Commissioner of
Income Tax, Chennai Vs Tulsyan NEC Ltd. ...
With
Civil Appeal
Nos.10680-81/2010 (@ S.L.P. (C) Nos. 29672-73/09),
Civil Appeal
No.10682/2010 (@ S.L.P. (C) No. 27584/09),
Civil Appeal
No.10683/2010 (@ S.L.P. (C) No. 29674/09),
Civil Appeal
No.10684/2010 (@ S.L.P. (C) No. 29675/09),
Civil Appeal
No.10685/2010 (@ S.L.P. (C) No. 25691/09),
Civil Appeal
No.10686/2010 (@ S.L.P. (C) No. 25850/09),
Civil Appeal
No.10687/2010 (@ S.L.P. (C) No. 26330/09),
Civil Appeal
No.10688/2010 (@ S.L.P. (C) No. 26523/09),
Civil Appeal
No.10689/2010 (@ S.L.P. (C) No. 27353/09),
Civil Appeal
No.10690/2010 (@ S.L.P. (C) No. 30207/09),
Civil Appeal
No.10691/2010 (@ S.L.P. (C) No. 30209/09),
Civil Appeal
No.10692/2010 (@ S.L.P. (C) No. 30212/09),
Civil Appeal No.10693/2010
(@ S.L.P. (C) No. 30235/09),
Civil Appeal
No.10694/2010 (@ S.L.P. (C) No. 30217/09),
Civil Appeal
No.10695/2010 (@ S.L.P. (C) No. 30214/09),
Civil Appeal
No.10696/2010 (@ S.L.P. (C) No. 30213/09),
Civil Appeal
Nos.10697-98/2010 (@ S.L.P. (C) Nos. 30237-38/09),
Civil Appeal
Nos.10699-10700/2010 (@ S.L.P. (C) Nos. 30240-41/09),
Civil Appeal
No.10701/2010 (@ S.L.P. (C) No. 30242/09),
Civil Appeal
No.10702/2010 (@ S.L.P. (C) No. 32044/09),
Civil Appeal
No.10703/2010 (@ S.L.P. (C) No. 32045/09),
Civil Appeal
No.10704/2010 (@ S.L.P. (C) No. 31396/09),
Civil Appeal
No.10705/2010 (@ S.L.P. (C) No. 31782/09),
Civil Appeal
No.10706/2010 (@ S.L.P. (C) No. 31812/09),
Civil Appeal
No.10708/2010 (@ S.L.P. (C) No. 26265/09),
Civil Appeal
No.10709/2010 (@ S.L.P. (C) No. 30854/09),
Civil Appeal
No.10710/2010 (@ S.L.P. (C) No. 30254/09),
Civil Appeal No.10711/2010
(@ S.L.P. (C) No. 31785/09),
Civil Appeal No.10712/2010
(@ S.L.P. (C) No. 31786/09),
Civil Appeal No.10713/2010
(@ S.L.P. (C) No. 31787/09),
Civil Appeal No.10714/2010
(@ S.L.P. (C) No. 33764/09),
Civil Appeal No.10715/2010
(@ S.L.P. (C) No. 33991/09),
Civil Appeal No.10716/2010
(@ S.L.P. (C) No. 33744/09),
Civil Appeal No.10717/2010
(@ S.L.P. (C) No. 33747/09),
Civil Appeal No.10718/2010
(@ S.L.P. (C) No. 33748/09),
Civil Appeal No.10719/2010
(@ S.L.P. (C) No. 33148/09),
Civil Appeal No.10720/2010
(@ S.L.P. (C) No. 34742/09),
Civil Appeal No.10721/2010
(@ S.L.P. (C) No. 34743/09),
Civil Appeal No.10722/2010
(@ S.L.P. (C) No. 34744/09),
Civil Appeal No.10723/2010
(@ S.L.P. (C) No. 34740/09),
Civil Appeal No.10724/2010
(@ S.L.P. (C) No. 34133/09),
Civil Appeal No.10725/2010
(@ S.L.P. (C) No. 35671/09),
Civil Appeal No.10726/2010
(@ S.L.P. (C) No. 35598/09),
Civil Appeal No.10727/2010
(@ S.L.P. (C) No. 1149/10),
Civil Appeal No.10728/2010
(@ S.L.P. (C) No. 668/10),
Civil Appeal Nos.10729-30/2010
(@ S.L.P. (C) Nos. 1152-53/10),
Civil Appeal No.10731/2010
(@ S.L.P. (C) No. 1130/10),
Civil Appeal No.10732/2010
(@ S.L.P. (C) No. 666/10),
Civil Appeal No.10733/2010
(@ S.L.P. (C) No. 642/10),
Civil Appeal No.10734/2010
(@ S.L.P. (C) No. 1702/10),
Civil Appeal No.10735/2010
(@ S.L.P. (C) No. 2416/10),
Civil Appeal No.10736/2010
(@ S.L.P. (C) No. 2971/10),
Civil Appeal No.10737/2010
(@ S.L.P. (C) No. 2969/10),
Civil Appeal No.10738/2010
(@ S.L.P. (C) No. 4542/10),
Civil Appeal No.10739/2010
(@ S.L.P. (C) No. 5435/10),
Civil Appeal No.10740/2010
(@ S.L.P. (C) No. 31394/09),
Civil Appeal Nos.10745-46/2010
(@ S.L.P. (C) Nos. 8601-02/10),
Civil Appeal No.10747/2010
(@ S.L.P. (C) No. 8998/10),
Civil Appeal No.10748/2010
(@ S.L.P. (C) No. 12310/10),
Civil Appeal No.10749/2010
(@ S.L.P. (C) No. 13052/10),
Civil Appeal No.10750/2010
(@ S.L.P. (C) No. 13053/10),
Civil Appeal No.10751/2010
(@ S.L.P. (C) No. 9078/10),
Civil Appeal No.10752/2010
(@ S.L.P. (C) No. 17875/10),
Civil Appeal Nos.10753-55/2010
(@ S.L.P. (C) Nos. 20258-60/10),
Civil Appeal No.10756/2010
(@ S.L.P. (C) No. 22722/10),
Civil Appeal No.10757/2010
(@ S.L.P. (C) No. 23576/10),
Civil Appeal No.10758/2010
(@ S.L.P. (C) No. 30780 /10),
Civil Appeal
No.10759/2010 (@ S.L.P. (C) No. 31601/10) and
Civil Appeal
No.10760/2010 (@ S.L.P. (C) No. 638/10),
JUDGMENT
S. H. KAPADIA, CJI
1.
Leave
granted.
2.
The
issue involved in this batch of civil appeals, by special leave, filed by the
Department relates to the question whether MAT credit admissible in terms of
