M/s Apeejay Shipping Limited, Kolkata V. DCIT, Centre Circle - III, Kolkata, Kolkata

ITA 2550/KOL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1567 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANISH TIWARI
• Keywords: Business income; Capital expenditure
• Section: 143(3); 11

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.2550/KOL/2013 ASSESSMENT YEAR:2009-10 M/S APEEJAY SHIPPING LTD., APEEJAY HOUSE, 15, PARK STREET, KOLKATA-16 [ PAN NO.AADCS 7605 P ] / V/S . DCIT, CENTRAL CIRCLE-III, AAYKAR BHAWAN, POORVA, 110, SHANTI PALLY, KOLKATA-107 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI MANISH TIWARI, FCA /BY RESPONDENT SHRI SALLONG YADEN, ADDL. CIT-DR ! /DATE OF HEARING 22-06-2017 ! /DATE OF PRONOUNCEMENT 30-08-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA DATED 27.08.2013. ASSESSME NT WAS FRAMED BY JCIT(OSD), CENTRAL CIRCLE-III KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 29.1 2.2011 FOR ASSESSMENT YEAR 2009-10. THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEAL A RE AS UNDER:- SHRI MANISH TIWARI, LD. AUTHORIZED REPRESENTATIVE A PPEARED ON BEHALF OF ASSESSEE AND SHRI SALLONG YADEN, LD. DEPARTMENTAL REPRESENTA TIVE REPRESENTED ON BEHALF OF REVENUE. 2. FIRST ISSUE RAISED BY ASSESSEE IN GROUND NO.1 IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUSTAINING THE DISALLOWANCE OF 2,64,64,575/- ON ACCOUNT OF LOSS ON CURRENCY FLUC TUATION. ITA NO.2550/KOL/2013 A.Y. 2009-10 M/S APEEJAY SHIPPING LTD. VS. DCIT, CC-III, KOL. PAGE 2 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IN THE PR ESENT CASE IS A LIMITED COMPANY AND ENGAGED IN BUSINESS OF SHIPPING AND OTHER INVES TMENTS. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS DERIVED ITS MAJOR INCOME FR OM THE SHIPPING BUSINESS AND ACCORDINGLY THE TAX WAS PAID UNDER TONNGE TAX SCHEME AS PER THE PROVISION OF SECTION 115VA OF THE ACT. BESIDES THE INCOME FROM I TS SHIPPING BUSINESS ASSESSEE HAS ALSO SHOWN INCOME FROM INTEREST, PROFIT ON SALE OF INVESTMENT AND DIVIDEND ON MUTUAL FUND / SHARES. 4. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS SHOWN INTEREST INCOME FROM OTHER SOURCES ON THE AMOUNT OF LOAN WHICH WAS GIVEN IN FOREIGN CURRENCY TO ITS SUBSIDIARY COMPANIES AS DETAILED UNDER : I) APEEJAY TEA (PANAMA) INC. LOCATED IN PANAMA. II) SURRENDRA OVERSEAS (PANAMA) INC., LOCATED IN PA NAMA. THE ASSESSEE IN RESPECT OF THESE TWO LOANS GIVEN TO THE SUBSIDIARY COMPANIES IN FOREIGN CURRENCY HAS INCURRED LOSS AS DETAILED UNDE R:- SL. NO NAME OF SUBSIDIARY CO. AMOUNT (RS) LOSS REMARK(S) 1 APEEJAY TEA (PANAMA) INC. 2,38,38,000 ON ACCOUNT OF FOREIGN CURRENCY FLUCTUATION 2 SURRENDRA OVERSEAS (PANAMA) INC. 26,24,575 ON ACCOUNT OF FORWARD CONTRACTS TO HEDGE RISK DURING THE YEAR, THE ABOVE STATED LOSSES WERE ACTUA LLY INCURRED BY THE ASSESSEE. THE ASSESSEE IN RESPECT OF BOTH THE LOANS HAS DECLARED INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBS ERVED AS UNDER:- I) THAT THE LOSSES HAVE BEEN INCURRED BY THE ASSESS EE ON ACCOUNT OF CAPITAL TRANSACTIONS; II) THE ASSESSEE HAS SHOWN THE LOAN GIVEN TO ITS SU BSIDIARY COMPANY UNDER THE CURRENT ASSET BUT THE IMPUGNED LOSS DOES NOT PERTAI N TO THE INTEREST ON SUCH LOAN BUT IT IS ARISING OUT OF PRINCIPAL AMOUNT OF LOAN. ITA NO.2550/KOL/2013 A.Y. 2009-10 M/S APEEJAY SHIPPING LTD. VS. DCIT, CC-III, KOL. PAGE 3 III) THE MAIN BUSINESS OF ASSESSEE IS SHIPPING, THU S, PROVIDING LOAN OF INTEREST IS NOT A PRIMARY BUSINESS OF THE ASSESSEE. THEREFORE, THE ASSESSEE HAS SHOWN INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER S OURCES. IV) THE ASSESSEE AS PER RULE 115 OF THE IT RULES, 1 962 HAS TO RESTATE ITS TRANSACTIONS AT THE END OF EVERY FINANCIAL YEAR AFT ER GIVING EFFECT THE CURRENCY FLUCTUATION. ACCORDINGLY, ANY EFFECT ON ACCOUNT OF CURRENCY FLUC TUATION EITHER GENERATES INCOME OR LOSS IF IT RELATES TO THE CURRENT ACCOUNT TRANSACTI ONS. IN THE INSTANT CASE, THE LOAN GIVEN BY THE ASSESSEE REPRESENT CAPITAL ACCOUNT TRANSACTI ONS THEREFORE, ANY FLUCTUATION ON ACCOUNT OF IT SHOULD BE IGNORED. IN VIEW OF THE ABOVE, AO DISALLOWED THE LOSS CLAIME D BY THE ASSESSEE FOR 2,64,64,575/- ON ACCOUNT OF CURRENCY FLUCTUATION A ND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO CONFIRMED THE ORDER OF ASSESSING OFFICER BY OBSERVING AS UNDER:- 3.GROUND NO. 1 IS DIRECTED AGAINST THE ACTION OF TH E AO IN NOT ALLOWING THE CLAIM OF LOSS OF RS.2,64,64,575/- ON ACCOUNT OF FOREIGN EXC HANGE FLUCTUATION. IT IS WAS EXPLAINED AT THE ASSESSMENT STAGE THAT THE ASSESSEE COMPANY HAD GIVEN FOREIGN CURRENCY LOANS TO APEEJAY TEA (PANAMA) AND HAD SUFF ERED LOSS OF RS.2,38,38,000/- AS A RESULT OF FLUCTUATION IN FOREIGN CURRENCY ON REAL ISATION OF THE PRINCIPAL LOAN AMOUNT. THE ASSESSEE ALSO ENTERED INTO FORWARD CONTRACTS TO HEDGE ITS RISK AGAINST LOANS ADVANCED TO SURRENDRA OVERSEAS(PANAMA) AND INCURRED LOSS OF RS.26,26,575/- ON EXPIRY OF THE CONTRACTS. IT WAS ARGUED THAT THE ABO VE LOSS IS ALLOWABLE AS DEDUCTION IN COMPUTATION OF PROFITS FROM NON-SHIPPING ACTIVITY. THE AO DID NOT ACCEPT THE ARGUMENTS. THE AO NOTED THAT THE LOSS ON FLUCTUATIO N OF FOREIGN CURRENCY WAS NOT ON ACCOUNT OF INTEREST