Identical Question Was Considered By Us In The Case Ofprincipal Commissioner Of Income Tax-6 v. M/S.scopeinternational Pvt. Ltd., In T.c.a

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYANT.C.A.No.716 of 2018 The Commissioner of Income Tax,Chennai. .. AppellantVersus M/s.Saint Gobain Glass India Limited,Plot No.A-1, Sipcot Industrial ParkSriperumbudur, Kanchipuram District – 602 105PAN : AABCS4338M.. Respondent Prayer:- Tax Case Appeal filed under Section 260-A of the IncomeTax Act, 1961, against the order of the Income Tax AppellateTribunal, Madras 'B' Bench, Chennai dated 31.05.2018 made inI.T.A.No.2549/Mds/2017 relating to the Assessment Year 2011-12against the order of the Commissioner of Income Tax (Appeals)-17, Chennai dated 21/08/2017 made in ITA NO.07/2012-13, againstthe order of the Deputy Commissioner of Income Tax, Large Taxpayers Unit, Chennai dated 10/08/2012 made in U/s 143(1) of theIncome Tax Act for the assessment years 2011-12. [Order of the Court was made by T.S.SIVAGNANAM, J.]This appeal has been filed by the Revenue under Section260 A of the Income Tax Act, 1961 ('the Act' for brevity),challenging the order dated 31.05.2018 passed by the Income TaxAppellate Tribunal, Madras, 'B' Bench ('the Tribunal' forbrevity) Chennai in I.T.A.No.2549/Mds/2017 for the AssessmentYear 2011-12. The appeal was admitted on 18.12.2018 on thefollowing Substantial Questions of Law:“1. Whether the reasoning and finding of theTribunal is right in confirming that MAT credit underSection 115JAA includes surcharge and education cess https://hcservices.ecourts.gov.in/hcservices/ instead of excluding surcharge and education cess?” 2. We have heard M/s.R.Hemalatha, learned Senior Standingcounsel for the appellant / Revenue and Mr.Venkatanarayanan,learned counsel for M/s.Subbaraya Aiyar Padmanabhan, appearingfor the respondent / assessee. 3. Identical question was considered by us in the case ofPrincipal Commissioner of Income Tax-6 Vs. M/s.ScopeInternational Pvt. Ltd., in T.C.A.No.369 of 2019 dated19.06.2019. The operative portion of the judgment reads asfollows: “4. The short issue, which falls forconsideration in this appeal, is as to whether theorder passed by the Commissioner of Income Tax(Appeals)-15, Chennai-34 [for short, the CIT(A)], inITA.No.439/2013-14 dated 28.9.2017 as confirmed by theTribunal in the impugned order requires interferenceand as to whether any substantial question of lawarises for consideration. 5. A reference under Section 92CA(1) of the Actwas received from the Assistant Commissioner of IncomeTax Act, Company Circle VI(2), Chennai. Accordingly, anotice under Section 92CA(2) of the Act along withquestionnaire was issued to the assessee on 18.11.2011calling for details of documents and information. Theassessee submitted their explanation and theirauthorized representative appeared before theAssessing Officer and the case was discussed. Theassessee is a wholly owned subsidiary of M/s.StandardChartered Bank, UK and is engaged in the business ofproviding back end support to certain branches of thebank spread across the globe including India. TheTransfer Pricing Officer passed an order on03.10.2012, based on which, the Assessing Officercompleted the assessment vide order dated 31.3.2013.As against the order passed by the Assessing Officer,the assessee preferred an appeal to the CIT(A). Inthis appeal, we are concerned only about the issuerelating to MAT credit not being given on surchargeand cess. 6. Before the CIT(A), the assessee contendedthat the tax liability discharged during theassessment year 2009-10 was based on Section 115JB ofthe Act, as the tax calculated under the MATprovisions was higher than the tax calculated as pernormal provisions of income tax and that this resultedin a MAT credit to the extent the tax liability underthe MAT provisions higher than the tax liability undernormal tax provisions to be carried forward for 6. Before the CIT(A), the assessee contendedthat the tax liability discharged during theassessment year 2009-10 was based on Section 115JB ofthe Act, as the tax calculated under the MATprovisions was higher than the tax calculated as pernormal provisions of income tax and that this resultedin a MAT credit to the extent the tax liability underthe MAT provisions higher than the tax liability undernormal tax provisions to be carried forward for adjustment during the subsequent assessment years. Itwas further contended that while calculating the MATcredit, the Assessing Officer considered only the taxamount without considering the surcharge and cessunder normal tax provisions and MAT provisions andthat this resulted in reduced amount of MAT credit. 7. In support of their contention, the assesseeplaced reliance upon the decision of the Hon'bleSupreme Court in the case of CIT Vs. K.Srinivasan[reported in (1972) 83 ITR 346]. It was furthercontended that while giving effect to the carriedforward MAT credit in the tax calculation for theassessment year 2012-13, the Assessing Officer hadcorrectly considered tax, surcharge and cess. 8. The CIT(A), after taking note of thesubmissions made by the assessee, found the same to beprima facie acceptable and further found that theAssessing Officer did not consider the appellant'ssubmission. The Assessing Officer was directed toverify the appellant's submission with reference toassessment record. The Assessing Officer was furtherdirected to allow the appellant's claim for the MATcredit, if the assessee' submission was factuallycorrect. Accordingly, the appeal filed by the assesseestood partly allowed. 9. The Revenue challenged the order passed bythe CIT(A) before the Tribunal and it was contendedbefore the Tribunal that the CIT(A) had no power todirect the Assessing Officer to verify. The Tribunaltook note of the decision of the Hon'ble Supreme Courtin the case of K.Srinivasan and held that in exerciseof its power, it is entitled to direct the AssessingOfficer to verify the claim of the assesse andthereafter allow the claim with regard to MAT credit.Accordingly, the Tribunal declined to interfere withthe order passed by the CIT(A). 10. The Revenue is before us contending thatsurcharge and cess should not be included and that thedecision in the case of K.Srinivasan would not beapplicable to the facts of this case. Thus, theargument advanced before us is that both the CIT(A) aswell as the Tribunal ought not to have followed thedecision in the case of K.Srinivasan, which wasrendered in the context of Section 2 of the Actwhereas Section 11JAA of the Act was insertedsubsequently with retrospective effect from 01.4.1997. 11. Section 2(43) of the Act defines 'tax' inrelation to the assessment year commencing on the 1stday of April, 1965 and any subsequent assessment yearto mean income-tax chargeable under the provisions of this Act and in relation to any other assessment yearincome-tax and super-tax chargeable under theprovisions of this Act prior to the aforesaid date andin relation to the assessment year commencing on the1st day of April, 2006, and any subsequent assessmentyear includes the fringe benefit tax payable underSection 115WA of the Act. 11. Section 2(43) of the Act defines 'tax' inrelation to the assessment year commencing on the 1stday of April, 1965 and any subsequent assessment yearto mean income-tax chargeable under the provisions of this Act and in relation to any other assessment yearincome-tax and super-tax chargeable under theprovisions of this Act prior to the aforesaid date andin relation to the assessment year commencing on the1st day of April, 2006, and any subsequent assessmentyear includes the fringe benefit tax payable underSection 115WA of the Act. 12. Explanation (2)(iii) and (iv) to Section115JB of the Act states that for the purposes ofClause (a) of Explanation 1 to Section 115JB of theAct, the amount of income tax shall include surchargeas levied by the Central Acts from time to time andeducation cess on income-tax, if any, as levied by theCentral Acts from time to time. A useful reference maybe made to Section 2 of the Finance Act and it wouldsuffice to refer to Sub-Section (1) and Sub-Section(2), which state that subject to the provisions ofSubSections (2) and (3), income-tax shall be chargedat the rates specified in Part I of the First Scheduleand such tax shall be increased by a surcharge forpurposes of the Union calculated in either case in themanner provided therein. 13. The Hon'ble Supreme Court, in the case ofK.Srinivasan, took note of the legislative history ofthe Finance Act as also the practice to indicate thatthe term "income tax" as employed in Section 2 of theFinance Act, which includes surcharge as also thespecial and the additional surcharge whenever providedwhich are also surcharges within the meaning ofArticle 271 of The Constitution. It was pointed outthat the word 'surcharge' has been used to eitherincrease the rates of income tax and super tax or toincrease these taxes. It was also pointed out thataccording to Article 271, notwithstanding anything inArticles 269 and 270, the Parliament may, at any time,increase any of the duties or taxes referred to inthose Articles by a surcharge for the purpose of theUnion and the whole proceeds of any such surchargeshall form part of the Consolidated Fund of India. TheHon'ble Supreme Court took note of the distinctionmade by the High Court in the case and held that thedistinction made by the High Court that the surchargesare levied only under the Finance Act and income taxunder the Act may not hold good. The Hon'ble SupremeCourt explained the term 'surcharge' to mean as thecharge in addition to or subject to an additional orextra charge. 14. In our considered view, the decision of theHon'ble Supreme Court in the case of K.Srinivasan willapply with full force to the assessee's case. Furthermore, if we refer to the circular of theCentral Board of Direct Taxes in Circular No.3 of 2018dated 11.7.2018, which fixed the monetary limit forfiling appeals by the Department before the Tribunals,High Courts and Supreme Court, one gets a fair idea asto what was the understanding of the term 'tax' by theBoard. If we have a look at paragraph 4 of the saidcircular, the Board states that for the purposes ofthe said Circular, tax effect shall be tax includingapplicable surcharge and cess. 14. In our considered view, the decision of theHon'ble Supreme Court in the case of K.Srinivasan willapply with full force to the assessee's case. Furthermore, if we refer to the circular of theCentral Board of Direct Taxes in Circular No.3 of 2018dated 11.7.2018, which fixed the monetary limit forfiling appeals by the Department before the Tribunals,High Courts and Supreme Court, one gets a fair idea asto what was the understanding of the term 'tax' by theBoard. If we have a look at paragraph 4 of the saidcircular, the Board states that for the purposes ofthe said Circular, tax effect shall be tax includingapplicable surcharge and cess. 15. Though the case on hand is not hit by themonetary limit according to Mr.T.R.Senthilkumar,learned Senior Standing Counsel, yet, on a perusal ofthe said circular, it is evidently clear thatconsistently, the understanding of the Board was thattax includes applicable surcharge and cess. 16. For the above reasons, we are of the viewthat the Revenue has not made out any case tointerfere with the order passed by the Tribunal. Aspointed out earlier, in the assessee's own case, forthe assessment year 2012-13, relief has been grantedto the assessee and there is nothing on record to showthat the said order is either reversed or reopened.Hence, the substantial questions of law raised areanswered against the Revenue. 17. Accordingly, the above tax case appeal isdismissed. No costs.” 4. M/s.R.Hemalatha, learned Senior Standing counselreferred to a decision of the High Court of Calcutta in the caseof Srei Infrastructure Finance Ltd. Vs. Deputy Commissioner ofIncome-tax, Circle-11(2), Kolkata, [2016] 72 taxmann.com 239(Calcutta) 5. In the said decision it was held that the MAT Creditunder Section 115 JAA has brought forward from the earlierorders is to be set off against tax on total income includingsurcharge and education cess instead of adjusting the same fromtax on total income before charging such a surcharge andeducation cess. 6. We find factually the said decision is different andcannot be applied to the facts and circumstances of this case.Furthermore, in the case of M/s.Scope International Pvt. Ltd.,(cited supra), we had followed the decision of the Hon'bleSupreme Court of India in the case of CIT Vs. K.Srinivasan[reported in (1972) 83 ITR 346]. As on date, the decision in thecase of M/s.Scope International Pvt. Ltd., (cited supra)continue to hold the field and therefore, we are inclined tofollow the same. https://hcservices.ecourts.gov.in/hcservices/ 7. Thus, by following the above decision, the Tax CaseAppeal is dismissed and the Substantial Question of Law isanswered against the appellant / Revenue. No costs. Sd/-Assistant Registrar(CS-VII) //True copy//Sub Assistant RegistrarKakTo1.The Income Tax Appellate Tribunal,'B' Bench, Chennai.2. The Commissioner of Income Tax, (Appeals)-17, Chennai.3. The Deputy Commissioner of Income Tax, Large Tax Payers Unit, Chennai.+1cc to Mr.T.Ravikumar, Advocate SR.No.34003+1cc to M/s.Subbaraya Aiyar, Advocate SR.No.33996T.C.A.No.716 of 2018GP(CO)GMY(18/11/2020)