Section 115JAA has to be set off against the tax payable (assessed tax) before calculating
interest under Sections 234A, B and C of the Income Tax Act, 1961 (the Act).
3.
At
the outset, it may be stated that there is no dispute in regard to eligibility
of the assessee for set off of tax paid under Section 115JA. The dispute is
only in regard to priority of adjustment for the MAT credit.
4.
To
answer the above, we set here in below the provisions of Sections 115JA and
115JAA, which read as under:
"Deemed income
relating to certain companies. 115JA. (1) Notwithstanding anything contained in
any other provisions of this Act, where in the case of an assessee, being a
company, the total income, as computed under this Act in respect of any
previous year relevant to the assessment year commencing on or 4after the 1st
day of April, 1997 but before the 1st day of April, 2001 (hereafter in this
section referred to as the relevant previous year) is less than thirty per cent
of its book profit, the total income of such assessee chargeable to tax for the
relevant previous year shall be deemed to be an amount equal to thirty per cent
of such book profit.(2) Every assessee, being a company, shall, for the purposes
of this section prepare its profit and loss account for the relevant previous
year in accordance with the provisions of Parts II and III of Schedule VI to the
Companies Act, 1956(1 of 1956) :Provided that while preparing profit and loss
account, the depreciation shall be calculated on the same method and rates
which have been adopted for calculating the depreciation for the purpose of preparing
the profit and loss account laid before the company at its annual general
meeting in accordance with the provisions of section 210 of the Companies Act,
1956 (1 of 1956) :
Provided further that
where a company has adopted or adopts the financial year under the Companies
Act,1956 (1 of 1956), which is different from the previous year under the Act,
the method and rates for calculation of depreciation shall correspond to the method
and rates which have been adopted for calculating the depreciation for such
financial year or part of such financial year falling within the relevant previous
year. Explanation.--For the purposes of this section, "book profit"
means the net profit as shown in the profit and loss account for the relevant
previous year prepared under sub-section (2), as increased by-- 5(a) the amount
of income-tax paid or payable, and the provision there for; or(b) the amounts
carried to any reserves by whatever name called; or(c) the amount or amounts
set aside to provisions made for meeting liabilities, other than ascertained
liabilities; or(d) the amount by way of provision for losses of subsidiary
companies; or(e) the amount or amounts of dividends paid or proposed; or(f) the
amount or amounts of expenditure relatable to any income to which any of the
provisions of Chapter III applies; if any amount referred to in clauses (a) to
(f) is debited to the profit and loss account, and as reduced by,--(i) the
amount withdrawn from any reserves or provisions if any such amount is credited
to the profit and loss account :Provided that, where this section is applicable
to an assessee in any previous year (including the relevant previous year), the
amount withdrawn from reserves created or provisions made in a previous year
relevant to the assessment year commencing on or after the 1stday of April,
1997 but ending before the 1st day of April, 2001 shall not be reduced from the
book profit unless the book profit of such year has been increased by those
reserves or provisions (out of which the said amount was withdrawn) under this
Explanation; or 6(ii) the amount of income to which any of the provisions of Chapter
III applies, if any such amount is credited to the profit and loss account; or(iii)
the amount of loss brought forward or unabsorbed depreciation, whichever is
less as per books of account. Explanation.—
For the purposes of
this clause, the loses hall not include depreciation; or(iv) the amount of
profits derived by an industrial undertaking from the business of generation