BUT ON ACCOUNT OF REALISATION OF THE PRINCIPAL LOAN AMOUNT. THE ASSESSEE COMPANY WAS MAINLY ENGAGED IN THE BUSINESS OF SHIPPING AND FORWARDING LOAN WAS NOT PART OF IT PRIMARY BUSINESS. IT WAS FO R THIS REASONS THAT THE ASSESSEE HAD SHOWN INTEREST INCOME UNDER THE HEAD OTHER SOURCES. THE AO HELD THAT IRRESPECTIVE OF ITS DISCLOSURE AS CURRENT ASSET IN THE BALANCE SHEE T, THE LOAN GIVEN BY THE ASSESSEE COMPANY WAS NOT ITS TRADING ASSET OR PART OF CIRCUL ATING CAPITAL AS THE INCOME DERIVED THEREFROM DID NOT FORM PART OF ITS BUSINESS INCOME. THE AO THEREFORE IGNORED THE LOSS OF RS.2,64,64,575/-. THE LD. AR APPEARED FOR THE AS SESSEE AND REITERATED THE SUBMISSIONS ALREADY MADE AT THE ASSESSMENT STGE. I DO NOT FIND MERIT OR SUBSTANCE IN THE ARGUMENTS MADE ON BEHALF OF THE ASSESSEE. THE A SSESSING OFFICER HAS RIGHTLY HELD THAT GIVING OF LOAN WAS NOT THE PRIMARY BUSINESS OF THE ASSESSEE AND THE LOSS DUE TO FLUCTUATION IN FOREIGN CURRENCY ON ACCOUNT OF REAL IZATION OF THE PRINCIPAL LOAN AMOUNT WAS NOT ALLOWABLE AS DEDUCTION FROM THE PROFITS OF THE NON-SHIPPING ACTIVITY. THE ORDER OF THE AO IS UPHELD. GROUND NO 1 IS DISMISSED . ITA NO.2550/KOL/2013 A.Y. 2009-10 M/S APEEJAY SHIPPING LTD. VS. DCIT, CC-III, KOL. PAGE 4 BEING AGGRIEVED BY THIS ORDER OF LD. CIT ASSESSEE C AME IN SECOND APPEAL BEFORE US. 6. LD. AR FOR THE ASSESSEE BEFORE US SUBMITTED THAT THE INVESTMENT WAS MADE BY ASSESSEE IN ITS SUBSIDIARY COMPANIES. THEREFORE, IT WAS DIRECTLY LINKED WITH THE BUSINESS OF THE ASSESSEE. THE INTEREST INCOME EARNE D ON THE LOAN GIVEN TO SUBSIDIARY COMPANY WAS SHOWN UNDER THE HEAD INCOME FROM OTHE R SOURCES BUT THE NOMENCLATURE OF THE INCOME CANNOT BE A DECISIVE FAC TOR FOR NOT ALLOWING THE LOSS INCURRED ON ACCOUNT OF CURRENCY FLUCTUATION. THE A SSESSEE ALSO SUBMITTED THAT THE LOANS GIVEN TO SUBSIDIARY COMPANIES WERE CLASSIFIED UNDER THE HEAD CURRENT ASSET . AS SUCH, LD. AR PRAYED TO DELETE THE ADDITION MADE BY AO. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW AND PRAYED BEFORE THE BENCH TO CONFIRM THE SAME. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, ASSESSEE HAS INCURRED LOSS ON ACCOUNT OF CURRENCY FLUCTUATION IN RELATION TO LOAN PROVIDE D TO ITS SUBSIDIARY COMPANIES. THE AO HELD THAT THE IMPUGNED LOSS RELATES TO THE PRINC IPAL AMOUNT OF THE LOAN AND THEREFORE IT CANNOT BE ALLOWED AS DEDUCTION. MOREOV ER, AO ALSO OBSERVED THE INTEREST INCOME CORRESPONDING TO THE LOAN WAS DECLARED UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE, NO DEDUCTION ON ACCOUNT OF CUR RENCY FLUCTUATION WAS ALLOWED TO THE ASSESSEE. THE VIEW TAKEN BY AO WAS SUBSEQUENTLY CONFIRMED BY LD. CIT(A). 