2009 (4) TMI 42 - HC - Income Tax

Whether the Tribunal was right in holding that MAT credit is to be set off from the tax payable before setting off the Tax deducted at Source and Advance tax paid - Whether the MAT credit can be given priority of set off against tax payable, contrary to the scheme of Schedule G of Form 1 - Whether the interest under Section 234 B and 234 C had to be calculated after giving the MAT credit against the tax payable on the basis of normal computation held that all the questions are answered against the revenue and in favour of assessee

Summary

Issues:
Interpretation of MAT credit set off against tax payable, priority of MAT credit set off, calculation of interest under Section 234B and 234C after MAT credit adjustment.

Interpretation of MAT Credit Set Off Against Tax Payable:
The case involved an appeal by the revenue against the order of the Income Tax Appellate Tribunal regarding MAT credit set off for the assessment year 2002-03. The Commissioner of Income Tax (Appeals) held that MAT credit is the assessee's credit available for adjustment against tax due in subsequent years. The Tribunal allowed the appeal in favor of the assessee based on a previous order. The revenue raised questions regarding the order, specifically whether MAT credit should be set off before Tax Deducted at Source (TDS) and Advance tax, and whether MAT credit can take priority over the scheme of Schedule G of Form 1. The Division Bench considered similar issues in a previous case and ruled in favor of the assessee, stating that MAT credit should be given effect before charging interest under Section 234B and 234C. The Bench emphasized that the intention of the legislature is to give tax credit to tax, not tax and interest, and that Form-I cannot dictate the order of priority of adjustments contrary to the provisions of the Act.

Priority of MAT Credit Set Off:
Regarding the priority of MAT credit set off against tax payable, the Division Bench held that the intention of the legislature is to provide tax credit to tax only, not tax and interest. The Bench emphasized that Form-I cannot determine the order of priority of adjustments, such as TDS, Advance Tax, and MAT credit under Section 115JAA, which goes against the provisions of the Act. The Tribunal's decision was deemed in accordance with the law, and the questions regarding the priority of MAT credit set off were answered in favor of the assessee and against the revenue.

Calculation of Interest Under Section 234B and 234C After MAT Credit Adjustment:
In addressing the calculation of interest under Section 234B and 234C after MAT credit adjustment, the Division Bench reiterated that the credit under Section 115JAA should be given effect before charging interest under the mentioned sections. The Bench referenced a Delhi High Court judgment and aligned with its reasoning, stating that the revenue failed to provide compelling reasons to hold a contrary view. Consequently, the questions related to the calculation of interest after MAT credit adjustment were answered in favor of the assessee and against the revenue.

Conclusion:
The judgment upheld the assessee's position on all questions of law, aligning with the Division Bench's previous ruling. The appeal by the revenue was dismissed based on the consistent interpretation and application of the relevant provisions and legal principles.