orgeneration and distribution of power; or(v) the amount of profits derived by
an industrial undertaking located in an industrially backward State or district
as referred to in sub-section (4) and sub-section (5) of section 80-IB, for the
assessment years such industrial undertaking is eligible to claim a deduction
of hundred per cent of the profits and gains under sub-section (4) or
sub-section (5) of section 80-IB; or(vi) the amount of profits derived by an
industrial undertaking from the business of developing, maintaining and
operating any infrastructure facility as defined as defined in the Explanation
to sub-section (4)of section 80-IA and subject to fulfilling the conditions laid
down in that sub-section; or(vii) the amount of profits of sick industrial
company for the assessment year commencing from the assessment year relevant to
the previous year in which the said company has become a sick industrial
company under sub-section (1) of section 17 of the Sick Industrial Companies
(Special Provisions) Act, 1985 (1 of 1986)and ending with the assessment year
during which the entire net worth of such company becomes equal to or exceeds
the accumulated losses. 7 Explanation.—
For the purposes of
this clause, "net worth" shall have the meaning assigned to it in
clause(ga) of sub-section (1) of section 3 of the Sick Industrial Companies
(Special Provisions) Act, 1985 (1 of 1986); or(viii) the amount of profits
eligible for deduction under section 80HHC, computed under clause (a), (b) or
(c) of sub-section (3) or sub-section (3A), as the case may be, of that
section, and subject to the conditions specified in sub-sections (4) and (4A)
of that section;(ix) the amount of profits eligible for deduction under section
80HHE, computed under sub-section (3) of that section.(3) Nothing contained in
sub-section (1) shall affect the determination of the amounts in relation to
the relevant previous year to be carried forward to the sub sequent year or
years under the provisions of sub-section (2) of section 32 or sub-section (3)
of section 32A or clause (ii)of sub-section (1) of section 72 or section 73 or
section74 or sub-section (3) of section 74A.(4) Save as otherwise provided in
this section, all other provisions of this Act shall apply to every assessee, being
a company, mentioned in this section.
Tax credit in respect
of tax paid on deemed income relating to certain companies.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.(2)
The tax credit to be allowed under sub-section (1)shall be the difference of
the tax paid for any 8assessment year under sub-section (1) of section 115JAand
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).(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-section (4) and sub-section (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).(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 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 or section115JB, 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, section147, section 154, section
155, sub-section (4) of section245D, section 250, section 254, section 260,
section262, 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."
5.
As
per provisions of Section 115JA, a company is liable to pay tax on 30% of book
profits, if the income computed under normal provisions of the Act is less than
30% of the book profits. Thus, the assessee is required to compute income
chargeable to tax on two alternative basis - (i) income computed under normal
provisions of the Act and (ii) 30% of book profits as disclosed in the P &
L Account prepared in accordance with Parts II and III of Schedule VI to the Companies
Act, 1956, subject to the adjustments specified in the Explanation to Section
115JA. The higher of the two computations is deemed to be the "total
income" chargeable to tax and tax is payable accordingly. Thus, Section
115JAenacts a deeming fiction by deeming 30% of book profits to be the
"total income" chargeable to tax. The amount of tax paid under
Section 115JA is held to be a "tax" payable under the Act, as defined
in Section 2(43). [See National Thermal Power Corpn. Ltd. v. Union of India 192
ITR 187 (Delhi)]
6.
