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MAT doesn’t include surcharge and education cess, Hence No Credit

Written By Admin on Sunday, 2 September 2012 | Sunday, September 02, 2012

- TAXMANN

IT : Since only income-tax is paid under the provisions of section 115JB, the MAT credit under section 115JAA shall be restricted to income-tax only and would not to be extended to surcharge and education cess

FACTS

• The assessee-company claimed MAT credit under section 115JAA in respect of tax paid, surcharge, education cess and secondary & higher education cess ("cess");

• Under section 143(1) intimation the assessee was not allowed to claim the MAT credit in respect of surcharge and cess;

• On appeal, the CIT(A) rejected assessee's appeal on the reasoning that section 115JAA allows credit for the income-tax only, and does not include surcharge and cess as per section 2(43). Further, wherever required the legislation has provided that income-tax shall be increased by amount of surcharge and cess;

• On further appeal to the Tribunal, the assessee argued that, in view of Explanation 2 to section 115JB, the definition of tax includes surcharge and cess, which is applicable to all provisions of MAT as contained in Chapter-XIIB.

• The revenue argued that the section 115JAA refers only to income-tax, and further the intimation under section 143(1) is computer generated, wherein the calculations are done automatically through software.

HELD
The Tribunal held in favour of revenue as under:

• Section 115JB does not specify that the income-tax shall be increased by amount of surcharge and cess;

• Wherever Statute has intended that income-tax shall include surcharge and cess, it has specifically provided so like it has provided in Explanation 2 to section 115JB;

• In Form 29B, which is filed along with return of income where MAT is applicable, at Point No. 14 it is stated that the amount of income-tax payable by the assessee would be 15% of book profits, and it does not provide for levy of surcharge and cess;

• Thus, MAT payable under section 115JB only includes income-tax and not surcharge and cess;

• In view of above, if only income-tax is paid under the provisions of section 115JB, the entitlement to tax credit under section 115JAA would be for income-tax only and not surcharge and cess;

• The Explanation 2 to section 115JB was inserted to clarify the meaning of 'tax' as used in Explanation 1 to section 115JB with respect to calculation of book profit, which cannot be extended to section 115JAA of the Act.

• Therefore, the order of the CIT(A) was upheld. - [2012] 25 taxmann.com 1 (Delhi - Trib.)
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