2015 (1) TMI 973 - HC - Income Tax

MAT credit - set off from the tax payable before setting off the tax deducted at source and advance tax paid - Held that - 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 the MAT credit, the assessee does so at its risk as in case it is ultimately found that the amount of tax credit availed of 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 the 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 234C on the shortfall in the payment of advance tax despite existence of the MAT credit standing to the account of the assessee. Thus, despite the MAT credit standing to the account of the assessee, the liability of the assessee gets increased instead of it getting reduced. - Decided in favour of assesee.

Summary

Issues:
1. Treatment of amenities charges for central air conditioning
2. Treatment of receipt for allotment of car park
3. Set off of MAT credit before tax deductions
4. Priority of MAT credit set off against tax payable

Analysis:

Issue 1: Treatment of amenities charges for central air conditioning
The case involved the question of whether charges paid for central air conditioning of shops should be considered as an advance or a trading receipt. The Tribunal held that the charges should be treated as an advance, not as a trading receipt. The High Court agreed with the Tribunal's decision, citing precedent and relevant legal provisions.

Issue 2: Treatment of receipt for allotment of car park
Another issue was the treatment of receipt for the allotment of a car park, whether it should be considered a returnable deposit. The Tribunal, following its previous orders, ruled in favor of the assessee. The High Court upheld the Tribunal's decision, emphasizing consistency in rulings and legal interpretations.

Issue 3: Set off of MAT credit before tax deductions
The matter of setting off Minimum Alternative Tax (MAT) credit before tax deductions was raised. The Tribunal, in line with previous cases and legal principles, allowed the set off of MAT credit before calculating interest under Sections 234B and 234C. The High Court concurred with the Tribunal's decision, highlighting relevant legal provisions and the rationale behind the set off.

Issue 4: Priority of MAT credit set off against tax payable
Lastly, the question of whether MAT credit can be given priority of set off against tax payable contrary to the scheme of Schedule G of Form 1 was considered. The High Court referred to a Supreme Court judgment to support its decision in favor of the assessee, emphasizing the legislative intent behind the relevant provisions and the potential hardships faced by taxpayers if MAT credit was not considered in setting off tax liabilities.

In conclusion, the High Court ruled in favor of the assessee on all substantial issues raised in the appeal, providing detailed legal analysis and referencing relevant case law and statutory provisions to support its decision.