GROUP INDIA P. LTD, NAVI MUMBAI V. DCIT (LTU), MUMBAI

ITA 2348/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5292 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 03-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Capital asset; Depreciation; Rectification of order; Salary income; Permanent establishment; Question of law; Unabsorbed depreciation; Set aside; Capital Gains
• Section: 115JB; 195; 44BB; 32; 6; 12; 10; 90; 154; 11; 139

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NOS.2348 & 2350/MUM/2017 ASSESSMENT YEAR: 2008-09 SI GROUP INDIA PVT. LTD. PLOT NO.2/1, T.T.C. INDUSTRIAL AREA, THANE BELAPUR ROAD, NAVI MUMBAI-400705 VS DCIT (LARGE TAXPAYER UNIT), 29 TH FLOOR, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI-400005 ( /ASSESSEE) ( / REVENUE) PAN. NO. AAACH7323L ' #$% / DATE OF HEARING : 11/10/2018 $% / DATE OF ORDER: 11/10/2018 / ASSESSEE BY SHRI AJIT JAIN / REVENUE BY CHAUDHARY ARUN KUMAR SINGH- DR ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THESE TWO APPEALS ARE BY THE ASSESSEE AGAINST THE IMPUGNED ORDERS DATED 20/01/2017 AND 25/01/2017 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI, CONFIRMING T HE ACTION OF THE LD. ACIT IN RESTRICTING THE MAT CREDIT OF TH E ASSESSMENT YEAR 2006-07 TO THE EXTENT OF RS.44,29,8 48/- INSTEAD OF RS.49,70,291/-, CLAIMED BY THE ASSESSEE AND FURTHER THE FACT THAT THE SAID MAT CREDIT UNDER SEC TION 115JAA OF THE ACT CONSIST OF SUR-CHARGE OF RS.4,42, 985/- AND EDUCATION CESS OF RS.97,457/-, WHICH WOULD BE P ART OF MAT PAYABLE UNDER SECTION 115JB OF THE ACT FOR ASSE SSMENT YEAR 2006-07. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI AJIT JAIN, ADVANCED ARGUMENTS, WHICH ARE IDENT ICAL TO THE GROUND RAISED BY CONTENDING THAT THE ASSESSEE M OVED APPLICATION UNDER SECTION 154 OF THE ACT, WHICH WAS NOT CONSIDERED IN PROPER PERSPECTIVE. PLEA WAS ALSO RAI SED THAT TAX INCLUDES SURCHARGE, CESS SO FAR AS SECTION 115J B AND 115JAA IS CONCERNED AND PLACED RELIANCE UPON THE DE CISION IN THE CASE OF M/S EASTERN JEWELS PVT. LTD. VS ACIT (ITA ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 3 NO.163/JP/2017) AND CIT VS K. SRINIVASAN 83 ITR 346 (SUPREME COURT). ON OTHER HAND, THE LD. DR, CHAUDHA RY ARUN KUMAR SINGH, CONTENDED THAT ASSESSEE FILED TWO APPLICATIONS UNDER SECTION 154 OF THE ACT AND DEFEN DED THE IMPUGNED ORDERS. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE ARGUMENTS FROM BOTH SIDES, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE ORDER OF TH E JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF M/S EASTERN JE WELS PVT LTD. VS ACIT FOR READY REFERENCE AND ANALYSIS:- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)- 01, JAIPUR DATED 14.12.2016 PERTAINI NG TO ASSESSMENT YEAR 2011-12 WHEREIN THE ASSESSEE HAS CH ALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION O F THE ASSESSING OFFICER IN RESTRICTING THE MAT CREDIT OF AY 2010-11 TO RS. 6,59,098/- AS AGAINST RS. 10,41,894/- CLAIMED B Y THE ASSESSEE COMPANY. 2. BRIEFLY STATED, THE FACTS OF CASE ARE THAT IN IT S RETURN OF INCOME, THE ASSESSEE HAS CLAIMED MAT CREDIT OF RS. 10,41,894/- U/S 115JAA PERTAINING TO AY 2010-11. THE AO HOWEVER RESTRICTED THE MAT CREDIT TO RS. 6,59,098/- AS CLAI M BY THE ASSESSEE IN ITS RETURN OF INCOME FOR A.Y 2010-11 AN D SECONDLY, THE AO HELD THAT THE MAT CREDIT SO WORKED OUT BY TH E ASSESSEE, IT HAS INCLUDED SURCHARGE AND EDUCATION CESS WHICH IS NOT TO BE INCLUDED FOR CALCULATING THE MAT CREDIT AS ONLY TAX IS TO BE ALLOWED TO BE CARRIED FORWARD AS MAT CREDIT AND NOT SURCHARGE AND EDUCATION CESS AS CONTEMPLATED U/S 115JAA OF TH E ACT. ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 4 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS RETURNED A FINDING THAT AS REGARDS THE QUANTUM OF CARRIED FORWARD MAT CREDI T IS CONCERNED, WHERE THERE WAS SOME MISTAKE IN CARRYING FORWARD THE MAT CREDIT PERTAINING TO AY 2010- 11, THE PROPE R COURSE OF ACTION FOR THE APPELLANT WOULD HAVE BEEN TO REVISE ITS RETURN OF INCOME FOR THE AY 2010-11 AND CARRY FORWARD THE COR RECT AMOUNT OF MAT CREDIT. SECONDLY, THE LD. CIT(A) RELI ED ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN CASE OF CIT VS. VACMENT INDIA [2015] 55 TAXMANN.COM 314 AND CONFIRM ED THE ACTION OF THE AO IN RESTRICTING THE MAT CREDIT TO R S. 6,59,731/-. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 4. FIRSTLY, IT WAS SUBMITTED BY THE LD. AR THAT THE ASSESSEE HAS MOVED AN APPLICATION U/S 154 FOR AY 2010-11 FOR REC TIFYING THE QUANTUM OF MAT CREDIT AND THE AO HAS SINCE ACCEPTED THAT THE ASSESSEE COMPANY IS ELIGIBLE TO CARRY FORWARD MAT C REDIT OF RS. 10,41,894/- PERTAINING TO AY 2010-11 VIDE ITS ORDER DATED 12.02.2018. IT WAS FURTHER SUBMITTED THAT THE HONB LE SUPREME COURT IN CASE OF CIT VS. K. SRINIVASAN [1972] 83 IT R 346 HAS HELD THAT THE WORDS INCOME-TAX WOULD INCLUDE SURC HARGE AND ADDITIONAL SURCHARGE. THEREFORE, THE TAX PAID AND T AX PAYABLE AS PER SECTION 115JAA(2A) WOULD INCLUDE BOTH SURCHA RGE AND EDUCATION CESS AND THE MAT CREDIT CLAIMED BY THE AS SESSEE COMPANY IS CORRECT. FURTHER, REFERENCE WAS DRAWN TO THE COORDINATE BENCH DECISION IN CASE OF ACIT VS. SMT. ZAHIDA BANO (ITA NO. 579/JP/2013 DATED 15.05.2017) WHERE T HE AFORESAID DECISION OF THE HONBLE SUPREME COURT HAS BEEN FOLLOWED. FURTHER, THE LD. AR REFERRED TO THE DECIS ION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SREI INFRASTRUCT URE FINANCE LTD. VS. DCIT [2016] 395 ITR 291 (CAL) WHEREIN THE EARLIER DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN CAS E OF CIT V. VACMENT INDIA [2014] 369 ITR 304 (ALL) HAS BEEN DIS TINGUISHED AND IT HAS BEEN HELD THAT BOTH THE SURCHARGE AND ED UCATION CESS ARE PART OF INCOME TAX. 5. THE QUESTION OF LAW WHICH CAME UP FOR CONSIDERAT ION BEFORE THE HONBLE CALCUTTA HIGH