MAT Credit Under section 115JAA

[PANKAJ JAIN]

Dear All,

Can MAT credit be claimed against tax before surcharge and education cess?

Best Regards,

[bhaveshformals]

In ITR 6 The MAT Credit is taken before Surcharge and the Cess.

[vipinsurana]

Can anyone tells whether unutilised MAT credit u/s 115JAA can be used by Transferor company under the scheme of Amalgamation.
Vipin Surana
ACA

[CA.BHUPENDRASHAH]

ITR1-6 has so many syntax errors too ???  ???

[PANKAJ JAIN]

What to do if an Assessee has Business Loss computed under section 67A, as the ITR 6 does not provide for the same... ???

[sivaiah G]

No, in my opinion MAT credit cannot be claimed before surcharge and education cess because, MAT credit is allowable from the tax liability only. Tax includes surcharge as per the Supreme Court decision reported in 83 ITR 346. Therefore, first we have to calculate surcharge and education cess and then MAT credit follows.

[bhuvana.raman72]

There is no specific provision in the Income tax Act which permits transfer of MAT credit from the Transferor Company to the Transferee Company in the event of Amalgamation, in my opinion. Can some expert clarify if my view is incorrect?

[pawansingla]

2010-TIOL-667-ITAT-MUM

IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'C', MUMBAI

ITA. No. 5869/Mum/2007
Assessment year : 2000-01

M/s CLASSIC SHARES & STOCK BROKING SERVICES LTD
RADHA BHAVAN, 1ST FLOOR,
121, NAGINDAS MASTER ROAD,
MUMBAI-400 023
PAN: AABCS4255R

Vs

ASST COMMISSIONER OF INCOME TAX
CENTRAL CIRCLE 40,
AAYAKAR BHAVAN, M K MARG,
MUMBAI-400 020

D K Agarwal, JM and R K Panda, AM

Dated: July 23, 2010

Appellant Rep by: Mr Rajiv Khandelwal
Respondent Rep by: Mr P Daniel

Income Tax - Sections 115JAA, 154, 250 - Whether the surcharge has to
be calculated before giving MAT credit on tax payable.

The assessment was completed u/s. 143(3) which was revised u/s. 250
for giving effect to the order of the CIT(A). On further appeal, the
ITAT gave certain relief and the AO gave effect to the same finally.
The assessee subsequently filed a petition u/s. 154 on the ground that
while computing the tax liability credit for tax paid on Rs.18,03,214
u/s. 115JA for the A.Y. 1999-2000 should be given before calculating
the surcharge The AO rejected the contention of the assessee. CIT(A)
upheld the action of the AO.

Appeal was filed in the Tribunal where counsel for the assessee
submitted that while calculating the surcharge for A.Y. 2000-01 the AO
should have first given MAT credit on the tax payable and thereafter
should have calculated the surcharge at the rate of 10% on the tax
payable. He submitted that in ITR Form 6 credit u/s. 115JAA is first
reduced from gross tax payable followed by a rebate u/s. 88E and
surcharge is levied on the balance tax payable and referred to the
decision of the Supreme Court in the case of CIT v. Smt. P.K.
Kochemmu Amma Peroke. He Further submitted that  subsections (3) and
(4) of section 115JAA, which are similar to the provisions of section
71B, 72 and 74 which state that brought forward loss under a
particular head can be set off only against the income under the same
head. On the same analogy brought forward tax credit u/s. 115JAA has
to be set off at a stage prior to levy of surcharge. The DR,
supporting the order of the CIT(A) submitted that there is a lot of
difference between MAT and tax rebate. He submitted that the assessee
is bound to pay income-tax and surcharge thereon and thereafter he is
entitled to credit for MAT. He submitted that MAT is not a rebate and
it is like any other tax such as advance tax and self assessment tax.
He submitted that the surcharge has to be calculated as tax payable
before giving MAT credit.

Having heard the parties the Tribunal has held that,

++ the words used are tax credit in respect of tax paid on deemed
income relating to certain companies. The tax and the surcharge
thereon has to be calculated first and thereafter tax paid such as
advance tax, self assessment tax and tax paid under MAT have to be
deducted.

Assessee's Appeal dismissed

ORDER

Per: R K Panda:

This appeal filed by the assessee is directed against the order dated
29th August, 2007 of the CIT(A), Central-VII, Mumbai relating to
assessment year 2000-01.

2. This appeal was earlier dismissed by the Tribunal for want of
prosecution. Subsequent the Tribunal vide order dated 30th April, 2010
recalled the order and hence this is a recalled matter.