The
relevant provisions under Section 115JAA of the Act, introduced by Finance Act,
1997 w.e.f. 1.4.1997, i.e., applicable for assessment years 1997-98 and onwards,
governing the carry forward and set off of credit available in respect of tax
paid under Section 115JA, show that when tax is paid by the assessee under
Section 115JA, then the assessee becomes entitled to claim credit of such tax
in the manner prescribed. Such a right gets crystallized no sooner the tax is paid
by the assessee under Section 115JA, as per the return of income filed by that
assessee for a previous year (say, year one). [See Section 115JAA(1)]. The said
credit gets limited to the tax difference between tax payable on book profits
and tax payable on income computed under the normal provisions of the Act [see
Section 115JAA(2)] in year one. Such credit is, however, allowable for a period
of five succeeding assessment ears, immediately succeeding the assessment year
in which the credit becomes available (say years 2 to 6) [See
Section115JAA(3)]. However,
MAT credit is
available for set off against the tax payable in succeeding years where the tax
payable on income computed under the normal provisions of the Act exceeds the
tax payable on book profits computed for that year[See Section 115JAA(4),(5)]. At
this stage, we would like to emphasize the word "allowed" in all the
sub-sections of Section115JAA. The statute envisages under Section 115JAA
"credit in respect of tax so paid" because the entire tax is not an automatic
credit but has to be calculated in accordance with sub-section (2) of Section
115JAA. Sub-section (4) to Section11 5JAA allows "tax credit" in the
year tax becomes payable. Thus, the amount of set off is limited to the tax
payable on the income computed under the normal provisions of the Act less the
tax payable on book profits for that year. [Refer Section115JAA(4) and Section
115JAA(5)]. The tax credit to be allowed is the function of the tax payable on
book profits and the tax payable on income computed under the normal provisions
of the Act, in year one. As stated, the difference of the two is the amount of
tax credit to be allowed.
The A.O. may vary the
amount of tax credit to be allowed pursuant to completion of summary assessment
under Section 143(1) or regular assessment under Section 143(3) for year one,
in terms of Section 115JAA(6). As a consequence of such variation the tax
credit to be allowed for year one is liable to change. With every change in the
amount of tax payable on book profits and/ or tax payable on income computed
under the normal provisions of the Act, the tax credit to be allowed would have
to be changed by the A.O. by passing consequential orders, deriving authority
from Section 115JAA(6) of the Act. Thus, the tax credit allowable can be set
off by the assessee while computing advance tax/ self-assessment tax payable
for years2 to 6 limited to the difference between the tax payable on income
computed under the normal provisions and tax payable on book profits in each of
those years, as per assessee's own computation. Although the right to avail tax
credit gets crystallized in year one, on payment of tax under Section115JA and
the set off thereof follows statutorily, the amount of credit available and the
amount of set off to be actually allowed as in all cases of deductions/
allowances under Sections 30-37, is fluid/ inchoate and subject to final
determination only on adjudication of assessment either under Section 143(1) or
under Section 143(3). The fact that the amount of tax credit to be allowed or
to be set off is not frozen and is ambulatory, does not take away/ destroy the
right of the assessee to the amount of tax credit.
7.
In
the present batch of cases, it is not in dispute that the assessees are
entitled to set off of MAT credit carried forward from year one. In fact, the
A.O. did set off the MAT credit while calculating the amount of tax payable for
years 2 to 6. However, while calculating interest payable under Sections 234B
and C, the A.O. computed the shortfall of the tax payable without taking into
account the set off of MATcredit.
8.
The
effect of the stand of the Department is as follows:
In Titan's case, the
assessee files its returns for assessment year 2001-02. The total income
declared in the return was`23,48,68,460/-. The assessee claimed a refund of`10,60,394/-.
The A.O. initially processed the return under Section 143(1) and accepted it. Subsequently,
the A.O. rectified the alleged mistake and charged interest under Section 234B
of `1,10,67,561/-. The A.O. further charged interest under Section 234C of
`40,18,170/-. This levy of interest took place because the A.O. took the view
that credit of the tax paid under Section 115JA(1) was to be given in terms of Section
115JAA only after computing the interest to be charged under Sections 234B and
C.
