S SPECIFIED THEREIN. THE DISTINCTION MADE BY THE HIGH COURT THAT THE SURCHARGES ARE LEVIED ONLY UNDER THE FINANCE ACT AND INCOME- TAX UNDER THE ACT MAY NOT HOLD GOOD IF THE ABOVE VIE W WHICH HAS BEEN PRESSED ON BEHALF OF THE REVENUE WERE TO B E ACCEPTED. IN OUR JUDGMENT IT IS UNNECESSARY TO EXPRES S ANY OPINION IN THE MATTER BECAUSE THE ESSENTIAL POINT FOR ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 15 DETERMINATION IS WHETHER SURCHARGE IS AN ADDITIONAL M ODE OR RATE FOR CHARGING INCOME-TAX. 10. THE MEANING OF THE WORD 'SURCHARGE' AS GIVEN IN TH E 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 CH ARGE. IF THAT MEANING IS APPLIED TO S. 2 OF THE FINANCE ACT, 1 963, IT WOULD LEAD TO THE RESULT THAT INCOME-TAX AND SUPER-TA X WERE TO BE CHARGED IN FOUR DIFFERENT WAYS OR AT FOUR DIFFER ENT RATES WHICH MAY BE DESCRIBED AS : (I) THE BASIC CHARGE OR RATE (IN PART I OF THE FIRST SCHEDULE); (II) SURCHARGE; (III) SPE CIAL 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 BEE N COMMENDED ON BEHALF OF THE REVENUE, THAT THE WORD 'SURCHARGE' HAS BEEN USED IN ART. 271 FOR THE PURPOS E OF SEPARATING IT FROM THE BASIC CHARGE OF A TAX OR DUTY FOR THE PURPOSE OF DISTRIBUTING THE PROCEEDS OF THE SAME BET WEEN THE UNION AND THE STATES. THE PROCEEDS OF THE SURCHARGE ARE EXCLUSIVELY ASSIGNED TO THE UNION. EVEN IN THE FINANC E ACT ITSELF IT IS EXPRESSLY STATED THAT THE SURCHARGE IS MEANT FOR THE PURPOSE OF THE UNIO 12. WE SHALL NOW REFER TO EXPLANATION 2 TO SECTION 115JB WHICH READS AS UNDER:- EXPLANATION 2 TO SECTION 115JB EXPLANATION 2.FOR THE PURPOSES OF CLAUSE (A) OF EX PLANATION 1, THE AMOUNT OF INCOME-TAX SHALL INCLUDE (I) ANY TAX ON DISTRIBUTED PROFITS UNDER SECTION 1 15-O OR ON DISTRIBUTED INCOME UNDER SECTION 115R ; (II) ANY INTEREST CHARGED UNDER THIS ACT; (III) SURCHARGE, IF ANY, AS LEVIED BY THE CENTRAL A CTS FROM TIME TO TIME; (IV) EDUCATION CESS ON INCOME-TAX, IF ANY, AS LEVIE D BY THE CENTRAL ACTS FROM TIME TO TIME; AND (V) SECONDARY AND HIGHER EDUCATION CESS ON INCOME- TAX, IF ANY, AS LEVIED BY THE CENTRAL ACTS FROM TIME TO TIME . A BARE PERUSAL OF THE ABOVE WOULD REVEAL THAT THE S AID EXPLANATION ALSO CORROBORATES WHAT HAS BEEN STATED BY US ABOVE AND WHAT HAS BEEN ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 16 HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF K SRINIVASAN (SUPRA) THAT TAXES PAID INCLUDE SURCHARGE AND CESS. AS A NATURAL COROLLARY, TAX PAID UNDER THE NORMA L PROVISIONS WOULD ALSO INCLUDE SURCHARGE AND CESS. THUS, WHAT FOLLOWS FROM THE AFORESAID DISCUSSION IS THAT TAX CREDIT TO BE COMPUTED WOULD BE AFTER INCLUSION OF S URCHARGE AND CESS FOR BOTH THE TAX PAID U/S 115JB OF THE ACT AND TA X PAYABLE AS PER NORMAL PROVISIONS OF THE ACT. 13. WE SHALL NOW BE DEALING WITH THE QUESTION OF POINT AT WHICH CREDIT OF MAT TO BE GIVEN .SECTION115JAA(4) OF THE ACT DEALS WITH THE SAME STATING AS UNDER:- 115JAA. (1) (4) THE TAX CREDIT SHALL BE ALLOWED SET-OFF IN A YE AR WHEN TAX BECOMES PAYABLE ON THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT OTHER THAN SECTION 115JA OR SECTION 115JB, AS THE C ASE MAY BE. AS IS CLEAR FROM THE ABOVE TAX CREDIT IS TO BE ALLO