7.1 FROM THE FOREGOING DISCUSSION, WE FIND THAT THE ASSESSEE HAS GIVEN LOAN TO ITS SUBSIDIARY COMPANY IN FOREIGN CURRENCY WHICH WAS LO CATED OUTSIDE INDIA. AT THE TIME OF REPAYMENT OF LOAN BY THOSE SUBSIDIARY COMPANIES, THE ASSESSEE HAS INCURRED LOSS OF 2,64,64,575/- ONLY ON ACCOUNT OF PRINCIPAL AMOUNT. IT IS AN UNDISPUTED FACT THAT THE LOSSES WERE INCURRED ON ACCOUNT OF CAPITAL TRANSACT IONS. IT IS ALSO UNDISPUTED FACT THAT THE INCOME FROM SUCH LOAN WAS DECLARED BY THE ASSES SEE UNDER THE HEAD INCOME FROM OTHER SOURCES . THUS, IT IS CLEAR THAT THE LOSS HAS BEEN INCURRE D FROM THE INCOME WHICH WAS DECLARED UNDER THE HEAD INCOME FROM OTHER SOUR CES. NOW, THE ISSUE BEFORE US ARISES FOR OUR ADJUDICATION WHETHER LOSS ON ACCOUNT OF CURRENCY FLUCTUATION CAN BE CLAIMED AS DEDUCTION AGAINST THE INCOME FROM OTHER SOURCES U/S 57 OF THE ACT. THE PROVISION OF SECTION 57 OF THE ACT PROVIDES THE DED UCTION WHICH CAN BE CLAIMED ARE DETAILED AS UNDER :- ITA NO.2550/KOL/2013 A.Y. 2009-10 M/S APEEJAY SHIPPING LTD. VS. DCIT, CC-III, KOL. PAGE 5 DEDUCTIONS . 57 . THE INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTIONS, NAMELY:- I)----------------- (II---------------- (III) ANY OTHER EXPENDITURE (NOT BEING IN THE NATUR E OF CAPITAL EXPENDITURE) LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF MAKING OR EARNING SUCH INCOME; [(IV) ------------------ A PLAIN LOOK AT THE ABOVE STATUTORY PROVISION MAKES IT CLEAR THAT CLAUSE (III) TO SECTION 57 OF THE ACT IS APPLICABLE IN THE INSTANT CASE. TH E EXPENSES WHICH HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OR EARNING O F SUCH INCOME ARE ELIGIBLE FOR DEDUCTION BUT THE SAME SHOULD NOT BE IN THE NATURE OF CAPITAL EXPENDITURE. IT IS UNDISPUTED FACT THAT THE LOAN GIVEN TO THE SUBSIDIA RY COMPANIES WERE RETURNED BACK IN ENTIRETY. THE LOSS WAS INCURRED DUE TO THE CURRENCY FLUCTUATION AT THE TIME OF REPAYMENT OF LOAN OF PRINCIPAL AMOUNT BY THE SUBSID IARY COMPANY WHICH WAS CLAIMED BY THE ASSESSEE. THERE WAS NO CASE OF NON RECOVERY OF THE PRINCIPAL AMOUNT FROM THE COMPANIES. THUS IN OUR CONSIDERED VIEW THE IMPUGNED LOSS REPRESENTS IS ON REVENUE ACCOUNTS AND HAS DIRECT NEXUS WITH THE INTEREST INC OME OF THE ASSESSEE. THEREFORE IT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 57(III) OF THE ACT. IN VIEW OF THE ABOVE, WE REVERSE THE ORDER OF AUTHORITIES BELOW. HENCE, THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 8. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO. 2 IS THAT LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF AO ON ACCOUNT OF WRONG CALC ULATION OF MINIMUM ALTERNATE TAX (MAT FOR SHORT) CREDIT U/S 115JAA OF THE ACT. 9. THE ASSESSING OFFICER HAS WORKED OUT THE TAX LIA BILITY UNDER THE PROVISION OF NORMAL COMPUTATION OF INCOME. THUS, THE INCOME UNDE R THE MAT PROVISION WAS NOT DETERMINED BEING LOWER TAX LIABILITY. HOWEVER, THE ASSESSING OFFICER UNDER THE NORMAL COMPUTATION OF INCOME DETERMINED THE TAX LIABILITY AND SUBSEQUENTLY ADDED SURCHARGE AND EDUCATION CESS. THEREAFTER THE AO ALLOWED THE M AT CREDIT AVAILABLE TO THE ASSESSEE. THE NECESSARY WORKINGS FOR THE TAX UNDER THE NORMAL COMPUTATION OF INCOME AND MAT CREDIT ALLOWED TO THE ASSESSEE ARE DETAILED AS UNDER:- CALCULATION OF TAX TAX PAYABLE @ 30% RS.8,38,10,076/- ADD: SURCHARGE @ 10% RS. 83,81,008/- ITA NO.2550/KOL/2013 A.Y. 2009-10 M/S APEEJAY SHIPPING LTD. VS. DCIT, CC-III, KOL. PAGE 6 ADD: EDUCATION CUSS @ 3% RS. 27,65,733/ - RS.9,49,56,817 LESS: MAT CREDIT ALLOWED FOR ADJUSTMENT AS B/F FROM A.Y. 2008-09 RESTRICT ED TO REGULAR TAX PAYABLE FOR THE YEAR RS.8,38, 10,076/- COMPUTED MAT FOR THE YEAR RS.3,62, 96,754/- RS.4,75,13,322/- BALANCE PAYABLE RS.4,74,43,495/- 10. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO DISREGARDED THE CONTENTION OF ASSESSEE BY OBSERVING AND CONFIRM ED THE ORDER OF ASSESSING OFFICER BY OBSERVING AS UNDER:- FIRST DETERMINED THE TAX ON TOTAL INCOME INCLUDING SURCHARGE AND EDUCATIONAL CESS; AND THEN, ALLOWED CREDIT FOR MAT. THE LD. AR HAS AR GUED THAT THE AO WAS NOT JUSTIFIED IN FIRST COMPUTING THE SURCHARGE AND EDUC ATIONAL CESS AND THEN ALLOWING CREDIT FOR MAT. THE AO SHOULD HAVE INSTEAD ALLOWED CREDIT FOR MAT AND THEN COMPUTED SURCHARGE AND EDUCATIONAL CESS. I HAVE PER USED THE ASSESSMENT ORDER AND CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE AS SESSEE. I FIND NO INFIRMITY IN THE METHOD OF COMPUTATION OF THE TAX LIABILITY AS MADE BY THE AO. THE SURCHARGE AND EDUCATIONAL CESS IS LEVIABLE ON THE TAX LIABILITY; AND, CREDIT FOR THE MAT IS ALLOWABLE ONLY FROM, THE TOTAL TAX LIABILITY. THE ORDER OF TH E AO IS CONFIRMED. GROUND NO 2 IS DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 11. AT THE OUTSET, LD. AR BEFORE US SUBMITTED THAT AS PER THE PROVISION OF MAT CREDIT HAS TO BE ALLOWED FIRST BEFORE CHARGING SURC HARGE AND EDUCATION CESS FOR WORKING OUT THE TAX LIABILITY UNDER THE NORMAL PROV ISION OF TAX. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BE LOW. 12. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT IM PUGNED ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. M/S CRI LTD. IN ITA NO.1942/KOL/2014 FOR THE A.Y. 2009-10 DATED 29.05.2017. THE RELEVANT EXTRACT IS REPRODUCED BELO W:- 5.AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE CIT-A AND CONTENDED THAT THE AO WAS WRONG IN CHARGING SURCHARGE ON THE GROSS TAX (BEFORE MAT CREDIT) INSTEAD OF NET TAX. THE ASSESSEE HAS PLACED RELIANCE ON THE PROPOSITION OF LAW IN THE ORDER IN THE CASE OF UNIVERSAL MEDICARE P.LTD OF THE CO-ORDINATE BENCH, ITAT MUMBAI. THE CIT-A CONSIDERING THE FACTS OF THE CASE WITH THAT OF ITA NO.2550/KOL/2013 A.Y. 2009-10 M/S APEEJAY SHIPPING LTD. VS. DCIT, CC-III, KOL. PAGE 7 THE FACTS IN THE CASE OF UNIVERSAL MEDICARE ( SUPRA) OF MUMBAI TRIBUNAL ALLOWED THE MAT CREDIT BEFORE CHARGING OF SURCHARGE AND EDUCATION CESS. RELEVANT FINDING OF THE CIT-A IS REPRODUCED HEREIN BELOW:- 5. THE LD AR HAS SUBMITTED THAT THE SCHEME FOR THE COMPUTATION OF TAX AS PRESCRIBED BY THE ITR-6 FOR THE RELEVANT ASS ESSMENT YEAR 2009-10 CLEARLY SHOWS THE CHRONOLOGY: COMPUTE THE G ROSS TAX PAYABLE (COLUMN 3), THEN REDUCE MAT CREDIT U/S 115J AA (COLUMN 4) TO DETERMINE THE TAX PAYABLE AFTER CREDIT U/S 11 5JAA (COLUMN 5); AND THEN, ADD SURCHARGE (COLUMN 6) AND EDUCATIO N CESS (COLUMN 7) TO DETERMINE THE GROSS TAX LIABILITY (CO LUMN 8). THE LD AR ALSO PLACED RELIANCE IN THE CASE OF UNIVERSAL ME DICARE (P) LTD VS ACIT IN ITA NO. 839/MUM/2012 WHEREIN IDENTICAL I SSUE WAS DECIDED BY THE HON'BLE BENCH OF THE ITAT, MUMNBAI. IN THAT CASE, THE HON'BLE TRIBUNAL HAS HELD AS UNDER: GROUND NO. 6 RELATE TO LEVYING SURCHARGE AND EDUCAT IONAL CESS BEFORE ADJUSTING MAT CREDIT. IT IS PERTINENT TO MEN TION THAT THIS ISSUE HAS NOT BEEN DISCUSSED IN THE ASSESSMENT ORDE R. HOWEVER, THE SAME HAS BEEN RAISED BEFORE THE LD CIT(A). THE CLAI M OF THE ASSESSEE IS THAT MAT CREDIT SHOULD FIRST BE REDUCED FROM THE TAX PAYABLE AND THEREAFTER ON THE RESIDUAL AMOUNT THE S URCHARGE AND EDUCATIONAL CESS BE LEVIED. IT IS RELEVANT TO NOTE THAT IN THE INCOME TAX RETURN FORM-ITR-6, COLUMN NO. 4, THE ASSESSEE I S REQUIRED TO FILL THE CREDIT U/S 115JAA OF TAX PAID IN EARLIER Y EARS AND AFTER WHICH ON THE BALANCE TAX PAYABLE, THE ASSESSEE HAS TO FILL THE SURCHARGE AND EDUCATIONAL CESS AT COLUMN NO. 8 AND 10 FOR THE PURPOSE OF ARRIVING AT THE GROSS TAX LIABILITY. ALS O, THE ITAT IN THE CASE OF RICHA GLOBAL EXPORTS (P) LTD V ACIT IN ITA NO. 2303/DEL!2012 HAS HELD THERE IS NO NEED TO GIVE SEP ARATE CREDIT OF EDUCATION CESS AND SURCHARGE WHILE GIVING CREDIT OF MAT. WHAT IS REQUIRED IS THAT IN THE YEAR WHEN SUCH CREDIT IS GI VEN, EDUCATION CESS AND SURCHARGE