2009 (4) TMI 43 - HC - Income Tax

MAT credit - 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 by applying ratio of decision of Division Bench in the case of M/S. CHEMPLAST SANMAR LIMITED, held that assessee is entitled to adjust the MAT credit before charging interest u/s 234B and 234C Whether the MAT credit can be given priority of set off against tax payable, contrary to the scheme of Schedule G of Form 1 AND Whether 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 held that Rule 12(1)(a) and Form-I cannot go beyond the provisions of the Act. Form-I cannot lay down the order of priority of adjustment of TDS, advance Tax, MAT credit under Section 115JAA which is contrary to the provisions of the Act appeal of revenue is dismissed

Issues: Appeal against order of Income Tax Appellate Tribunal regarding MAT credit adjustment, priority of set off, calculation of interest under sections 234B and 234C.

Analysis:
1. MAT Credit Adjustment: The appeal involved a dispute over the adjustment of Minimum Alternate Tax (MAT) credit before setting off Tax Deducted at Source (TDS) and Advance tax paid. The Tribunal held that MAT credit had to be adjusted before calculating interest under sections 234B and 234C. The Division Bench, in a similar case, supported this view by emphasizing that the credit under Section 115JAA should be given effect to before charging interest under the relevant sections. The Court rejected the revenue's argument based on Form-I, stating that the intention of the legislature was to give tax credit to tax only, not tax and interest. Therefore, the MAT credit was to be given priority over interest, as per the provisions of the Act.

2. Priority of Set Off: The issue of whether MAT credit could be given priority of set off against tax payable contrary to the scheme of Schedule G of Form 1 was also addressed. The Division Bench clarified that the intention of the legislature was clear in providing tax credit to tax only, not tax and interest. It emphasized that Form-I could not dictate the order of priority of adjustment of TDS, Advance Tax, and MAT credit, which was contrary to the statutory provisions. Therefore, the Court upheld the Tribunal's decision to allow MAT credit before charging interest under sections 234B and 234C, in line with the legislative intent.

3. Calculation of Interest: The final issue revolved around the calculation of interest under sections 234B and 234C after giving effect to the MAT credit against the tax payable based on normal computation. The Division Bench reiterated that the MAT credit under Section 115JAA should be given effect to before charging interest under the mentioned sections. It emphasized that Rule 12(1)(a) and Form-I could not override the provisions of the Act, and the Tribunal's order aligning with the law did not warrant any interference. Consequently, the Court answered all questions of law against the revenue and in favor of the assessee, dismissing the appeal based on the precedent set by the Division Bench in a similar case.

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