COURT (SUPRA) WAS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE TRIBUNAL WAS RIGHT IN CONFIRMING THE SET-OFF OF MAT CREDIT UNDER SECTION 115JAA BROUGHT FORWARD FROM EARLIER Y EARS AGAINST TAX ON TOTAL INCOME INCLUDING SURCHARGE AND EDUCATION CESS INSTEAD OF ADJUSTING THE SAME FROM TAX ON TOTA L INCOME ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 5 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 AN D CESS ARE PART OF THE INCOME TAX THOUGH PAYABLE IN ADDITION T O THE INCOME TAX CALCULATED AT THE RATE PROVIDED IN SECTI ON 115JB. 8. WE ARE SUPPORTED IN OUR VIEW BY SUB-SECTION (1), THE SECOND PROVISO TO SUB-SECTION (3); SUB-SECTION (11) AND SUB- SECTION (12) OF SECTION (2) OF THE FINANCE ACT, 200 8, WHICH PROVIDES AS FOLLOWS:- .. SECOND PROVISO TO SUB-SECTION (3):- .. ALL THE PROVISIONS QUOTED ABOVE SPEAK ABOUT INCOME TAX BEING INCREASED BY THE AMOUNT OF SURCHARGE AND CESS . CAN IT IN THAT CASE BE CONTENDED THAT SURCHARGE IS ANYTHIN G OTHER THAN INCOME TAX? WE THINK THE ANSWER IS NO. 9. IT IS TRUE THAT SUB-SECTION (1) OF SECTION 4 OF THE INCOME TAX ACT PROVIDES FOR RATE OR RATES OF INCOME TAX TO BE STIPULATED BY THE CENTRAL ACT. IF THE LEGISLATURE C HOOSES TO REALISE PART OF THE AMOUNT BY WAY OF TAX AND PART O F IT BY WAY OF SURCHARGE AND CESS THEREON RATHER THAN PROVIDING FOR A HIGHER RATE TO REALISE THE INTENDED AMOUNT OF TAX, CAN IT BE SAID THAT THE RATE OF INCOME TAX IS WHAT APPEARS TO HAVE BEEN PROVIDED WITHOUT TAKING INTO ACCOUNT THE SURCHARGE AND THE CESS? THE ANSWERE WE THINK AGAIN IS AN EMPHATIC NO . THE REASON BEHIND INCREASE OF INCOME TAX BY THE AMOUNT OF SURCHARGE AND CESS HAS BEEN SPELT OUT ON THE BASIS WHEREOF IT CAN BE SAID THAT THE INTENTION IS THAT PART OF THE AMOUNT REALIZED BY WAY OF INCOME TAX IS EARMARKED FOR BEIN G SPENT IN EDUCATION AND HIGHER EDUCATION. 10 WE ARE, SO SUCH, OF THE OPINION THAT THE VIEW TAKEN BY THE LEARNED TRIBUNAL IS A CORRECT VIEW. NO ELABORATE REASONING IS, AS SUCH REQUIRED TO SHOW WHY ARE WE UNABLE TO FOLLOW THE JUDGMENT OF THE ALLAHABAD H IGH COURT IN THE CASE OF VACMENT INDIA (SUPRA)? . 12. THERE CAN BE NO QUARREL WITH THE AFORESAID VIE W. BUT THE SAME HAS NO APPLICATION TO THIS CASE BECAUSE THE FO RM FOR THE RELEVANT YEAR, WHICH PROVIDED INSPIRATION TO THE AS SESSEE TO TAKE THIS POINT, DID IN FACT SEEK TO CONTROL OR DER OGATE FROM ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 6 THE SECTIONS QUOTED ABOVE. THAT FORM, AS A MATTER O F FACT, WAS ERRONEOUS. THAT FORM HAS SUBSEQUENTLY BEEN CORRECTE D. HAD IT NOT BEEN A CASE OF A WRONG FORM, THE CORRECTED F ORM WOULD IN THAT CASE BE CONTRARY TO LAW. OUR ATTENTION WAS NOT DRAWN NOR WAS IT CONTENDED THAT THE CORRECTED FORM IS CON TRARY TO LAW. BOTH THE FORMS, VIZ. THE ONE WHICH WAS PREVALE NT AT THE RELEVANT PERIOD OF TIME AND WHICH WAS CORRECTED FOR THE ASSESSMENT YEAR 2012-13, COULD NOT BE THE CORRECT F ORMS. IF THE FORM OF 2012-13 WAS CORRECT, THEN THE FORM OF 2 008-09 WAS WRONG, AND NATURALLY CONTRARY TO LAW. 13. WE, AS SUCH, ANSWER THE QUESTION IN THE AFFIRMA TIVE AND AGAINST THE ASSESSEE.. 6. FURTHER, THE RELIANCE WAS PLACED ON THE DECISION S OF COORDINATE BENCH IN THE CASE OF VIRTUSA (INDIA) (P) LTD. VS. DCIT (2016) 157 ITD 1160 (HYD) AND IN THE CASE OF B HAGWATI OXEGEN LTD. VS. ACIT (2017) 51 CCH 0368 KOL TRIB. I T WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE HAS RIGHTLY CLAIMED THE MAT CREDIT WELL WITHIN THE FOUR CORNERS OF PROVISIO NS OF SECTION 115JAA. THE RELIEF MAY KINDLY BE GRANTED BY ALLOWIN G 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 CONSID ERATION IS WHETHER FOR THE PURPOSES OF COMPUTING THE MAT CREDI T U/S 115JAA OF THE ACT, WHETHER TAX INCLUDE SURCHARGE AN D EDUCATION CESS OR NOT. 9. IN THIS REGARD, WE REFER TO THE PROVISIONS OF SE CTION 115JB OF THE ACT AND IN PARTICULAR EXPLANATION - 2 WHEREIN T HE AMOUNT OF INCOME TAX HAS BEEN DEFINED TO INCLUDE SURCHARGE AN D 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 INCLU DE (I) ANY TAX ON DISTRIBUTED PROFITS UNDER SECTION 11 5-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; ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 7 (IV) EDUCATION CESS ON INCOME-TAX, IF ANY, AS LEVIE D BY THE CENTRAL ACTS FROM TIME TO TIME; AND (V) SECONDARY A ND HIGHER EDUCATION CESS ON INCOME-TAX, IF ANY, AS LEVIED BY THE CENTRAL ACTS FROM TIME TO TIME. 10. IN THE INSTANCE CASE, AS PER THE ORDER OF THE A O PASSED UNDER SECTION 154 OF THE ACT DATED 31.3.2010 FOR AY 2010-11, IT HAS BEEN STATED THAT THE ASSESSEE COMPANY HAS PAID MAT U/S 115JB AMOUNTING TO RS 40,15,518 AND GIVEN THAT TAX UNDER NORMAL PROVISIONS COMES TO RS 29,70,947, THE MAT CR EDIT OF RS 10,44,571 IS ALLOWED TO BE CARRIED FORWARD U/S 115J AA OF THE ACT. FURTHER, IN VIEW OF EXPLANATION 2 TO SECTION 1 15JB, THERE IS NO DISPUTE THAT THE TAX INCLUDES SURCHARGE AND EDUC ATION CESS. IN ANY CASE, THE DECISION OF THE HONBLE CALCUTTA H IGH COURT IN CASE OF SREI INFRASTRUCTURE FINANCE LTD (SUPRA) SUP PORTS THE CASE OF THE ASSESSEE COMPANY. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. 2.2. IT IS NOTED THAT AS EXPLAINED BY THE LD. COUN SEL FOR THE ASSESSEE, TWO APPLICATIONS WERE MOVED UNDER SEC TION 154 OF THE ACT RECTIFYING THE MISTAKES OF QUANTUM O F MAT CREDIT AND SINCE THE EARLIER APPLICATION WAS NOT DI SPOSED OF BY THE LD. ASSESSING OFFICER, THE ASSESSEE MOVED AN OTHER APPLICATION, THEREFORE, TWO APPEALS HAS BEEN MOVED FOR ASSESSMENT YEAR 2008-09 BUT THE ISSUES INVOLVED ARE SAME. THE ISSUE BEFORE US IS WITH RESPECT TO WHETHER MAT CREDIT WILL INCLUDE INCOME TAX, SUR-CHARGE AND EDUCATION C ESS. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE VIDE APPLICA TION DATED 02/04/2014 APPLIED FOR RECTIFICATION OF ORDER DATED 07/01/2004, UNDER SECTION 154 OF THE ACT AS PER WHI CH, IT ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 8 WAS CLAIMED THAT THERE WAS SHORT GRANT OF MAT CREDI T. THE CONTENTION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE . BEFORE ADVERTING FURTHER, IT IS OUR BOUNDED DUTY TO EXAMIN E SECTION 115JB OF THE ACT, WHICH IS REPRODUCED HEREUNDER:- 115JB. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSESSEE, BEIN G A COMPANY, THE INCOME-TAX, PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESS MENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2012, IS LESS THAN EIGHTEEN AND ONE-HALF PER CENT OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND T HE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT O F 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 IT S 76 [STATEMENT OF PROFIT AND LOSS] FOR THE RELEVANT PREVIOUS YEAR IN ACCORDA NCE 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 PRE VIOUS 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 S UCH 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 PURP OSE OF PREPARING SUCH ACCOUNTS INCLUDING 76E [STATEMENT OF PROFIT AND LOSS] AND LAID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORD ANCE WITH THE PROVISIONS OF 76F [SECTION 129] OF THE 76D [COMPANIES ACT, 2013 (18 OF 2013)] : PROVIDED FURTHER THAT WHERE THE COMPANY HAS ADOPTED OR ADOPTS THE FINANCIAL YEAR UNDER THE 76D [COMPANIES ACT, 2013 (18 OF 2013)], WHICH IS DIFFERENT FROM THE PREVIOUS YEAR UNDER THIS ACT, ( I ) THE ACCOUNTING POLICIES; ( II ) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARING S UCH ACCOUNTS INCLUDING 76E [STATEMENT OF PROFIT AND LOSS]; ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 9 ( III ) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL CORRESPOND TO THE ACCOUNTING POLICIES, ACCOUN TING STANDARDS AND THE METHOD AND RATES FOR CALCULATING THE DEPRECIATI ON WHICH HAVE BEEN ADOPTED FOR PREPARING SUCH ACCOUNTS INCLUDING 76E [STATEMENT OF PROFIT AND LOSS] FOR SUCH FINANCIAL YEAR OR PART OF SUCH F INANCIAL YEAR FALLING WITHIN THE RELEVANT PREVIOUS YEAR. EXPLANATION 1 .FOR THE PURPOSES OF THIS SECTION, 'BOOK PROFIT' M EANS THE 77 [PROFIT] AS SHOWN IN THE 76E [STATEMENT OF PROFIT AND LOSS] FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB-SECTION ( 2), AS INCREASED BY ( A ) THE AMOUNT OF INCOME-TAX PAID OR PAYABLE, AND TH E PROVISION THEREFOR; OR ( B ) THE AMOUNTS CARRIED TO ANY RESERVES, BY WHATEVER NAME CALLED, OTHER THAN A RESERVE SPECIFIED UNDER SECTION 33AC ; OR ( C ) THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MA DE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES; OR ( D ) THE AMOUNT BY WAY OF PROVISION FOR LOSSES OF SUB SIDIARY COMPANIES; OR ( E ) THE AMOUNT OR AMOUNTS OF DIVIDENDS PAID OR PROPO SED ; OR ( F ) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE T O ANY INCOME TO WHICH SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE ( 38 ) THEREOF) OR SECTION 11 OR SECTION 12 APPLY; OR ( FA ) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO INCOME, BEING SHARE OF THE ASSESSEE IN THE INCOME OF AN ASSOCIATI ON OF PERSONS OR BODY OF INDIVIDUALS, ON WHICH NO INCOME-TAX IS PAYABLE I N ACCORDANCE WITH THE PROVISIONS OF SECTION 86 ; OR ( FB ) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO INCOME ACCRUING OR ARISING TO AN ASSESSEE, BEING A FOREIGN COMPANY, FROM, ( A ) THE CAPITAL GAINS ARISING ON TRANSACTIONS IN SEC URITIES; OR ( B ) THE INTEREST, ROYALTY OR FEES FOR TECHNICAL SERV ICES CHARGEABLE TO TAX AT THE RATE OR RATES SPECIFIED IN CHAPTER XII, IF THE INCOME-TAX PAYABLE THEREON IN ACCORDANCE WIT H 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 BUSI NESS TRUST IN EXCHANGE OF UNITS ALLOTTED BY THE TRUST REFERRED TO IN CLAUS E ( XVII ) OF SECTION 47 OR THE AMOUNT REPRESENTING NOTIONAL LOSS RESULTING FRO M 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 T AX UNDER SECTION 115BBF ; OR] ( G ) THE AMOUNT OF DEPRECIATION, ( H ) THE AMOUNT OF DEFERRED TAX AND THE PROVISION THE REFOR, ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 10 ( I ) THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET, ( J ) THE AMOUNT STANDING IN REVALUATION RESERVE RELAT ING 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 SH ARES 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 79 [STATEMENT OF PROFIT AND LOSS], AS THE CASE MAY BE; IF ANY AMOUNT REFERRED TO IN CLAUSES ( A ) TO ( I ) IS DEBITED TO THE 79A [STATEMENT OF PROFIT AND LOSS] OR IF ANY AMOUNT REF ERRED TO IN CLAUSE ( J ) IS NOT CREDITED TO THE 79A [STATEMENT OF PROFIT AND LOSS], AND AS REDUCED BY, ( I ) THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISI ON (EXCLUDING A RESERVE CREATED BEFORE THE 1ST DAY OF APRIL, 1997 O THERWISE THAN BY WAY OF A DEBIT TO THE 80 [STATEMENT OF PROFIT AND LOSS]), IF ANY SUCH AMOUNT IS CREDITED TO THE 80 [STATEMENT OF PROFIT AND LOSS]: PROVIDED THAT WHERE THIS SECTION IS APPLICABLE TO AN ASSESSE E IN ANY PREVIOUS YEAR, THE AMOUNT WITHDRAWN FROM RESERVES C REATED OR PROVISIONS MADE IN A PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 1997 S HALL NOT BE REDUCED FROM THE BOOK PROFIT UNLESS THE BOOK PROFIT OF SUCH YEAR HAS BEEN INCREASED BY THOSE RESERVES OR PROVISIONS (OUT OF W HICH THE SAID AMOUNT WAS WITHDRAWN) UNDER THIS EXPLANATION OR EXPLANATION BELOW THE SECOND PROVISO TO SECTION 115JA , AS THE CASE MAY BE; OR ( II ) THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISI ONS OF SECTION 10 (OTHER THAN THE PROVISIONS CONTAINED IN CLAUSE ( 38 ) THEREOF) OR SECTION 11 OR SECTION 12 APPLY, IF ANY SUCH AMOUNT IS CREDITED TO THE 80 [STATEMENT OF PROFIT AND LOSS]; OR ( IIA ) THE AMOUNT OF DEPRECIATION DEBITED TO THE 80 [STATEMENT OF PROFIT AND LOSS] (EXCLUDING THE DEPRECIATION ON ACCOUNT OF REV ALUATION OF ASSETS); OR ( IIB ) THE AMOUNT WITHDRAWN