2008 (2) TMI 910 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are related to the adjustment of Minimum Alternate Tax (MAT) credit against tax payable, the interpretation of section 115JAA of the Income-tax Act, and the order of priority of adjustment between Tax Deducted at Source (TDS), advance tax, and MAT credit.

Adjustment of MAT Credit Against Tax Payable:
The appellant, engaged in the business of printing and publishing, filed a return of income for the assessment year 2001-2002 claiming a refund of tax. The Assessing Officer initially calculated the refund without setting off the MAT credit from the tax payable, resulting in a lower refund amount. The appellant's application under section 154 of the Act to rectify this error was rejected by the Assessing Officer. The CIT (Appeals) directed the Assessing Officer to accept the appellant's claim and calculate the refund considering the MAT credit. The Tribunal upheld the CIT (Appeals) decision, emphasizing that MAT credit should be adjusted against the tax payable before TDS is deducted. The Tribunal referred to previous decisions supporting this interpretation and concluded that the MAT credit must be set off first against the tax payable, with TDS deducted only from the remaining tax payable amount.

Interpretation of Section 115JAA:
Section 115JAA of the Income-tax Act provides for tax credit in respect of tax paid on deemed income for certain companies. The Tribunal highlighted the provisions of this section, particularly sub-section (4), which specifies that the tax credit shall be allowed set off in a year when tax becomes payable on the total income computed in accordance with the normal provisions of the Act. The Tribunal clarified that the MAT credit should be adjusted before TDS deduction, as per the legislative intent and previous Tribunal decisions. The Tribunal affirmed that the MAT credit must be set off against the tax payable before any TDS deduction, in line with the statutory provisions of section 115JAA.

Order of Priority of Adjustment:
The Tribunal also addressed the issue of the order of priority of adjustment between TDS, advance tax, and MAT credit. Referring to previous Tribunal decisions, the Tribunal emphasized that MAT credit should be given priority in set off against the tax payable before considering TDS deduction. The Tribunal rejected the order of priority prescribed in the return form, emphasizing that the MAT credit adjustment should precede any TDS deduction. The Tribunal's decision aligned with previous Tribunal rulings, emphasizing the correct order of adjustment between MAT credit and TDS, as mandated by the statutory provisions of section 115JAA.