WED WHEN TAX BECOMES PAYABLE. DERIVING FROM THE DEFINITION OF TA X PAYABLE AS TO INCLUDE SURCHARGE AND CESS, WHAT IS ARRIVED AT IS T HAT TAXES PAYABLE UNDER THE NORMAL PROVISIONS INCLUDING SURCHARGE AND CESS IS TO BE FIRST CALCULATED AND THE CREDIT OF MAT,INCLUDING SU RCHARGE AND CESS IS TO BE ALLOWED. IN VIEW OF THE ABOVE, AFTER ANALYZING THE PROVISION S OF SECTION 115JAA, 115JB AND 2(43) OF THE ACT, READ ALONGWITH THE RELEVANT ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 17 CLAUSES OF THE FINANCE ACT, WE HAVE NO HESITATION I N HOLDING THAT THE MAT CREDIT ALLOWABLE TO THE ASSESSEE IS INCLUSIVE O F SURCHARGE AND CESS. ON THE SAME ANALOGY, THE COORDINATE BENCH OF THE IT AT HAS HELD THAT MAT CREDIT WILL INCLUDE SURCHARGE AND CES S ,IN ITS DECISION IN THE CASE OF VIRTUSA (INDIA) PVT.LTD(SUPRA).THE F INDINGS IN THE SAID CASE ARE AS UNDER: CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND MATERIAL FACTS ON THE RECORD. THE PROVISIONS OF SECTIO N 115JB IN BRIEF ARE: EVERY ASSESSMENT YEAR, TWO PARALLEL COMPUT ATIONS ARE CONTEMPLATED. ONE COMPUTATION OF TOTAL INCOME IN ACCORDANCE WITH THE NORMAL PROVISIONS OF THE I.T. ACT AND ANOTHER IS THE COMPUTATION OF BOOK PROFIT AS STIPULA TED U/S 115JB. IF THE INCOME TAX PAYABLE ON THE TOTAL INCOME I S LESS THAN 18.5% OF THE BOOK PROFIT COMPUTED U/S 115JB, THE N THE BOOK PROFIT SO COMPUTED SHALL BE DEEMED TO BE THE TOT AL INCOME, THEN THE BOOK PROFIT SO COMPUTED SHALL BE DEEM ED TO BE THE TOTAL INCOME AND THE COMPANY SHALL PAY TAX @ 18 .5% THEREON. THE AMOUNT SO PAID AS THE MAT SHALL BE AVAILA BLE TO THE CREDIT OF THE COMPANY TO BE SET OFF AS CONTEMPLA TED U/S 115JAA WITHIN A PERIOD OF 10 AYS. SURCHARGE AT 5% SHA LL BE LEVIED IF BOOK PROFIT EXCEEDS 1 CRORE. EDUCATION CESS @ 3% SHALL BE ADDED ON THE AGGREGATE OF INCOME TAX AND SUR CHARGE. AT THE SAME TIME, SECTION 115JAA PROVIDES THAT WHERE ANY AMOUNT OF TAX IS PAID UNDER SECTION 115JB(L) BY A CO MPANY FOR ANY ASSESSMENT YEAR, CREDIT IN RESPECT OF THE TAXES SO PAID FOR SUCH ASSESSMENT YEAR SHALL BE ALLOWED ON THE DIFFERENC E 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 O THER WORDS, MAT CREDIT SHALL BE COMPUTED AS UNDER: MAT CREDIT AVAILABLE = TAX PAID U/S 115JB - TAX PAYAB LE ON THE TOT AL INCOME UNDER NORMAL PROVISIONS OF THE ACT. 9.1 THE AMOUNT OF TAX CREDIT SO DETERMINED SHALL BE ALLOW ED TO BE CARRIED FORWARD AND SET OFF IN A YEAR WHEN THE T AX BECOMES PAYABLE ON THE TOTAL INCOME COMPUTED UNDER THE REGULA R PROVISIONS. HOWEVER, NO CARRY FORWARD SHALL BE ALLOWED BEYOND THE TENTH ASSESSMENT YEAR IMMEDIATELY SUCCEEDI NG THE ASSESSMENT YEAR IN WHICH THE TAX CREDIT BECOMES ALLOWABLE. THE SET OFF IN RESPECT OF THE BROUGHT FORWAR D TAX CREDIT SHALL BE ALLOWED FOR ANY ASSESSMENT YEAR TO THE EXTENT OF THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOM E AND THE ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 18 TAX WHICH WOULD HAVE BEEN PAYABLE UNDER SECTION 115JB FOR THAT ASSESSMENT YEAR. 9.2 IN OTHER WORDS, MAT CREDIT WILL BE ALLOWED ONLY IN T HAT PREVIOUS YEAR IN WHICH TAX PAYABLE ON THE TOTAL INCOME AS PER NORMAL PROVISIONS OF THE INCOME TAX ACT IS MORE THAN TAX PAYABLE UNDER