FROM REVALUATION RESERVE AND CREDITED TO THE 80 [STATEMENT OF PROFIT AND LOSS], TO THE EXTENT IT DO ES NOT EXCEED THE AMOUNT OF DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS REFERRED TO IN CLAUSE ( IIA ); OR ( IIC ) THE AMOUNT OF INCOME, BEING THE SHARE OF THE ASSE SSEE IN THE INCOME OF AN ASSOCIATION OF PERSONS OR BODY OF INDI VIDUALS, ON WHICH NO INCOME-TAX IS PAYABLE IN ACCORDANCE WITH THE PROVIS IONS OF SECTION 86 , IF ANY, SUCH AMOUNT IS CREDITED TO THE 80 [STATEMENT OF PROFIT AND LOSS]; OR ( IID ) THE AMOUNT OF INCOME ACCRUING OR ARISING TO AN AS SESSEE, BEING A FOREIGN COMPANY, FROM, ( A ) THE CAPITAL GAINS ARISING ON TRANSACTIONS IN SECU RITIES; OR ( B ) THE INTEREST, ROYALTY OR FEES FOR TECHNICAL SERVI CES CHARGEABLE TO TAX AT THE RATE OR RATES SPECIFIED IN CHAPTER XII, ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 11 IF SUCH INCOME IS CREDITED TO THE 80 [STATEMENT OF PROFIT AND LOSS] AND THE INCOME-TAX PAYABLE THEREON IN ACCORDANCE WITH THE P ROVISIONS 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, BEI NG 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 CARRYI NG 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 SH ARES 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 IN RESPECT OF PATENT CHARGEABLE TO TAX UNDER SECTION 115BBF ; 83 [OR]] 84 [ ( IIH ) THE AGGREGATE AMOUNT OF UNABSORBED DEPRECIATION A ND LOSS BROUGHT FORWARD IN CASE OF A COMPANY AGAINST WHOM A N APPLICATION FOR CORPORATE INSOLVENCY RESOLUTION PROCESS HAS BEEN AD MITTED BY THE ADJUDICATING AUTHORITY UNDER SECTION 7 OR SECTION 9 OR SECTION 10 OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (31 OF 2016). EXPLANATION .FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSION 'ADJUDICATING AUTHORITY' SHALL HAVE THE MEANING ASS IGNED TO IT IN CLAUSE ( 1 ) OF SECTION 5 OF THE INSOLVENCY AND BANKRUPTCY COD E, 2016 (31 OF 2016) AND THE LOSS SHALL NOT INCLUDE DEPRECIATIO N; OR ] ( III ) THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION, WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT 84 [ IN CASE OF A COMPANY OTHER THAN THE COMPANY REFERRED TO IN CLAUSE ( IIH ) ] . EXPLANATION .FOR THE PURPOSES OF THIS CLAUSE, ( A ) THE LOSS SHALL NOT INCLUDE DEPRECIATION; ( B ) THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY IF THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IS NIL; OR ( IV ) TO ( VI ) [***] ( VII ) THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COMPANY FOR THE ASSESSMENT YEAR COMMENCING ON AND FROM THE ASSESSMENT YEAR REL EVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COMPANY HAS BECOME A SICK INDUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (1 OF 1986 ) AND ENDING WITH THE ASSESSMENT YEAR DURING WHICH THE ENTIRE NET WOR TH OF SUCH COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 12 EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'NET WORTH' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE ( GA ) OF SUB-SECTION (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISION S) ACT, 1985 (1 OF 1986); OR 85 [( VIII ) THE AMOUNT OF DEFERRED TAX, IF ANY SUCH AMOUNT IS CREDITED TO THE 85 [STATEMENT OF PROFIT AND LOSS]. 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 ) ANY INTEREST CHARGED UNDER THIS ACT; ( III ) SURCHARGE, IF ANY, AS LEVIED BY THE CENTRAL ACTS FROM TIME TO TIME; ( IV ) EDUCATION CESS ON INCOME-TAX, IF ANY, AS LEVIED B Y THE CENTRAL ACTS FROM TIME TO TIME; AND ( V ) SECONDARY AND HIGHER EDUCATION CESS ON INCOME-TA X, IF ANY, AS LEVIED BY THE 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, BEI NG A COMPANY TO WHICH THE 86 [SECOND PROVISO TO SUB-SECTION (1) OF SECTION 129 O F THE COMPANIES ACT, 2013 (18 OF 2013)] IS APPLICABLE, HA S, 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 PRE VIOUS 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 T HAT THE PROVISIONS OF THIS SECTION SHALL NOT BE APPLICA BLE 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 SPE CIFIED TERRITORY WITH WHICH INDIA HAS AN AGREEMENT REFERRED TO IN SUB-SEC TION (1) OF SECTION 90 OR THE CENTRAL GOVERNMENT HAS ADOPTED ANY AGREEMEN T UNDER SUB- SECTION (1) OF SECTION 90A AND THE ASSESSEE DOES NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA IN ACCORDANCE WITH THE PROVI SIONS OF SUCH AGREEMENT; OR ( II ) THE ASSESSEE IS A RESIDENT OF A COUNTRY WITH WHI CH INDIA DOES NOT HAVE AN AGREEMENT OF THE NATURE REFERRED TO IN CLAU SE ( I ) AND THE ASSESSEE IS NOT REQUIRED TO SEEK REGISTRATION UNDER ANY LAW FOR THE TIME BEING IN FORCE RELATING TO COMPANIES.] 90 [ EXPLANATION 4A. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION SHALL NOT BE AP PLICABLE AND SHALL BE DEEMED NEVER TO HAVE BEEN APPLICABLE TO AN ASSESSEE , BEING A FOREIGN COMPANY, WHERE ITS TOTAL INCOME COMPRISES SOLELY OF PROFITS AND GAINS FROM BUSINESS REFERRED TO IN SECTION 44B OR SECTION 44BB OR SECTION 44BBA OR SECTION 44BBB AND SUCH INCOME HAS BEEN OFFERED TO TAX AT THE RATES SPECIFIED IN THOSE SECTIONS. ] ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 13 91 [ EXPLANATION 5 ].FOR THE PURPOSES OF SUB-SECTION (2), THE EXPRESS ION 'SECURITIES' SHALL HAVE THE SAME MEANING AS ASSIGNE D TO IT IN CLAUSE ( H ) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATIO N) ACT, 1956 (42 OF 1956). 