SHOULD BE COMPUTED AFTER GIVING CREDIT OF MAT TO THE TAX COMPUTED ON THE ASSESSED INCOME IN THE S AME WAY AS 'IN THE CASE OF INTEREST UNDER SECTIONS 2348 AND 234C. THE NATURE OF MAT IS LIKE PRE- PAID TAXES AND, THEREFORE, IT SHOU LD BE TREATED ALIKE FOR THE PURPOSES OF COMPUTING EDUCATION CESS AND SURCHARGE ALSO. IN VIEW OF THAT MATTER, WE FIND MERITS IN THE CONTE NTION OF THE ASSESSEE THAT MAT CREDIT SHOULD FIRST BE REDUCED FR OM THE TAX PAYABLE AND THEREAFTER ON THE RESIDUAL AMOUNT THE S URCHARGE AND EDUCATIONAL CESS BE LEVIED. WE ORDER AND DIRECT ACC ORDINGLY. GROUND NO. 6 IS ALLOWED. 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSE E AND ALSO THE MATERIAL PLACED ON RECORD. I FIND MERIT IN THE SUBM ISSION THAT MAT CREDIT HAS TO BE FIRST ALLOWED BEFORE CHARGING THE SURCHARGE AND EDUCATION CESS. THE CONTENTION OF THE ASSESSEE IS I N LINE WITH THE SCHEME FOR THE COMPUTATION OF TAX AS PRESCRIBED BY THE ITR-6 FOR THE RELEVANT ASSESSMENT YEAR. THE ISSUE IS ALSO COV ERED DIRECTLY BY ITA NO.2550/KOL/2013 A.Y. 2009-10 M/S APEEJAY SHIPPING LTD. VS. DCIT, CC-III, KOL. PAGE 8 THE DECISION OF THE HON'BLE ITAT, MUMBAI IN THE CAS E OF UNIVERSAL. MEDICARE (P) LTD VS ACIT IN ITA NO. 839/MUM/2012 (S UPRA). ACCORDINGLY, THE AO IS DIRECTED TO FOLLOW THE COLUM NS OF THE ITR-6 FOR THE RELEVANT ASSESSMENT YEAR; AND, CHARGE THE S URCHARGE AND EDUCATION CESS AFTER ALLOWING THE MAT CREDIT. GROUN D NO 2 IS ALLOWED. 6. FROM THE ABOVE, WE FIND THAT THE LD.CIT-A HAS FO LLOWED THE PROPOSITION OF LAW LAID DOWN BY THE MUMBAI BENCH OF ITAT ON THI S ISSUE. HENCE, WE FIND NO INFIRMITY IN HIS ORDER. 7. IN VIEW OF THE ABOVE, WE HOLD THAT MAT CREDIT SH ALL BE REDUCED FIRST FROM THE TAX PAYABLE AND ADD SURCHARGE AND EDUCATIO N CESS THEREAFTER. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF THE CIT-A. THE G ROUND RAISED BY THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE SAME, WE REVERSE THE ORD ER OF LOWER AUTHORITIES AND DIRECT THE AO ACCORDINGLY. HENCE, THIS GROUND OF ASSESSEE S APPEAL IS ALLOWED. 13. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 30/08/2017 SD/- SD/- (%&') (!&') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP-SR.PS )&*+ - 30/08/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S APEEJAY SHIPPING LTD.,APEEJAY HOUSE, 15, PARK ST. KOL-16 2. /RESPONDENT-DCIT, CEN. CIR.-III, AAYKAR BHAWAN POOR VA 110, SHANTIPALLY KOLKTA-107 3. **, - / CONCERNED CIT 4. - - / CIT (A) 5. ./0 %%, , , / DR, ITAT, KOLKATA 6. 012 / GUARD FILE. BY ORD ER/ & , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO , ,