Principal Commissioner Of Income Tax-6, Chennai-34 v. M/S.scope International Pvt. Ltd.,Chennai-34

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 19.6.2019 CORAM : THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMAND THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN TAX CASE APPEAL NO.369 OF 2019 Principal Commissioner of Income Tax-6, Chennai-34....Appellant Vs M/s.Scope International Pvt. Ltd.,Chennai-34. ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961against the order dated 16.11.2018 in ITA No.200/Chny/2018 onthe file of the Income Tax Appellate Tribunal Chennai 'B' Benchfor the assessment year 2009-10 as against the order of theCommissioner of Income Tax, (Appeals)-15 Chennai -34 made in ITANo.439/2013-14/CIT A-15 dated 28.09.2017 as against the order ofthe Deputy Commissioner of Income Tax Company Circle VI(1),Chennai - 600 034 made in Assessment order for the year 2009 -10,dated 31.3.2018 as against the order of the Joint Commissioner,Income Tax, Transfer pricing Officer III, Chennai made inCr.No.S.307/TPO-111/A.Y.2009-10, dated 03.10.2012. For Appellant : Mr.T.R.Senthilkumar, SSC assisted by Mrs.K.G.Usha RaniFor Respondent: Mr.SP.Chidambaram Judgment was delivered by T.S.SIVAGNANAM,J This appeal, filed by the Revenue under Section 260A of theIncome Tax Act, 1961 (for short, the Act), is directed againstthe order dated 16.11.2018 passed by the Income Tax AppellateTribunal, Chennai 'B' Bench (for brevity, the Tribunal) in ITANo.200/Chny/2018 for the assessment year 2009-10. 2. The Revenue has filed this appeal by raising thefollowing substantial questions of law : “i. Whether the Appellate Tribunal iscorrect in law in directing the inclusion ofsurcharge and cess in MAT credit underSection 115JAA of the Income Tax Act ? And https://hcservices.ecourts.gov.in/hcservices/ ii. Whether the Appellate Tribunal iscorrect in placing reliance on the decisionof the Hon'ble Supreme Court in the case ofCIT Vs. K.Srinivasan [reported in (1972) 83ITR 346], which was rendered in context toSection 2 of the Act whereas Section 115JAAof the Act was inserted subsequently withretrospective effect from 01.4.1997 ?” 3. We have heard Mr.T.R.Senthilkumar, learned SeniorStanding Counsel assisted by Mrs.K.G.Usha Rani, learned StandingCounsel for the Revenue and Mr.SP.Chidambaram, learned counselaccepting notice for the respondent. 4. The short issue, which falls for consideration in thisappeal, is as to whether the order passed by the Commissioner ofIncome Tax (Appeals)-15, Chennai-34 [for short, the CIT(A)], inITA.No.439/2013-14 dated 28.9.2017 as confirmed by the Tribunalin the impugned order requires interference and as to whetherany substantial question of law arises for consideration. 5. A reference under Section 92CA(1) of the Act was receivedfrom the Assistant Commissioner of Income Tax Act, CompanyCircle VI(2), Chennai. Accordingly, a notice under Section 92CA(2) of the Act along with questionnaire was issued to theassessee on 18.11.2011 calling for details of documents andinformation. The assessee submitted their explanation and theirauthorized representative appeared before the Assessing Officerand the case was discussed. The assessee is a wholly ownedsubsidiary of M/s.Standard Chartered Bank, UK and is engaged inthe business of providing back end support to certain branchesof the bank spread across the globe including India. TheTransfer Pricing Officer passed an order on 03.10.2012, based onwhich, the Assessing Officer completed the assessment vide orderdated 31.3.2013. As against the order passed by the AssessingOfficer, the assessee preferred an appeal to the CIT(A). In thisappeal, we are concerned only about the issue relating to MATcredit not being given on surcharge and cess. 6. Before the CIT(A), the assessee contended that the taxliability discharged during the assessment year 2009-10 wasbased on Section 115JB of the Act, as the tax calculated underthe MAT provisions was higher than the tax calculated as pernormal provisions of income tax and that this resulted in a MATcredit to the extent the tax liability under the MAT provisionshigher than the tax liability under normal tax provisions to becarried forward for adjustment during the subsequent assessmentyears. It was further contended that while calculating the MATcredit, the Assessing Officer considered only the tax amountwithout considering the surcharge and cess under normal tax provisions and MAT provisions and that this resulted in reducedamount of MAT credit. 7. In support of their contention, the assessee placedreliance upon the decision of the Hon'ble Supreme Court in thecase of CIT Vs. K.Srinivasan [reported in (1972) 83 ITR 346]. Itwas further contended that while giving effect to the carriedforward MAT credit in the tax calculation for the assessmentyear 2012-13, the Assessing Officer had correctly consideredtax, surcharge and cess. 8. The CIT(A), after taking note of the submissions made bythe assessee, found the same to be prima facie acceptable andfurther found that the Assessing Officer did not consider theappellant's submission. The Assessing Officer was directed toverify the appellant's submission with reference to assessmentrecord. The Assessing Officer was further directed to allow theappellant's claim for the MAT credit, if the assessee'submission was factually correct. Accordingly, the appeal filedby the assessee stood partly allowed. 9. The Revenue challenged the order passed by the CIT(A)before the Tribunal and it was contended before the Tribunalthat the CIT(A) had no power to direct the Assessing Officer toverify. The Tribunal took note of the decision of the Hon'bleSupreme Court in the case of K.Srinivasan and held that inexercise of its power, it is entitled to direct the AssessingOfficer to verify the claim of the assesse and thereafter allowthe claim with regard to MAT credit. Accordingly, the Tribunaldeclined to interfere with the order passed by the CIT(A). 