92 [(2A) FOR A COMPANY WHOSE FINANCIAL STATEMENTS ARE DRAWN UP IN COMPLIANCE TO THE INDIAN ACCOUNTING STANDARDS SPECI FIED IN ANNEXURE TO THE COMPANIES (INDIAN ACCOUNTING STANDARDS) RULE S, 2015, THE BOOK PROFIT AS COMPUTED IN ACCORDANCE WITH EXPLANATION 1 TO SUB-SECTION (2) SHALL BE FURTHER ( A ) INCREASED BY ALL AMOUNTS CREDITED TO OTHER COMPR EHENSIVE INCOME IN THE STATEMENT OF PROFIT AND LOSS UNDER THE HEAD 'IT EMS THAT WILL NOT BE RE-CLASSIFIED TO PROFIT OR LOSS'; ( B ) DECREASED BY ALL AMOUNTS DEBITED TO OTHER COMPRE HENSIVE INCOME IN THE STATEMENT OF PROFIT AND LOSS UNDER THE HEAD 'IT EMS THAT WILL NOT BE RE-CLASSIFIED TO PROFIT OR LOSS'; ( C ) INCREASED BY AMOUNTS OR AGGREGATE OF THE AMOUNTS DEBITED TO THE STATEMENT OF PROFIT AND LOSS ON DISTRIBUTION OF NON -CASH ASSETS TO SHAREHOLDERS IN A DEMERGER IN ACCORDANCE WITH APPEN DIX A OF THE INDIAN ACCOUNTING STANDARDS 10; ( D ) DECREASED BY ALL AMOUNTS OR AGGREGATE OF THE AMO UNTS CREDITED TO THE STATEMENT OF PROFIT AND LOSS ON DISTRIBUTION OF NON-CASH ASSETS TO SHAREHOLDERS IN A DEMERGER IN ACCORDANCE WITH APPEN DIX A OF THE INDIAN ACCOUNTING STANDARDS 10: PROVIDED THAT NOTHING CONTAINED IN CLAUSE ( A ) OR CLAUSE ( B ) SHALL APPLY TO THE AMOUNT CREDITED OR DEBITED TO OTHER COMPREHE NSIVE INCOME UNDER THE HEAD 'ITEMS THAT WILL NOT BE RE-CLASSIFIED TO P ROFIT OR LOSS' IN RESPECT OF ( I ) REVALUATION SURPLUS FOR ASSETS IN ACCORDANCE WIT H THE INDIAN ACCOUNTING STANDARDS 16 AND INDIAN ACCOUNTING STAND ARDS 38; OR ( II ) GAINS OR LOSSES FROM INVESTMENTS IN EQUITY INSTRU MENTS 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 PROVIS O IS RETIRED, DISPOSED, REALISED OR OTHERWISE TRANSFERRED SHALL BE INCREASE D 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 O F THE PRECEDING PREVIOUS YEARS AND RELATABLE TO SUCH ASSET OR INVES TMENT. (2B) IN THE CASE OF A RESULTING COMPANY, WHERE THE PROPERTY AND THE LIABILITIES OF THE UNDERTAKING OR UNDERTAKINGS BEIN G 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 P URPOSE 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 F OUR PREVIOUS YEARS, ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 14 SHALL BE FURTHER INCREASED OR DECREASED, AS THE CAS E MAY BE, BY ONE-FIFTH OF THE TRANSITION AMOUNT: PROVIDED THAT THE BOOK PROFIT OF THE PREVIOUS YEAR IN WHICH THE ASSET OR INVESTMENT REFERRED TO IN SUB-CLAUSES ( B ) TO ( E ) OF CLAUSE ( III ) OF THE EXPLANATION IS RETIRED, DISPOSED, REALISED OR OTHERWISE TRANSFE RRED, SHALL BE INCREASED OR DECREASED, AS THE CASE MAY BE , BY THE AMOUNT OR THE AGGREGATE OF THE AMOUNTS REFERRED TO IN THE SAI D SUB-CLAUSES RELATABLE TO SUCH ASSET OR INVESTMENT: PROVIDED FURTHER THAT THE BOOK PROFIT OF THE PREVIOUS YEAR IN WHICH THE FOREIGN OPERATION REFERRED TO IN SUB-CLAUSE ( F ) OF CLAUSE ( III ) OF THE EXPLANATION IS DISPOSED OR OTHERWISE TRANSFERRED, SHALL BE INCR EASED OR DECREASED, AS THE CASE MAY BE, BY THE AMOUNT OR THE AGGREGATE OF THE AMOUNTS REFERRED TO IN THE SAID SUB-CLAUSE RELATABL E TO SUCH FOREIGN OPERATIONS. EXPLANATION .FOR THE PURPOSES OF THIS SUB-SECTION, THE EXPRESS ION ( I ) 'YEAR OF CONVERGENCE' MEANS THE PREVIOUS YEAR WI THIN WHICH THE CONVERGENCE DATE FALLS; ( II ) 'CONVERGENCE DATE' MEANS THE FIRST DAY OF THE FI RST INDIAN ACCOUNTING STANDARDS REPORTING PERIOD AS DEFINED IN THE INDIAN ACCOUNTING STANDARDS 101; ( III ) 'TRANSITION AMOUNT' MEANS THE AMOUNT OR THE AGGRE GATE OF THE AMOUNTS ADJUSTED IN THE OTHER EQUITY (EXCLUDING CAP ITAL RESERVE AND SECURITIES PREMIUM RESERVE) ON THE CONVERGENCE DATE BUT NOT INCLUDING THE FOLLOWING: ( A ) AMOUNT OR AGGREGATE OF THE AMOUNTS ADJUSTED IN TH E OTHER COMPREHENSIVE INCOME ON THE CONVERGENCE DATE WHICH SHALL BE SUBSEQUENTLY RE-CLASSIFIED TO THE PROFIT OR LOSS; ( B ) REVALUATION SURPLUS FOR ASSETS IN ACCORDANCE WITH THE INDIAN ACCOUNTING STANDARDS 16 AND INDIAN ACCOUNTING STAND ARDS 38 ADJUSTED ON THE CONVERGENCE DATE; ( C ) GAINS OR LOSSES FROM INVESTMENTS IN EQUITY INSTRU MENTS DESIGNATED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME IN AC CORDANCE WITH THE INDIAN ACCOUNTING STANDARDS 109 ADJUSTED ON THE CON VERGENCE DATE; ( D ) ADJUSTMENTS RELATING TO ITEMS OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS RECORDED AT FAIR VALUE AS DEEMED COST IN ACCORDANCE WITH PARAGRAPHS D5 AND D7 OF THE INDIAN ACCOUNTING STANDARDS 101 ON THE CONVERGENCE DATE; ( E ) ADJUSTMENTS RELATING TO INVESTMENTS IN SUBSIDIARI ES, JOINT VENTURES AND ASSOCIATES RECORDED AT FAIR VALUE AS DEEMED COS T IN ACCORDANCE WITH PARAGRAPH D15 OF THE INDIAN ACCOUNTING STANDARDS 10 1 ON THE CONVERGENCE DATE; AND ( F ) ADJUSTMENTS RELATING TO CUMULATIVE TRANSLATION DI FFERENCES 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 AFFE CT THE DETERMINATION OF THE AMOUNTS IN RELATION TO THE RELEVANT PREVIOUS YEAR TO BE CARRIED ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 15 FORWARD TO THE SUBSEQUENT YEAR OR YEARS UNDER THE P ROVISIONS OF SUB- SECTION (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 SUB- SECTION (3) OF SECTION 74A . (4) EVERY COMPANY TO WHICH THIS SECTION APPLIES, SH ALL FURNISH A REPORT IN THE PRESCRIBED FORM 93 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 TH E 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 RE SPONSE 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 COM PANY, MENTIONED IN THIS SECTION. (5A) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO ANY INCOME ACCRUING OR ARISING TO A COMPANY FROM LIFE INSURANC E BUSINESS REFERRED TO IN SECTION 115B . (6) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO THE INCOME ACCRUED OR ARISING ON OR AFTER THE 1ST DAY OF APRIL, 2005 F ROM ANY BUSINESS CARRIED ON, OR SERVICES RENDERED, BY AN ENTREPRENEU R OR A DEVELOPER, IN A UNIT OR SPECIAL ECONOMIC ZONE, AS THE CASE MAY BE: PROVIDED THAT THE PROVISIONS OF THIS SUB-SECTION SHALL CEASE TO HAVE EFFECT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2012. 