The result was that
claim for refund in favour of the assessee of an amount of `10,60,394/-having
regard to the pre-paid taxes got converted into the demand by Department of
`1,50,58,707/- after giving full credit for the prepaid taxes only because the
A.O. gave a set off of MAT credit in the sum of `5,40,15,189/- not against the
total tax payable of `7,75,03,252/- but against the total tax payable of
`7,75,03,252/- minus TDS and Advance Tax paid by the assessee resulting in the
figure of `5,39,88,163/- being the balance tax payable by the assessee plus
interest under Section 234B and under Section 234C in all amounting to 14`6,90,73,894/-
from which the A.O. deducts the MAT credit of`5,40,15,189/-. Consequently,
under the computation of the assessee no tax was payable whereas under the
computation, assessee became liable to pay tax of `1,50,58,707/-. This conversion
from refund to demand took place because while computing interest under
Sections 234B and C the A.O. computed the shortfall of the tax payable without
taking into account the set off of MAT credit. For sake of clarity, we set out
the above facts in the case of M/s. Titan Industries Limited in the form of a
Chart:
|
Particulars
|
Return
of Income
|
Order
|
|
Business
income
|
163,486,461
|
163,486,461
|
|
Capital
gains-short
|
14,937
|
14,937
|
|
Capital
gains-long
|
90,780,066
|
90,780,066
|
|
Gross
Total Income
|
254,281,464
|
254,281,464
|
|
Less
deduction
|
|
|
|
under
Chapter VI-A
|
|
|
|
80G-Donation
|
1,500,000
|
1,500,000
|
|
80HHC-profits
|
6,590,600
|
6,590,600
|
|
80-1A
new industrial unit
|
11,322,409
|
11,322,409
|
|
Net
Income
|
234,868,455
|
234,868,455
|
|
Tax
payable
|
68,586,949
|
68,586,949
|
|
Surcharge
on the above at 13%
|
8,916,303
|
8,916,303
|
|
Total
tax payable
|
77,503,252
|
77,503,252
|
|
Less:
Set-off of MAT credit
|
54,015,189
|
|
|
Less:
TDS
|
5,231,557
|
4,198,191
|
|
Less:
Advance Tax
|
19,316,900
|
19,316,900
|
|
Balance
tax payable
|
1,060,394
|
53,988,163
|
|
Interest
under 234B
|
|
11,067,561
|
|
Interest
under 234C
|
|
4,018,170
|
|
Less:
Set-off of MAT credit
|
|
54,015,189
|
|
Net
tax payable
|
1,060,394
|
15,058,707
|
9.
We
have discussed hereinabove the scheme of Section115JA(1) and Section 115JAA.
The entire scheme of Sections115JA(1) and 115JAA shows that if an assessee is
entitled to atax credit as a consequence of the assessee making payment of tax
under Section 115JA(1) in the year one, then, the set off of such tax credit
follows as a matter of course once the conditions mentioned in Section 115JAA
are fulfilled and the grant of such credit is not dependent upon determination
by the A.O. save and except that the ultimate amount of tax credit to be
allowed will be dependent upon the final determination of the total income for
the first assessment year. There is no provision under Section 115JAA which
postpones the right of the assessee to claim set off to the determination of
the total income by the A.O. in the first assessment year. Entitlement/right to
claim set off is different from the quantum/quantification of that right.
Entitlement of MAT credit
is not dependent upon any action taken by the Department. However, quantum of
tax credit will depend upon the assessment framed by the A.O. Thus, the right
to set off arises as a result of the payment of tax under Section 115JA (1)although
quantification of that right depends upon the ultimate determination of total
income for the first assessment year. Further, an assessee has a right to take
into account the set off even while estimating its liability to pay advance tax
on the" current income" in accordance with the provisions of Chapter XVII-C.
Although Section 209(1)(d) does not make any specific provision either before
or after the amendments carried out by the Finance Act, 2006 to the effect that
an assessee is entitled to set off the tax credit that would be available in
terms of Section 115JAA(1) while computing the quantum of advance tax that is
to be paid it must follow that an assessee would been titled to do so otherwise
it results in absurdity, viz, that an assessee pays advance tax on the footing
that it is not entitled(when in fact it is so entitled as discussed above) to
the credit and thereafter claims a refund of such advance tax paid as a consequence
of the set off. Moreover, when an A.O. makes an intimation under Section 143(1)
he accepts the return filed by the assessee to which the A.O. may make an
adjustment and consequently makes a demand or refund. Section 143(1)provides
that
where a return is
made under Section 139 and if any tax or interest is found due on the basis of
such return after adjustment of any TDS, any advance tax, any tax paid on self
assessment and any amount paid otherwise by way of tax or interest, then,
without prejudice to provisions of sub-section(2), an intimation will be sent
to the assessee specifying the amount so payable and such intimation shall be
deemed to be a notice of demand under Section 156 and all the provisions of the
Act shall apply thereto. This section itself makes it clear that whilst the
A.O. determines the tax payable he has to give credit for all taxes paid either
by way of deduction at source, advance tax, self assessment tax or tax paid
otherwise which would include or which cannot exclude tax credit under Section
115JAA(1). However, the question before us is of priority of adjustment for the
MAT credit. In this connection, it is important to bear in mind that the credit
allowed is the excess of the normal tax liability over MAT liability in the subsequent
years. In this connection the following illustration on MAT credit be seen:
|
Particulars
|
Amount
Rs.