3. The learned counsel for the assessee at the time of hearing did not
press grounds of appeal No. 2 for which the learned DR has no
objection. Accordingly the same is dismissed.

4. In grounds of appeal No. 1, the assessee has challenged the order
of the CIT(A) in upholding the action of the Assessing Officer in
calculating surcharge on Income-tax before MAT credit for the A.Y.
1999-2000.

5. Facts of the case, in brief, are that the assessment in the instant
case was completed u/s. 143(3) on 31 st March, 2004 which was revised
u/s. 250 for giving effect to the order of the CIT(A). On further
appeal, the ITAT gave certain relief and the Assessing Officer gave
effect to the same finally on 31st January, 2007. The assessee
subsequently filed a petition u/s. 154 on the ground that while
computing the tax liability credit for tax paid at Rs.18,03,214 u/s.
115JA for the A.Y. 1999-2000 should be given before calculating the
surcharge. However, the Assessing Officer rejected the contention of
the assessee.

6.   Before CIT(A) it was submitted that the Assessing Officer worked
out the total income at Rs.4,70,77,660 on which tax payable has been
worked out at Rs.1,08,73,580 and surcharge of Rs.10,87,358 has been
worked out on it. The Assessing Officer thereafter has given MAT
credit for A.Y. 1999-2000 amounting to Rs.18.03 lakhs. It was
submitted that there was no surcharge payable for A.Y. 1999-2000. The
Assessing Officer should have worked out the surcharge on the net
amount after giving credit for MAT payment.

7. However, the CIT(A) was not satisfied with the explanation given by
the assessee and upheld the action of the Assessing Officer. Aggrieved
with such order of the CIT(A), the assessee is in appeal before us.

8. The learned counsel for the assessee submitted that while
calculating the surcharge for A.Y. 2000-01 the Assessing Officer
should have first given MAT credit of Rs.18,03,214 from the tax
payable at Rs.1,08,73,580 and thereafter should have calculated the
surcharge at the rate of 10% on the tax payable at Rs.90,70,366.
Therefore, according to the assessee the surcharge comes to Rs.
9,07,037 whereas according to the Assessing Officer the surcharge has
been calculated at Rs.10,87,358. He submitted that in ITR Form 6
credit u/s. 115JAA is first reduced from gross tax payable followed by
a rebate u/s. 88E and surcharge is levied on the balance tax payable.
Referring to the decision of the Hon'ble Supreme Court in the case of
CIT v. Smt. P.K.  Kochemmu Amma Peroke (1980) 125 ITR 624, he
submitted that the Hon'ble Court in the said decision has laid down
the principle that forms prescribed by the Department cannot be
ignored and the interpretation laws contained therein reflect the
executive opinion on the matter. Referring to provisions of section
2(43) of the Act, he submitted that "tax" means income-tax chargeable
under the provisions of this Act. Referring to section 4 of the Income-
tax Act with section 2(1) of Chapter II of the Finance Act, 2000 and
section 2(11) of the Finance Act, 2008 and section 2(12) of Finance
Act, 2008, he submitted that "income-tax" and "surcharge" are
different and distinct and surcharge is not included within the
meaning of income-tax. Referring to provisions of section 115JAA of
the Finance Act, 2000, he submitted that income-tax is a pre-rebate
and pre-surcharge figure and it should be understood as not the
ultimate amount payable to the Government but as an amount prior to
the computation of rebate and relief. Referring to the words used in
subsections (3) and (4) of section 115JAA, he submitted that the words
used are "setoff of brought forward tax credit" as against "deduction
of brought forward tax credit" which are similar to the provisions of
section 71B, 72 and 74 of the Act which state that brought forward
loss under a particular head can be set off only against the income
under the same head. On the same analogy brought forward tax credit u/
s. 115JAA has to be set off at a stage prior to levy of surcharge. In
his alternate contention, he submitted that when two views are
possible, the view favourable to the assessee has to be followed.

