2010 (2) TMI 844 - AT - Income Tax

Interest on Refund - whether the refund given to the assessee is out of MAT credit or out of advance tax Held that - effect of MAT credit u/s 115JAA has to be first considered and the assessee is liable to pay only the balance amount as advance tax and if the assessee paid lesser amount of advance tax as compared to this amount of advance tax payable by the assessee after considering MAT credit u/s 115JAA, the assessee is liable to pay interest u/s 234B and 234C and if such payment of advance tax by the assessee is in excess then this amount of advance tax payable by the assessee then the refund is on account of excess payment of advance tax which is eligible for interest u/s 244A, refund granted to the assessee is not out of MAT credit available to the assessee but is out of excess amount of advance tax paid by the assessee. There is no dispute on this aspect that if the refund is on account of excess payment of advance tax, interest u/s 244A is allowable to the assessee as per clause (a) of sub section (1) of section 244A, appeal of the revenue is dismissed.

Summary

Issues:
- Interpretation of provisions of Income Tax Act, 1961 regarding calculation of interest u/s 244A on refund
- Charging of interest u/s 234C after adjusting Minimum Alternate Tax (MAT) credit

Analysis:

Issue 1: Interpretation of provisions of Income Tax Act, 1961 regarding calculation of interest u/s 244A on refund

The case involved an appeal by the revenue against the order of Ld CIT(A) regarding the calculation of interest u/s 244A on a refund issued to the assessee. The Assessing Officer allowed the assessee tax credit u/s 115JAA of the IT Act, but held that no interest u/s 244A was to be allowed on this amount. The dispute centered on whether the refund was due to MAT credit allowed u/s 115JAA and if it fell within the ambit of section 244A. The Ld CIT(A) ruled in favor of the assessee, stating that the MAT credit available before the due date of advance tax installment represented advance tax and the refund was in the nature of excess advance tax refundable, thus entitling the assessee to interest u/s 244A. The Tribunal upheld the Ld CIT(A)'s decision, citing the judgment of the Hon'ble Delhi High Court in a similar case, which clarified that MAT credit falls within the meaning of "Advance Tax."

Issue 2: Charging of interest u/s 234C after adjusting Minimum Alternate Tax (MAT) credit

Another aspect of the case involved the charging of interest u/s 234C after adjusting MAT credit. The Hon'ble Delhi High Court's judgment in a related case clarified that for charging interest u/s 234C, the tax credit available to the assessee u/s 115JAA must be reduced from the liability for advance tax payment. The Tribunal, in line with this judgment, directed that the interest u/s 234C should be computed after setting off the tax credit available to the assessee. The Tribunal dismissed the revenue's appeal, upholding the Ld CIT(A)'s decision in favor of the assessee based on the legal interpretations provided by the Hon'ble Delhi High Court.

In conclusion, the Tribunal's judgment favored the assessee on both issues, relying on the legal interpretations provided by the Hon'ble Delhi High Court in similar cases. The appeal of the revenue was dismissed, and the orders of the Ld CIT(A) were upheld, emphasizing the importance of considering MAT credit in the calculation of interest and refunds under the Income Tax Act, 1961.