|
|
Year
1
|
|
|
115JB
liability
|
1,600
|
|
Normal
tax liability
|
400
|
|
Credit
which can be
|
1200
|
|
carried
forward – I
|
|
|
Year
2
|
|
|
115JB
liability (A)
|
600
|
|
Normal
tax liability (B)
|
1400
|
|
|
|
|
Tax
liability =
|
1400
|
|
(B)
[since B is higher than A]
|
800
|
|
MAT
credit available for set off in Year 2 [(A) - (B)] – II Net tax liability for
Year 2 [B-II]
|
600
|
|
MAT
credit to be carried Forward [I-II]
|
400
|
[See The Chartered
Accountant, Vol. 57, No. 09, March, 2009, page 1584]
10.
The
issue which crops up for decision is - how should the advance tax be calculated
when the Company has MATcredit?
11.
To
answer, we need to look at Section 234B. Under that section, "assessed
tax" means the tax on the total income determined under Section 143(1) or
on regular assessment under Section 143(3) as reduced by the amount of tax
deducted or collected at source in accordance with the provisions of Chapter
XVII on any income which is subject to such deduction or collection and which
is taken into account in computing such total income. The definition, thus, at
the relevant time excluded MAT credit for arriving at assessed tax. This led to
immense hardship. The position which emerged was that due to omission on one
hand MAT credit was available for set off for five years under Section 115JAA
but the same was not available for set off while calculating advance tax. This dichotomy
was more spelt out because Section 115JAA did not provide for payment of
interest on the MAT credit. To avoid this situation, Parliament amended
Explanation 1 to Section 234Bby Finance Act, 2006 w.e.f. 1.4.2007 to provide
along with tax deducted or collected at source, MAT credit under Section115JAA
also to be excluded while calculating assessed tax.
12.
From
the above, it is evident that any tax paid in advance/pre-assessed tax paid can
be taken into account in computing the tax payable subject to one caveat, viz,
that where the assessee on the basis of self computation unilaterally claims
set off or MAT credit, the assessee does so at its risk as in case it is
ultimately found that the amount of tax credit availed was not lawfully
available, the assessee would be exposed to levy of interest under Section 234B
on the shortfall in the payment of advance tax. We reiterate that we cannot accept
the case of the Department because it would mean that even if the assessee does
not have to pay advance tax in the current year, because of his brought forward
MAT credit balance, he would nevertheless be required to pay advance tax, and
if he fails, interest under Section 234B would be chargeable. The consequence
of adopting the case of the Department would mean that MAT credit would lapse
after five succeeding assessment years under Section 115JAA(3); that no interest
would be payable on such credit by the Government under the proviso to Section
115JAA(2) and that the assessee would be liable to pay interest under Sections
234B and C on the shortfall in the payment of advance tax despite existence of MAT
credit standing to the account of the assessee. Thus, despite MAT credit
standing to the account of the assessee, the liability of the assessee gets
increased instead of it gettingreduced.
13.
Lastly,
it is immaterial that the relevant form prescribed under Income Tax Rules, at
the relevant time (i.e. before 1.4.2007), provided for set off of MAT credit
balance against the amount of tax plus interest i.e. after the computation of
interest under Section 234B. This was directly contrary to a plain reading of
Section 115JAA(4). Further, a form prescribed under the rules can never have
any effect on the interpretation or operation of the parent statute.14. For the
above reasons, there is no merit in the civil appeals filed by the Department
and the same are dismissed with no order as to costs.
....................................CJI
(S. H. Kapadia)
...........................................J.
(K.S. Panicker Radhakrishnan)
...........................................J.
(Swatanter Kumar)
New
Delhi;
December
16, 2010
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