SECTION 115JB AND IT SHALL BE ALLOWED TO THE EXTENT OF THE FOLLOWING: TAX PAYABLE ON TOTAL INCOME UNDER THE NORMAL PROVISION S OF THE ACT TAX PAYABLE UNDER SECTION 115JB = MAT CRE DIT 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 PAYABLE ON HIS TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE OTHER PR OVISIONS OF THIS ACT. THE IMPORTANT WORD USED IS TAX PAID AND AS PER THE HONBLE APEX COURT DECISION IN THE CASE OF K. SRI NIVASAN (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 DIFFERENCE BET WEEN TAX ON HIS TOTAL INCOME AND THE TAX WHICH WOULD HAVE BEEN PAYABLE U/S 115JB, AS THE CASE MAY BE FOR THAT AY. ON CAREFUL READING, THE TERM USED ARE TAX NOT INCOME TAX OR ANY OTHER TERM. NEEDLESS TO SAY THE TERM TAX INCLUDES SURCHAR GE. THE SAID VIEW HAS BEEN REITERATED IN VARIOUS DECI SIONS OF THE ITAT AS CITED BY THE LD.COUNSEL FOR THE ASSESSEE BEFORE US. AS FOR THE DECISION RENDERED IN THE CASE OF THE ASSESSEE IN TH E EARLIER YEAR BY THE ITAT, WE FIND THAT THE SAID DECISION WAS RENDERED O N THE BASIS OF THE DECISION IN THE CASE OF M/S RICHA GLOBAL EXPORT PVT LTD.(SUPRA). THE SAID DECISION HAS BEEN DEALT WITH AND DISTINGUISHE D IN THE CASE OF VIRTUSA (SUPRA) AS UNDER: LET US ALSO ANALYSE THE CASE LAW OF RICHA GLOBAL EXPO RTS PVT. LTD. WHICH WAS APPLIED BY CIT(A), THE DELHI ITAT OPINED THAT SECTION 115JAA APPLIED ONLY TO INCOME TAX, NOT OF IN COME TAX AS INCREASED BY SURCHARGE AND EDUCATION CESS. WE ARE OF THE VIEW THAT THE APEX COURT DECISION IN THE CASE OF K. SRINIVASAN (SUPRA) MAY NOT HAVE BEEN BROUGHT TO THE KNOWLEDGE O F THE ITAT, DELHI. MOREOVER, THE EXPLANATION 2 OF SECTION 115 JB IS APPLICABLE TO CALCULATE TAX LIABILITY U/S 115JB AND THE SAME ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 19 EXPLANATION SHOULD ALSO BE APPLIED FOR GIVING CREDIT U /S 115JAA. THE TAX LIABILITIES CALCULATED U/S 115JB BY APP LYING THE EXPLANATION 2, THE TAX LIABILITY SO COMPUTED ARE R EMITTED BY THE ASSESSEE AND THEN THE SAME WAS CARRIED FORWA RD FOR FUTURE MAT CREDIT. IN OUR VIEW, WHILE CALCULATING THE M AT CREDIT U/S 115JAA, THE SAME EXPLANATION 2 IN SECTION 115JB MUST BE APPLIED. THEREFORE, THE SAID DECISION WILL NOT APPLY TO THE CASE OF THE ASSESSEE. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE REVE NUE IS DISMISSED. 14. SINCE THE FACTS AND ISSUE INVOLVED IN THE REMAI NING TWO APPEALS IN ITA NOS.1524 & 1525/CHD/2017 ARE IDENTICAL TO TH AT HAS BEEN DECIDED BY US IN ITA NO. 1619/CHD/2017, THE DECISIO N RENDERED THEREIN WILL APPLY MUTATIS-MUTANDIS TO THE SAID TW O APPEALS AND ALSO FOLLOWING WHICH, WE DISMISS THE APPEALS OF THE REV ENUE. 15. IN EFFECT, ALL THE THREE APPEALS OF THE REVENUE ARE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 11.10.2018. SD/- SD- ( /SANJAY GARG) ( ' # $ %! /ANNAPURNA GUPTA) / JUDICIAL MEMBER &' / ACCOUNTANT MEMBER DATED :11.10.2018 . . &) *+ ,+ / COPY OF THE ORDER FORWARDED TO : / THE APPELLANT / THE RESPONDENT ' - / CIT ' - ( )/ THE CIT(A) ITA NO.1619/CHD/2017 A.Y.2008-09 ITA NO.1524 /CHD/2017 A.Y.2015-16 ITA NO.1525 /CHD/2017 A.Y.2016-17 20 +./ 0 , $0 , 123/4 / DR, ITAT, CHANDIGARH /35# / GUARD FILE &) ' / BY ORDER, 6! / ASSISTANT REGISTRAR