10. The Revenue is before us contending that surcharge andcess should not be included and that the decision in the case ofK.Srinivasan would not be applicable to the facts of this case.Thus, the argument advanced before us is that both the CIT(A) aswell as the Tribunal ought not to have followed the decision inthe case of K.Srinivasan, which was rendered in the context ofSection 2 of the Act whereas Section 11JAA of the Act wasinserted subsequently with retrospective effect from 01.4.1997. 11. Section 2(43) of the Act defines 'tax' in relation tothe assessment year commencing on the 1st day of April, 1965 andany subsequent assessment year to mean income-tax chargeableunder the provisions of this Act and in relation to any otherassessment year income-tax and super-tax chargeable under theprovisions of this Act prior to the aforesaid date and inrelation to the assessment year commencing on the 1st day ofApril, 2006, and any subsequent assessment year includes thefringe benefit tax payable under Section 115WA of the Act. 11. Section 2(43) of the Act defines 'tax' in relation tothe assessment year commencing on the 1st day of April, 1965 andany subsequent assessment year to mean income-tax chargeableunder the provisions of this Act and in relation to any otherassessment year income-tax and super-tax chargeable under theprovisions of this Act prior to the aforesaid date and inrelation to the assessment year commencing on the 1st day ofApril, 2006, and any subsequent assessment year includes thefringe benefit tax payable under Section 115WA of the Act. 12. Explanation (2)(iii) and (iv) to Section 115JB of theAct states that for the purposes of Clause (a) of Explanation 1to Section 115JB of the Act, the amount of income tax shallinclude surcharge as levied by the Central Acts from time totime and education cess on income-tax, if any, as levied by theCentral Acts from time to time. A useful reference may be madeto Section 2 of the Finance Act and it would suffice to refer toSub-Section (1) and Sub-Section (2), which state that subject tothe provisions of Sub-Sections (2) and (3), income-tax shall becharged at the rates specified in Part I of the First Scheduleand such tax shall be increased by a surcharge for purposes ofthe Union calculated in either case in the manner providedtherein. 13. The Hon'ble Supreme Court, in the case of K.Srinivasan,took note of the legislative history of the Finance Act as alsothe practice to indicate that the term "income tax" as employedin Section 2 of the Finance Act, whichincludes surcharge asalso the special and the additional surcharge whenever providedwhich are also surcharges within the meaning of Article 271 ofThe Constitution. It was pointed out that the word 'surcharge'has been used to either increase the rates of income tax andsuper tax or to increase these taxes. It was also pointed outthat according to Article 271, notwithstanding anything inArticles 269 and 270, the Parliament may, at any time, increaseany of the duties or taxes referred to in those Articles by asurcharge for the purpose of the Union and the whole proceeds ofany such surcharge shall form part of the Consolidated Fund ofIndia. The Hon'ble Supreme Court took note of the distinctionmade by the High Court in the case and held that the distinctionmade by the High Court that the surcharges are levied only underthe Finance Actand income tax under the Act may not hold good.The Hon'ble Supreme Court explained the term 'surcharge' to meanas the charge in addition to or subject to an additional orextra charge. 14. In our considered view, the decision of the Hon'bleSupreme Court in the case of K.Srinivasan will apply with fullforce to the assessee's case. Furthermore, if we refer to thecircular of the Central Board of Direct Taxes in Circular No.3of 2018 dated 11.7.2018, which fixed the monetary limit forfiling appeals by the Department before the Tribunals, HighCourts and Supreme Court, one gets a fair idea as to what wasthe understanding of the term 'tax' by the Board. If we have alook at paragraph 4 of the said circular, the Board states thatfor the purposes of the said Circular, tax effect shall be taxincluding applicable surcharge and cess. 15. Though the case on hand is not hit by the monetary limitaccording to Mr.T.R.Senthilkumar, learned Senior Standing https://hcservices.ecourts.gov.in/hcservices/ Counsel, yet, on a perusal of the said circular, it is evidentlyclear that consistently, the understanding of the Board was thattax includes applicable surcharge and cess. 16. For the above reasons, we are of the view that theRevenue has not made out any case to interfere with the orderpassed by the Tribunal. As pointed out earlier, in theassessee's own case, for the assessment year 2012-13, relief hasbeen granted to the assessee and there is nothing on record toshow that the said order is either reversed or reopened. Hence,the substantial questions of law raised are answered against theRevenue. 15. Though the case on hand is not hit by the monetary limitaccording to Mr.T.R.Senthilkumar, learned Senior Standing https://hcservices.ecourts.gov.in/hcservices/ Counsel, yet, on a perusal of the said circular, it is evidentlyclear that consistently, the understanding of the Board was thattax includes applicable surcharge and cess. 16. For the above reasons, we are of the view that theRevenue has not made out any case to interfere with the orderpassed by the Tribunal. As pointed out earlier, in theassessee's own case, for the assessment year 2012-13, relief hasbeen granted to the assessee and there is nothing on record toshow that the said order is either reversed or reopened. Hence,the substantial questions of law raised are answered against theRevenue. 17. Accordingly, the above tax case appeal is dismissed. Nocosts. Sd/-Assistant Registrar //True Copy// Sub Assistant RegistrarTo1.The Income Tax Appellate Tribunal, Chennai 'B' Bench2.The Deputy/Assistant Registrar, Income Tax Appellate Tribunal, Chennai Benches.3. The Commissioner of Income tax, (Appeals_ 15, Chennai -34.4. The Deputy Commissioner of Income tax, Company Circle VI(1) Chennai - 34.5. The Joint Commissioner of Income Tax, Transfer Pricing Officer III, Nungambakkam, Chennai - 34.+1cc to Mr.T.R.Senthil Kumar, Advocate, SR.No.50709TCA.No.369 of 2019 Kak(09/09/2019)