2009 (4) TMI 53 - HC - Income Tax

Whether MAT credit is to be set off against from the tax payable before setting off the TDS and advance tax paid - Whether MAT Credit can be given priority of set off against tax payable - Whether the interest u/s 234B and 234C had to be calculated after giving the MAT credit against the tax payable on the basis of normal computation held that 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 - held that the credit u/s 115JAA should be given effect to before charging of interest u/s 234A, 234B and 234C - held that revenue cannot rely on the Form-I to say that the MAT credit should be given only after tax and interest

Summary

Issues Involved:
1. Interpretation of MAT credit set off against tax payable.
2. Calculation of interest u/s 234B and 234C after giving MAT credit.
3. Priority of MAT credit set off against tax payable contrary to Form 1.

Analysis:

Issue 1 - Interpretation of MAT credit set off against tax payable:
The High Court considered the appeal against the order of the Income Tax Appellate Tribunal regarding the set off of MAT credit against tax payable. The questions of law raised included whether MAT credit should be set off before tax deducted at source and advance tax paid, and if MAT credit can be given priority contrary to the scheme of Form 1. The Division Bench previously ruled in favor of the assessee, emphasizing that MAT credit should be given effect before charging interest under Sections 234A, 234B, and 234C. The Court concurred with the Delhi High Court's decision on this matter, stating that the intention is to give tax credit to tax and not to tax and interest.

Issue 2 - Calculation of interest u/s 234B and 234C after giving MAT credit:
Regarding the calculation of interest u/s 234B and 234C after giving MAT credit against tax payable based on normal computation, the Division Bench held that the revenue cannot rely on Form 1 to determine the order of priority of adjustment of TDS, advance Tax, and MAT credit under Section 115JAA. The Court emphasized that Form 1 cannot go beyond the provisions of the Act and that the MAT credit should be given effect before charging interest under Sections 234B and 234C. Consequently, the Court answered questions 2 and 3 in favor of the assessee and against the Revenue.

Issue 3 - Priority of MAT credit set off against tax payable contrary to Form 1:
The Court reiterated that the intention of the legislature is to provide tax credit to tax and not to tax and interest. It emphasized that Form 1 cannot dictate the order of priority of adjustment of TDS, advance Tax, and MAT credit under Section 115JAA, which goes against the provisions of the Act. The Court found that the Tribunal's order was in accordance with the law and did not warrant any interference. Consequently, all questions of law were answered against the revenue in favor of the assessee, leading to the dismissal of the appeals based on the Division Bench's judgment.

This comprehensive analysis highlights the High Court's detailed examination of the issues related to MAT credit set off against tax payable and the calculation of interest, ultimately ruling in favor of the assessee based on the interpretation of relevant legal provisions and precedents.