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2011 (5) TMI 565 - HC - Income TaxMAT credit - Scrutiny - Interest u/s 244A - Held that - Proviso to sub-Section (2) of Section 115JAA of the Act will have no application to the facts situation prevailing in the instant case. This proviso will have limited application only in those cases where tax credit is allowed to be set off under sub-Section (1) of Section 115JAA of the Act. On the other hand Section 244A of the Act deals with altogether different situation. Once take into account the interpretation given in Tulsyan NEC Ltd. (2010 (12) TMI 23 - Supreme Court of India) viz. the MAT credit is available on the very first day and such a right gets crystallized no sooner the tax is payable to the assessee under Section 115JA of the Act which is to be adjusted first then what becomes refundable after adjustment of MAT credit is the excess advance tax which was paid by the assessee. On such advance tax which becomes refundable interest under Section 244A of the Act has to be calculated and paid - Decided in the favour of the assessee
Issues Involved:
1. Whether ITAT was correct in law in allowing interest u/s 244A of the Act to the assessee if the advance tax paid by the assessee was in excess of MAT credit available to the assessee? Issue-wise Detailed Analysis: 1. Background and Computation of Tax: The respondent/assessee filed a return for the Assessment Year 1998-99, declaring an income of Rs. 153.97 crores, with a tax payable of Rs. 53,89,06,594/-. The assessee paid advance tax of Rs. 55.65 crores and claimed a TDS credit of Rs. 29,86,273/-. The total amount paid was Rs. 55,94,86,273/-. The AO processed the return under Section 143(1)(a) and charged interest under Section 234C, resulting in a total tax and interest payable of Rs. 54,44,59,250/-. 2. Assessment and MAT Credit Adjustment: Upon scrutiny, the AO recalculated the total income under normal provisions at Rs. 147,14,95,301/-. The income assessable under MAT provisions was less than the normal provisions, allowing MAT credit of Rs. 9,61,45,549/- for the Assessment Year 1997-98 to be adjusted in 1998-99 under Section 115JAA. The AO rectified the order for 1998-99 under Section 154, allowing the MAT credit and recalculating the tax but did not recalibrate the interest under Section 234C. 3. Refund and Interest under Section 244A: The AO worked out a refund of Rs. 9,61,45,549/- but did not allow interest under Section 244A, citing proviso to sub-Section (2) of Section 115JAA. The CIT (A) ruled in favor of the assessee, stating that the refund was due to excess advance tax paid, thus attracting Section 244A for interest on the refund. The CIT (A) also directed the AO to recalculate the interest under Section 234C. 4. Tribunal and Appeal: The Revenue appealed to the Tribunal, which upheld the CIT (A)'s decision. The Revenue then appealed to the High Court under Section 260A, challenging the Tribunal's order. 5. Revenue's Argument: The Revenue contended that MAT credit for earlier years became available only when the appeal for 1998-99 was filed, requiring the assessee to deposit advance tax as per normal provisions. Therefore, the refund was not due to advance tax, and Section 244A was not applicable. They relied on proviso to sub-Section (2) of Section 115JAA. 6. Court's Analysis and Judgment: The Court referred to the judgment in Jindal Exports, which held that MAT credit is credit for tax paid under Section 115JA and should be set off against tax payable on total income. The Court emphasized that the MAT credit is available from the first date of the previous year, and advance tax liability should be calculated after adjusting MAT credit. This interpretation aligns with the Supreme Court's ruling in Commissioner of Income Tax Vs. Tulsyan NEC Ltd., which clarified that MAT credit should be set off before calculating interest under Sections 234A, 234B, and 234C. 7. Conclusion: The Court concluded that the MAT credit is available for adjustment from the first day of the previous year, and the refund due to excess advance tax paid attracts interest under Section 244A. The proviso to sub-Section (2) of Section 115JAA does not apply in this context. The Court dismissed the Revenue's appeal and ruled in favor of the assessee, affirming the entitlement to interest under Section 244A on the refund of advance tax. Final Judgment: The Court answered the question in favor of the assessee and against the Revenue, dismissing the appeal and affirming the assessee's entitlement to interest under Section 244A on the refund of excess advance tax paid.
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