2008 (5) TMI 454 - AT - Income Tax

Summary

Issues:
1. Allowance of credits under section 115JAA of the Income-tax Act, 1961 for taxes paid under KVSS 1998.
2. Allowance of credit of taxes paid under Minimum Alternate Tax (MAT) for a period of five years though paid under KVSS.

Issue 1:
The appeal concerned the allowance of credits under section 115JAA of the Income-tax Act, 1961 for taxes paid under the Kar Vivad Samadhan Scheme, 1998 (KVSS). The assessee, engaged in exporting computer software technical services, filed its return for the assessment year 1997-98 claiming deduction under section 80HHE. The income was determined under section 115JA, resulting in a demand. The assessee opted for KVSS, paying the tax demand and contended that the tax paid should be carried forward and set off against tax liability under section 115JAA. The CIT(A) allowed the credit, but the revenue disputed, arguing that tax under KVSS cannot be treated as regular income tax. The Tribunal held that the assessee, having paid tax under section 115JA, is entitled to the benefit of section 115JAA, rejecting the revenue's argument.

Issue 2:
The second issue revolved around the allowance of credit for taxes paid under MAT for five years, even if paid under KVSS. The assessee claimed entitlement to MAT Credit under section 115JAA for taxes paid by opting under KVSS. The CIT(A) directed the Assessing Officer to allow the credit for taxes paid under KVSS for five assessment years. The revenue contended that KVSS is a separate scheme, barring the benefit of section 115JAA. However, the Tribunal held that the income determined under KVSS falls under section 115JAA, following precedents and highlighting that KVSS does not affect the liability to any tax. Citing judgments affirming this interpretation, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to allow credits under section 115JAA for taxes paid under KVSS and MAT for a period of five years, as the income determined under KVSS falls under the purview of section 115JAA. The Tribunal emphasized that opting for KVSS does not deprive the assessee of the benefit of section 115JAA, as clarified by legal precedents.