9. The learned DR, on the other hand, while supporting the order of
the CIT(A) submitted that there is a lot of difference between MAT and
tax rebate. He submitted that the assessee is bound to pay income-tax
and surcharge thereon and thereafter he is entitled to credit for MAT.
Refuting the submissions of the learned counsel for the assessee that
MAT credit is equivalent to rebate, he submitted that comparison
should be between comparables. He submitted that MAT is not a rebate
and it is like any other tax such as "advance tax" and "self
assessment tax". He submitted that if the plea of the learned counsel
for the assessee is accepted then in that case advance tax paid last
year has also to be set off from the current year's income and then
the surcharge has to be calculated which is not correct as per law. He
submitted that the surcharge has to be calculated as tax payable
before giving MAT credit. As regards the contention of the learned
counsel for the assessee that when the issue is debatable and two
views are possible, the view favourable to the assessee has to be
adopted, he submitted that the same is possibly only when the law is
ambiguous and two interpretations are possible. However, in the
instant case neither the law is ambiguous nor any two interpretations
are possible. Therefore, this plea of the learned counsel for the
assessee also cannot be accepted. He accordingly submitted that the
CIT(A) was justified in upholding the action of the Assessing Officer
in giving MAT credit after levy of the surcharge on tax payable.

10. We have considered the rival submissions made by both the sides,
perused the orders of the Assessing Officer and the CIT(A) and the
Paper Book filed on behalf of the assessee. The only dispute in the
instant appeal is as to whether the surcharge has to be calculated
before giving MAT credit or after giving MAT credit from the tax
payable. In our opinion, the answer is that the surcharge has to be
calculated on the tax payable before giving MAT credit.

11. We find the provisions of section 115JAA relating to tax credit in
respect of tax paid on deemed income relating to certain companies
reads as under:

"115JAA. (1) Where any amount of tax is paid under sub-section (1) of
section 115JA by an assessee being a company for any assessment year,
then, credit in respect of tax so paid shall be allowed to him in
accordance with the provisions of this section.

[(1A) Where any amount of tax is paid under sub-section (1) of section
115JB by an assessee, being a company for the assessment year
commencing on the 1st day of April, 2006 and any subsequent assessment
year, then, credit in respect of tax so paid shall be allowed to him
in accordance with the provisions of this section.]

[(2) The tax credit to be allowed under sub-section (1) shall be the
difference of the tax paid for any assessment year under sub-section
(1) of section 115JA and the amount of tax payable by the assessee on
his total income computed in accordance with the other provisions of
this Act:

Provided that no interest shall be payable on the tax credit allowed
under sub-section (1).

(2A) The tax credit to be allowed under sub-section (1A) shall be the
difference of the tax paid for any assessment year under sub-section
(1) of section 115JB and the amount of tax payable by the assessee on
his total income computed in accordance with the other provisions of
this Act:

Provided that no interest shall be payable on the tax credit allowed
under sub-section (1A).

(3) The amount of tax credit determined under sub-section (2) shall be
carried forward and set off in accordance with the provisions of sub-
sections (4) and (5) but such carry forward shall not be allowed
beyond the fifth assessment year immediately succeeding the assessment
year in which tax credit becomes allowable under sub-section (1).

(3A) The amount of tax credit determined under sub-section

(2A) shall be carried forward and set off in accordance with the
provisions of sub-sections (4) and (5) but such carry forward shall
not be allowed beyond the 15a [seventh] assessment year immediately
succeeding the assessment year in which tax credit becomes allowable
under sub-section (1A).]

(4) The tax credit shall be allowed set-off in a year when tax becomes
payable on the total income computed in accordance with the provisions
of this Act other than section 115JA 16 [or section 115JB , as the
case may be].

(5) Set off in respect of brought forward tax credit shall be allowed
for any assessment year to the extent of the difference between the
tax on his total income and the tax which would have been payable
under the provisions of sub-section (1) of section 115JA 16 [or
section 115JB, as the case may be] for that assessment year.

(6) Where as a result of an order under sub-section (1) or sub-section
(3) of section 143 , section 144 , section 147 , section 154 , section
155 , sub-section (4) of section 245D , section 250, section 254 ,
section 260 , section 262 , section 263 or section 264 the amount of
tax payable under this Act is reduced or increased, as the case may
be, the amount of tax credit allowed under this section shall also be
increased or reduced accordingly.]"

12. From the above it is clear that the words used are "tax credit" in
respect of tax paid on deemed income relating to certain companies.
Therefore, tax credit, in our opinion, takes the character of tax such
as advance tax or self-assessment tax and has to be reduced from the
tax and surcharge payable. In other words, the tax and the surcharge
thereon has to be calculated first and thereafter tax paid such as
advance tax, self assessment tax and tax paid under MAT have to be
deducted. We do not find much force in the submission of the learned
counsel for the assessee that MAT is like tax rebate u/s. 88E of the
Act. In this view of the matter, we do not find any infirmity in the
order of the CIT(A) and accordingly uphold the same. The ground raised
by the assessee is, therefore, dismissed.

13. In the result, the appeal filed by the assessee is dismissed.

(Pronounced in the open court on 23.7.2010.)