2012 (12) TMI 1192 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal erred in law in setting aside the orders of the lower authorities and directing to consider the credit of MAT before calculating interest u/s 234B of the Act.
2. Whether the Tribunal erred in law by holding that the amendment of s. 234B w.e.f. 1st April, 2007 is retrospective in nature.

Summary:

Issue 1: MAT Credit Consideration Before Calculating Interest u/s 234B

The Tribunal directed the AO to reconsider the credit of MAT before calculating the interest for default in payment of advance taxes. The Tribunal relied on the decisions of the Madras High Court in CIT vs. Roots Multiclean Ltd. and the Bombay High Court in CIT vs. Apar Industries Ltd., which held that MAT credit should be set off before charging interest under ss. 234B and 234C of the IT Act, 1961. The Tribunal's decision was based on the interpretation that the provisions of s. 115JAA should be given effect before charging interest under ss. 234A, 234B, and 234C. The Tribunal's order was in line with the reasoning provided by the Delhi High Court and upheld by the Supreme Court in CIT vs. Tulsyan NEC Ltd.

Issue 2: Retrospective Nature of Amendment to s. 234B

The Tribunal held that the amendment to s. 234B by the Finance Act of 2006, effective from 1st April, 2007, was clarificatory and thus retrospective in nature. The Bombay High Court in CIT vs. Apar Industries Ltd. observed that the amendment was intended to remove ambiguity in the interpretation of s. 234B and should be regarded as clarificatory. The amendment aimed to ensure that MAT credit under s. 115JAA is considered while calculating interest u/s 234B, even for periods prior to the amendment. This view was supported by the Supreme Court in CIT vs. Tulsyan NEC Ltd., which emphasized that the amendment was to alleviate hardship and should be applied retrospectively.

In conclusion, the High Court dismissed the tax appeal, affirming that the Tribunal was correct in its interpretation and application of the law, and no further consideration of the proposed questions was necessary. The rule stands discharged.