12 Sections 115JAA, 234B – For the purposes of calculating the levy of interest u/s. 234B of the Act, amount of “assessed tax” is to be determined after reducing the entire MAT credit (including surcharge and cess) u/s. 115JAA.

2017] 88 taxmann.com 28 (Kolkata – Trib.)

Bhagwati Oxygen Ltd. vs. ACIT

ITA No. : 240(Kol) of 2016

A.Y.: 2011-12     
Date of Order:  15^th November,
2017

FACTS

The assessee, a private limited company,
electronically filed its return of income for the assessment year 2011-12
disclosing total income of Rs. 1,41,26,460/. The assessee computed the tax
liability at Rs. 46,92,789/- including surcharge and cess under the normal
provisions of the Act.  The assessee
computed the book profit u/s. 115JB of the Act at Rs. 92,42,889/- and
determined the tax payable thereon at Rs. 17,13,632/- including surcharge and
cess. The assessee computed the MAT credit u/s. 115JAA of the Act to be
adjusted in future years at Rs. 29,79,157/- ( 46,92,789 – 17,13,632).

This return was processed u/s. 143(1) by
Centralized Processing Centre, Bangalore (in short “CPC”) wherein the
total income under normal provisions of the Act was determined at Rs.
1,41,27,460/- and tax @ 30% thereon was determined at Rs. 42,38,238/-. In the
said intimation u/s. 143(1) the book profit u/s. 115JB of the Act was
determined at Rs. 92,42,889/- and tax @ 18% was determined at Rs. 16,63,720/-.
Accordingly, the CPC in the intimation u/s. 143(1) of the Act determined the
MAT credit u/s. 115JAA of the Act at Rs. 25,74,518/- (4238238 – 1663720). While
determining the MAT credit u/s. 115JAA CPC completely ignored the surcharge
portion and cess portion computed by the assessee, both under normal provisions
of the Act as well as under computing the tax liability u/s. 115JB of the Act.
In view of this, the assessee was fastened with a demand payable.

Aggrieved, the assessee preferred an appeal
to CIT(A). In the course of appellate proceedings the assessee placing reliance
on the decision of the Hon’ble Supreme Court in the case of CIT vs. K.
Srinivasan [1972] 83 ITR 346, among other decisions, pleaded that surcharge
and cess are nothing but a component of tax. The CIT (A) however, was not
convinced with the argument of the assessee and upheld the demand raised by the
CPC in the intimation u/s. 143(1).

Aggrieved, the assessee preferred an appeal
to the Tribunal.

HELD 

The Tribunal observed that –

(i)   the issue under dispute
has been addressed against the assessee by the decision of Delhi Tribunal in
the case of Richa Global Exports (P.) Ltd. vs. Asstt. CIT [2012] 25
taxmann.com 1/54 SOT 185;

(ii)  the issue under dispute
is covered in favour of the assessee by the Co-ordinate Bench of Hyderabad
Tribunal in the case of Virtusa (India) (P.) Ltd. vs. Dy. CIT [2016] 67
taxmann.com 65/157 ITD 1160;  

(iii)  the Hyderabad Tribunal
after considering the decision of Delhi Tribunal (supra) and after
considering the decision of the Apex Court in the case of K. Srinivasan
(supra) had held that tax includes surcharge and cess and accordingly the
entire component of taxes including surcharge and cess shall have to be
reckoned for calculating the MAT credit u/s. 115JAA of the Act;  

(iv) the Hon’ble Apex Court had
in the case referred to supra, had held that meaning of word ‘surcharge’
is nothing but an ‘additional tax’.

It held that this understanding of surcharge
and cess being included as part of the tax gets further sanctified by the
amendment which has been brought in section 234B of the Act in Explanation 1
Clause 5, while defining the expression ‘assessed tax’. Having considered the
language of Explanation 1 to section 234B of the Act it observed that from the
said provisions it could be inferred that the legislature wanted to treat the
payment of entire taxes (including surcharge and cess) eligible for MAT credit
u/s. 115JAA while calculating the interest on ‘assessed tax’ u/s. 234B of the
Act, meaning thereby, the assessed tax shall be determined after reducing the
entire MAT credit u/s. 115JAA of the Act for the purpose of calculating
interest u/s. 234B of the Act. It observed that this is clinching evidence of
the intention of the legislature not to deprive any credit of any payment of
surcharge and cess made by the assessee either in the MAT or under the normal
provisions of the Act. It noted that it is not in dispute that the surcharge
and cess portion was not paid by the assessee along with the tax portion. The
bifurcation of the total payment of taxes by way of tax, surcharge and cess is
only for the administrative convenience of the Union of India in order to know
the purpose for which the said portion of amounts are to be utilised for their
intended purposes. Hence, the bifurcation is only for utilisation aspect and
does not change the character of payment in the form of taxes from the angle of
the assessee. As far as assessee is concerned, it had simply discharged the
statutory dues comprising of tax, surcharge and cess to the Union of India and
hence if paid in excess, would be eligible for either refund or adjustment as
contemplated u/s. 115JAA of the Act. It observed that if the version of the
CIT(A) is to be accepted, then it would result in an situation wherein if the
assessee is entitled for refund, he would not be entitled for refund on the
surcharge and cess portion. This cannot be the intention of the legislature and
it is already well settled that the tax is to be collected only to the extent
as authorised by law in terms of Article 265 of the Constitution and the
department cannot be unjustly enriched with the surcharge and cess portion of
the amounts actually paid by the assessee. It held that the reliance placed on
behalf of the assessee on the decision of Hyderabad Tribunal is well founded
and squarely applies to resolve the dispute in the present case.

The Tribunal allowed this ground of appeal
filed by the assessee.