94 [(7) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECT ION (1), WHERE THE ASSESSEE REFERRED TO THEREIN, IS A UNIT LOCATED IN AN INTERNATIONAL FINANCIAL SERVICES CENTRE AND DERIVES ITS INCOME SO LELY IN CONVERTIBLE FOREIGN EXCHANGE, THE PROVISIONS OF SUB-SECTION (1) SHALL HAVE THE EFFECT AS IF FOR THE WORDS 'EIGHTEEN AND ONE-HALF PER CENT ' WHEREVER OCCURRING IN THAT SUB-SECTION, THE WORDS 'NINE PER CENT' HAD BEEN SUBSTITUTED. EXPLANATION .FOR THE PURPOSES OF THIS SUB-SECTION, ( A ) 'INTERNATIONAL FINANCIAL SERVICES CENTRE' SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN CLAUSE ( Q ) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005 (28 OF 2005); ( B ) 'UNIT' MEANS A UNIT ESTABLISHED IN AN INTERNATIO NAL FINANCIAL SERVICES CENTRE; ( C ) 'CONVERTIBLE FOREIGN EXCHANGE' MEANS A FOREIGN E XCHANGE WHICH IS FOR THE TIME BEING TREATED BY THE RESERVE BANK OF I NDIA AS CONVERTIBLE FOREIGN EXCHANGE FOR THE PURPOSES OF THE FOREIGN EX CHANGE MANAGEMENT ACT, 1999 (42 OF 1999) AND THE RULES MAD E THEREUNDER.] 2.3. IF THE AFORESAID SECTION IS ANALYZED, EXPLAN ATION-2 INSERTED BY THE FINANCE ACT, 2008, W.R.E.F. 01/04/2 001 ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 16 CLARIFIES THAT 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 TIM E. 2.4. THE LD. DCIT IN HIS ORDER UNDER SECTION 154 S AYS THAT SECTION 115JAA STIPULATES THAT SUCH BOOK PROFI T SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND T AX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME TAX AT SPECIFIED RATE OF TAX, WHIC H WAS 7.5% FOR ASSESSMENT YEAR 2006-07. THUS, SECTION 115 JAA 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 COU RT) WHETHER INCOME TAX INCLUDE SUR-CHARGE, WHICH IS REP RODUCED 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 H AS BEEN FOUND TO ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 17 BE DEFECTIVE FOR WANT OF REASONS AND HAS, THEREFORE , TO BE REVOKED. SPECIAL LEAVE WAS SOUGHT AND HAS BEEN GRANTED. THE FACTS MAY BE SUCCINCTLY STATED. THE ASSESSEE'S MAIN SOURCE OF INCOME WAS SALARY FROM A LIMITED COMPANY (A. V. THO MAS & CO. LTD.). IN THE PREVIOUS YEAR ENDING ON 30TH MARCH, 1 964, HIS TOTAL INCOME FROM SALARY AMOUNTED TO RS. 42,900. IN MAKIN G THE ASSESSMENT THE INCOME-TAX OFFICER LEVIED SURCHARGE AND ADDITIONAL SURCHARGE IN ACCORDANCE WITH THE RATES PRESCRIBED B Y THE FINANCE ACT, 1963. THE ASSESSEE PREFERRED AN APPEAL TO THE APPELLATE ASSISTANT COMMISSIONER. IT WAS CONTENDED BEFORE HIM ON BEHALF OF THE ASSESSEE THAT THE PROVISIONS OF THE FINANCE ACT , 1964, DID NOT PERMIT THE INCOME-TAX OFFICER TO LEVY SURCHARGE AND ADDITIONAL SURCHARGE IN ACCORDANCE WITH THE PROVISIONS OF THE FINANCE ACT OF 1963. IN OTHER WORDS, IT WAS CONTENDED THAT UNDER S UB-SECTION (2) OF SECTION 2 OF THE FINANCE ACT OF 1964 ONLY INCOME-TA X WAS PAYABLE IN THE PROPORTION IN WHICH THE SALARY STOOD TO THE TOT AL INCOME, THE INCOME-TAX BEING WORKED OUT AT THE RATES APPLICABLE UNDER THE FINANCE ACT, 1963. THERE BEING NO MENTION OF ANY SU RCHARGE IN THE SUB-SECTION INCOME-TAX ALONE WAS LEVIABLE WHICH DID NOT INCLUDE SURCHARGE. THE APPELLATE ASSISTANT COMMISSIONER DID NOT ACCEDE TO THESE CONTENTIONS. HE WAS OF THE VIEW THAT SURCHARG E WAS ONLY ANOTHER FORM OF INCOME-TAX. THE MATTER WAS TAKEN TO THE APPELLATE TRIBUNAL WHICH UPHELD THE LEVY OF THE SURCHARGE AND THE ADDITIONAL SURCHARGE. ON A REFERENCE BEING SOUGHT, THE FOLLOWI NG QUESTION OF LAW WAS REFERRED TO THE HIGH COURT: 'WHETHER THE WORDS INCOME-TAX IN THE FINANCE ACT OF 1964 IN SUB- SECTION (2)( A ) AND SUB-SECTION (2)( B ) OF SECTION 2 WOULD INCLUDE SURCHARGE AND ADDITIONAL SURCHARGE ?' THE HIGH COURT ANSWERED THE QUESTION IN THE NEGATIV E AND IN FAVOUR OF THE ASSESSEE. SECTION 2 OF THE FINANCE ACT, 1964, WHICH IS HEADED AS 'INCOME-TAX AND SUPER-TAX' PROVIDES IN SUB-SECTION (1) THAT INC OME-TAX AND SUPER- TAX SHALL BE CHARGED AT THE RATES SPECIFIED IN PART S I AND II OF THE FIRST SCHEDULE RESPECTIVELY AND THAT IN CASES TO WHICH CE RTAIN PARAGRAPHS OF THOSE PARTS APPLY THESE TAXES SHALL BE INCREASED FOR SURCHARGE FOR THE PURPOSE OF THE UNION. ACCORDING TO SUB-SECTION (2) WHERE THE TOTAL INCOME OF AN ASSESSEE NOT BEING A COMPANY INC LUDES ANY INCOME CHARGEABLE UNDER THE HEAD 'SALARIES' INCOME- TAX AND SUPER- TAX PAYABLE BY THE ASSESSEE ON THE SALARY PORTION O F THE TOTAL INCOME SHALL BE THE PROPORTIONATE AMOUNT PAYABLE ACCORDING TO THE RATES PROVIDED IN THE FINANCE ACT, 1963. UNDER SECTION 2 OF THE FINANCE ACT, 1963, INCOME-TAX WAS TO BE CHARGED AT THE RATE S SPECIFIED IN PART I OF THE FIRST SCHEDULE AND SUPER-TAX AT THE RATES SPECIFIED IN PART II OF THAT SCHEDULE. THE INCOME-TAX WAS TO BE INCREASE D IN THE CASES MENTIONED BY A SURCHARGE AND ADDITIONAL SURCHARGE F OR THE PURPOSE OF THE UNION AND A SPECIAL SURCHARGE. THE SUPER-TAX WAS, HOWEVER, TO BE INCREASED BY A SURCHARGE FOR THE PURPOSE OF THE UNION AND A SPECIAL SURCHARGE. IT WILL BE NOTICED THAT SECTION 2(2) OF THE FINANCE ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 18 ACT, 1964, DID NOT CONTAIN MENTION OF ANY OF THE SU RCHARGES. THIS LED TO THE CONTROVERSY WHICH RESULTED IN THE REFERENCE. BEFORE THE HIGH COURT THE ASSESSEE RELIED ON SECTIO NS 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 L EVIED BY THE ACT. REFERENCE WAS MADE IN THIS CONNECTION TO THE F IRST SCHEDULE TO THE FINANCE ACT, 1963. PART I OF THAT SCHEDULE DEAL T WITH 'INCOME-TAX AND SURCHARGE ON INCOME-TAX'. UNDER THAT HEADING WE RE 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 R ATES OF SURCHARGE ON SUPER-TAX WERE GIVEN. AMONG THE SURCHARGES IN TH E CASE OF INCOME-TAX WERE MENTIONED: ( A ) A SURCHARGE FOR THE PURPOSE OF THE UNION, ( B ) A SPECIAL SURCHARGE AND ( C ) AN ADDITIONAL SURCHARGE. AS REGARDS THE SURCHARGE ON SUPER-TAX THERE WAS MENTIO N OF ( A ) A SURCHARGE FOR THE PURPOSE OF THE UNION AND ( B ) A SPECIAL SURCHARGE. THE HIGH COURT EXAMINED THE AFORESAID PROVISIONS OF THE FINANCE ACTS OF 1963 AND 1964 AND ARTICLES 270 AND 271 OF T HE CONSTITUTION APART FROM THE LEGISLATIVE ENTRY 82 IN LIST I OF TH E SEVENTH SCHEDULE. IT CAME TO THE CONCLUSION THAT INCOME-TAX AND SUPER -TAX DID NOT INCLUDE SURCHARGE AND THAT THESE WERE CALLED BY DIF FERENT NOMENCLATURE IN ALL THE STATUTORY PROVISIONS. IN ORDER TO DETERMINE THE POINT BEFORE US, WHICH IS OF CONSIDERABLE COMPLEXITY, IT IS NECESSARY TO TRACE THE CONCEPT OF SURCHARGE IN TAXATION LAWS IN OUR COUNTRY. THE POWER TO INCREASE FEDERAL TAX BY SURCHARGE BY THE FEDERAL LEGISLATURE WAS RECOMMENDE D FOR THE FIRST TIME IN THE REPORT OF THE COMMITTEE ON INDIAN CONSTITUTIONAL REFORMS, VOLUME I, PART I. FROM PARAGRAPH 141 OF THE PROPOSA LS IT APPEARS THAT THE WORD 'SURCHARGE' WAS USED COMPENDI OUSLY FOR THE SPECIAL ADDITION TO TAXES ON INCOME IMPOSED IN SEPT EMBER, 1931. THE GOVERNMENT OF INDIA ACT, 1935, PART VII, CONTAI NED PROVISIONS RELATING TO FINANCE, PROPERTY, CONTRACTS AND SUITS. SECTIONS 137 AND 138 IN CHAPTER I HEADED 'FINANCE' PROVIDED FOR LEVY AND COLLECTION OF CERTAIN SUCCESSION DUTIES, STAMP DUTIES, TERMINA L TAX, TAXES ON FARES AND FREIGHTS, AND TAXES ON INCOME, RESPECTIVE LY. IN THE PROVISO TO SECTION 137 THE FEDERAL LEGISLATURE WAS EMPOWERE D TO INCREASE AT ANY TIME ANY OF THE DUTIES OR TAXES LEVIABLE UNDER THAT SECTION BY A SURCHARGE FOR FEDERAL PURPOSES AND THE WHOLE PROCEE DS OF ANY SUCH SURCHARGE WERE TO FORM PART OF THE REVENUES OF THE FEDERATION. SUB- SECTION (3) OF SECTION 138 WHICH DEALT WITH TAXES O N INCOME RELATED TO IMPOSITION OF A SURCHARGE. UNDER THE GOVERNMENT OF INDIA ACT, 1935, THE SURCHARGE WAS LEVIED FOR THE FIRST TIME B Y THE INDIAN FINANCE NO. 2 ACT, 1940. SECTION 3(1) OF THAT ACT R EAD : 'SUBJECT TO THE PROVISIONS OF THIS SECTION, THE RAT ES OF INCOME-TAX AND RATES OF SUPER-TAX . . . IMPOSED BY SUB-SECTION (1) OF SECTION 7 OF THE INDIAN FINANCE ACT, 1940, SHALL, IN RESPECT OF THE YEAR BEGINNING ON ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 19 THE FIRST DAY OF APRIL, 1940, BE INCREASED BY A SUR CHARGE FOR THE PURPOSES OF THE CENTRAL GOVERNMENT ...' SIMILAR PHRASEOLOGY WAS EMPLOYED IN RESPECT OF SURC HARGE ON SUPER- TAX. THE PROVISIONS RELATING TO SURCHARGE WERE OMIT TED IN THE FINANCE ACTS OF 1946 TO 1950. IT WAS REINTRODUCED IN THE FI NANCE ACT OF 1951 AND THE SAME HAS BEEN CONTINUED IN THE FINANCE ACTS OF SUBSEQUENT YEARS. SPECIAL SURCHARGE CAME TO BE LEVIED IN THE F INANCE ACTS OF 1958 TO 1964 AND 1966 TO 1971 AND THE ADDITIONAL SU RCHARGE WAS LEVIED ONLY BY THE FINANCE ACT OF 1963. IN THE FINANCE ACT OF 1951, SECTION 2 RELATING TO I NCOME-TAX AND SUPER-TAX PROVIDED THAT THESE TAXES WOULD BE LEVIED AT THE RATES SPECIFIED IN PARTS I AND II OF THE FIRST SCHEDULE I NCREASED IN EACH CASE BY A SURCHARGE FOR THE PURPOSE OF THE UNION. THE FI NANCE ACT OF 1952 WAS A SHORT DOCUMENT AND SECTION 2 THEREOF SIM PLY PROVIDED : 'THE PROVISIONS OF SECTION 2 OF, AND THE FIRST SCHE DULE TO, THE FINANCE ACT, 1951, SHALL APPLY IN RELATION TO INCOM E-TAX AND SUPER- TAX FOR THE FINANCIAL YEAR 1952-53 AS THEY APPLY IN RELATION TO INCOME-TAX AND SUPER-TAX FOR THE FINANCIAL YEAR 195 1-52..........' THERE WAS NO SPECIFIC MENTION WHATSOEVER OF SURCHAR GE IN SECTION 2 NOR WAS THERE ANY MODIFICATION OF THE FIRST SCHEDUL E TO THE FINANCE ACT OF 1951 WHICH CONTAINED THE RATES, ETC., RELATI NG 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, 1971, IS TO THE EFFECT THAT THE PROVISIONS OF SECTION 2 AND OF THE FIRST SCHEDULE TO THE FINANCE ACT, 1970, SHALL APPLY IN RELATION TO INCOM E-TAX FOR THE ASSESSMENT YEAR OR, AS THE CASE MAY BE, THE FINANCI AL YEAR COMMENCING ON THE FIRST DAY OF APRIL, 1971, AS THEY APPLY IN RELATION TO INCOME-TAX FOR THE ASSESSMENT YEAR COMMENCING ON THE FIRST DAY OF APRIL, 1970, WITH CERTAIN MODIFICATIONS SET OUT IN THE SECTION. THE FIRST SCHEDULE TO THE FINANCE ACT OF 1970 WAS MODIF IED AND THE SCHEDULE SO MODIFIED CONTAINS PROVISIONS FOR A SURC HARGE ON INCOME- TAX. IT IS SIGNIFICANT THAT SECTION 2 OF THE FINANC E ACT OF 1971 SPEAKS ONLY OF INCOME-TAX AND NOT OF ANY SURCHARGE. IT IS ONLY IN THE MODIFICATIONS MADE IN THE SCHEDULE TO THE FINANCE A CT OF 1970 THAT THERE IS PROVISION FOR A SURCHARGE. THE ABOVE LEGISLATIVE HISTORY OF THE FINANCE ACTS, AS ALSO THE PRACTICE, WOULD APPEAR TO INDICATE THAT THE TERM 'I NCOME-TAX' AS EMPLOYED IN SECTION 2 INCLUDES SURCHARGE AS ALSO TH E SPECIAL AND THE ADDITIONAL SURCHARGE WHENEVER PROVIDED WHICH ARE AL SO SURCHARGES WITHIN THE MEANING OF ARTICLE 271 OF THE CONSTITUTI ON. THE PHRASEOLOGY EMPLOYED IN THE FINANCE ACTS OF 1940 AN D 1941 SHOWED THAT ONLY THE RATES OF INCOME-TAX AND SUPER-TAX WER E TO BE INCREASED BY A SURCHARGE FOR THE PURPOSE OF THE CENTRAL GOVER NMENT. IN THE FINANCE ACT OF 1958, THE LANGUAGE USED SHOWED THAT INCOME-TAX WHICH WAS TO BE CHARGED WAS TO BE INCREASED BY A SU RCHARGE FOR THE PURPOSES OF THE UNION. THE WORD 'SURCHARGE' HAS THU S BEEN USED TO EITHER INCREASE THE RATES OF INCOME-TAX AND SUPER-T AX OR TO INCREASE THESE TAXES. THE SCHEME OF THE FINANCE ACT OF 1971 APPEARS TO LEAVE ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 20 NO ROOM FOR DOUBT THAT THE TERM 'INCOME-TAX' AS USE D IN SECTION 2 INCLUDES SURCHARGE. ACCORDING TO ARTICLE 271, NOTWITHSTANDING ANYTHING IN ARTICLES 269 AND 270, PARLIAMENT MAY AT ANY TIME INCREASE ANY OF THE DUTIES OR TAXES REFERRED TO IN THOSE ARTICLES BY A SURCHARGE FOR THE PURPOSES OF THE UNION AND THE WHOLE PROCEEDS OF ANY SUCH SURCHA RGE SHALL FORM PART OF THE CONSOLIDATED FUND OF INDIA. ARTICLE 270 PROVIDES FOR TAXES LEVIED AND COLLECTED BY THE UNION AND DISTRIBUTED B ETWEEN THE UNION AND THE STATES. CLAUSE (1) SAYS THAT TAXES ON INCOM E OTHER THAN AGRICULTURAL INCOME SHALL BE LEVIED AND COLLECTED B Y THE GOVERNMENT OF INDIA AND DISTRIBUTED BETWEEN THE UNION AND THE STATES IN THE MANNER PROVIDED IN CLAUSE (2). ARTICLE 269 DEALS WI TH TAXES LEVIED AND COLLECTED BY THE UNION BUT ASSIGNED TO THE STAT ES. THE PROVISIONS OF ARTICLE 268 WHICH IS THE FIRST ONE UNDER THE HEA DING '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 D ISTRIBUTION OF THE PROCEEDS OF THE TAXES AND DUTIES MENTIONED THEREIN BETWEEN THE UNION AND THE STATES. THE LEGISLATIVE POWER OF PARL IAMENT TO LEVY TAXES AND DUTIES IS CONTAINED IN ARTICLES 245 AND 2 46(1) READ WITH THE RELEVANT ENTRIES IN LIST I OF THE SEVENTH SCHEDULE. AS MENTIONED BEFORE, THE LEGISLATIVE ENTRY 82 IN LI ST I RELATES TO TAXES ON INCOME OTHER THAN AGRICULTURAL INCOME; INCOME-TA X, 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 R ELATING TO THEM. IT IS THAT ACT WHICH AUTHORISES THESE TAXES TO BE CHAR GED AND PRESCRIBES THE RATES AT WHICH THEY CAN BE CHARGED. SECTION 4 O F THE ACT SIMPLY PROVIDES THAT WHERE ANY CENTRAL ACT ENACTS THAT INC OME-TAX SHALL BE CHARGED FOR ANY ASSESSMENT YEAR AT ANY RATE OR RATE S INCOME-TAX AT THAT RATE OR THOSE RATES SHALL BE CHARGED IN ACCORD ANCE THERETO AND SUBJECT TO THE PROVISIONS OF THE ACT. SECTION 95, W HICH WAS OMITTED BY THE FINANCE ACT OF 1965, CONTAINED SIMILAR PROVI SION WITH REGARD TO SUPER-TAX. ALTHOUGH UNDER THE ACT SECTION 4 IS T HE CHARGING SECTION YET INCOME-TAX CAN BE CHARGED ONLY WHERE TH E CENTRAL ACT WHICH, IN THE PRESENT CASE, WILL BE THE FINANCE ACT , ENACTS THAT INCOME-TAX SHALL BE CHARGED FOR ANY ASSESSMENT YEAR AT THE RATE OR RATES SPECIFIED THEREIN. THE DISTINCTION MADE BY TH E HIGH COURT THAT THE SURCHARGE ARE LEVIED ONLY UNDER THE FINANCE ACT AND INCOME-TAX UNDER THE ACT MAY NOT HOLD GOOD IF THE ABOVE VIEW W HICH HAS BEEN PRESSED ON BEHALF OF THE REVENUE WERE TO BE ACCEPTE D. IN OUR JUDGMENT IT IS UNNECESSARY TO EXPRESS ANY OPINION I N THE MATTER BECAUSE THE ESSENTIAL POINT FOR DETERMINATION IS WH ETHER SURCHARGE IS AN ADDITIONAL MODE OR RATE FOR CHARGING INCOME-TAX. 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................'; ALS O 'ADDITIONAL TAX'. THUS, THE MEANING OF SURCHARGE IS TO CHARGE IN ADDI TION OR TO SUBJECT TO AN ADDITIONAL OR EXTRA CHARGE. IF THAT M EANING IS ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 21 APPLIED TO SECTION 2 OF THE FINANCE ACT, 1963, IT W OULD LEAD TO THE RESULT THAT INCOME-TAX AND SUPER-TAX WERE TO BE CHA RGED 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 PROVIDED IN THE SCHEDULE. READ IN THIS WAY, THE ADDITIONAL CHARGES FORM A PAR T OF THE INCOME-TAX AND SUPER-TAX. IT IS POSSIBLE TO ARGUE, AND THAT ARGUMENT HAS BEEN COMMENDED ON BEHALF OF THE REVENUE, THAT T HE WORD 'SURCHARGE' HAS BEEN USED IN ARTICLE 271 FOR THE PU RPOSE OF SEPARATING IT FROM THE BASIC CHARGE OF A TAX OR DUT Y FOR THE PURPOSE OF DISTRIBUTING THE PROCEEDS OF THE SAME BETWEEN THE U NION AND THE STATES. THE PROCEEDS OF THE SURCHARGE ARE EXCLUSIVE LY ASSIGNED TO THE UNION. EVEN IN THE FINANCE ACT ITSELF IT IS EXPRESS LY STATED THAT THE SURCHARGE IS MEANT FOR THE PURPOSE OF THE UNION. IT WOULD APPEAR THAT, SINCE THE FINANCE ACT, 1943, UP TO THE FINANCE ACT, 1967, A PROVISION WAS MADE FOR TAXING THE INCO ME UNDER THE HEAD 'SALARIES' ACCORDING TO THE PROVISIONS OF THE FINANCE ACT OF THE PRECEDING YEAR RATHER THAN OF THE CURRENT YEAR IF T HE ASSESSEE HAD ANY INCOME IN ADDITION TO HIS INCOME BY WAY OF SALARY. ACCORDING TO THE TRIBUNAL THIS WAS DONE BECAUSE IF THE INCOME UNDER THE HEAD 'SALARIES' WAS TO BE ASSESSED AT THE RATES FIXED BY THE FINANCE ACT ENACTED FOR THE CURRENT YEAR IT WOULD ENTAIL CONSID ERABLE ADMINISTRATIVE WORK IN THE FORM OF A REFUND OR COLL ECTION IN THE FINAL ASSESSMENT. SINCE BY THE FINANCE ACT OF 1967, THIS METHOD OR PROCEDURE WAS DROPPED WE DO NOT CONSIDER THAT MUCH SIGNIFICANCE CAN BE ATTACHED TO THIS ASPECT. IN THE RESULT WE ARE UNABLE TO SUSTAIN THE VIEW OF THE HIGH COURT. THE QUESTION THAT WAS REFERRED MUST BE ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE REVENUE. IN VIEW OF THE NATURE OF THE POINT INVOLVED THE PARTIES ARE LEFT TO BEAR THEIR OWN COSTS IN THIS CO URT. THE APPEAL BY CERTIFICATE IS DISMISSED. WE WISH TO ACKNOWLEDGE WITH THANKFULNESS THE VALUAB LE ASSISTANCE RENDERED AS AMICUS CURIAE AT OUR REQUEST BY MR. S.T. DESAI, SENIOR ADVOCATE, AND MR. BALAKRISHNAN, ADVOCATE, AS THE RE SPONDENT WAS UNREPRESENTED. 2.5. IN THE AFORESAID CASE, THE HON'BLE APEX COURT HELD THAT THE SURCHARGE IS PART OF INCOME TAX. THIS ISSU E HAS BEEN DEALT WITH BY THE COORDINATE BENCH/JAIPUR BENCH OF THE TRIBUNAL IN THE AFORESAID ORDER DATED 14/06/2018 AN D EXPLANATION-2 TO SECTION 115JB OF THE ACT CLEARLY S TATES THAT ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 22 TAX INCLUDES SURCHARGE AND EDUCATION CESS. THUS, FO LLOWING THE RATION OF THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF M/S EASTERN JEWELS PVT. LTD. VS ACIT IN ITA NO.163/JP/2017. GROUND NO.1.1 TO 1.4 RAISED BY THE ASSESSEE AS TO WHETHER INCOME TAX WILL INCLUDE SUR- CHARGE AND EDUCATION CESS SO FAR AS SECTION 115JB AND 115J AA ARE CONCERNED, ARE ALLOWED AS INDICATED ABOVE. 3. THE ASSESSEE HAS NOT PRESSED GROUND NO.2.1 TO 2.3 WHICH WERE RAISED WITHOUT PREJUDICE TO GROUND N O.1.1 TO 1.4 WITH RESPECT TO STAGE AT WHICH MAT CREDIT IS TO BE ALLOWED WHILE COMPUTING INCOME AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. FINALLY, THE APPEALS OF THE ASSESSEE ARE PARTLY ALL OWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 11/10/2018. SD/- SD/- ( RA MIT KOCHAR ) (JOGINDER SINGH) ! ' / ACCOUNTANT MEMBER # ' /JUDICIAL MEMBER ' # MUMBAI; ' DATED : 11/10/2018 F{X~{T? P.S/. . . ITA NO.2348 & 2350/MUM/2017 SI GROUP INDIA PVT. LTD. 23 $#%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. )*+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. // ' 0 ( )* ) / THE CIT, MUMBAI. 4. // ' 0 / CIT(A)- , MUMBAI 5. 2 3- , /)*%)4 , ' # / DR, ITAT, MUMBAI 6. 56# / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , ' # / ITAT, MUMBAI