2009 (4) TMI 88 - HC - Income Tax

Whether ITAT was right in holding that for purposes of computation of interest under Section 234B and 234C, tax credit u/s 115JAA has to be first set off against the tax payable and the interest under the said sections have to be computed after taking into consideration the tax credit carried forward u/s 115JAA even though there is no legal sanction for such adjustment u/s 208 to 211, u/s 234B or 234C or under any other provisions of the Act - question of law is answered against the revenue to the effect that the interest under the said two provisions have to be calculated after giving effect to the MAT credit

Summary

Issues:
1. Computation of interest under Sections 234B and 234C in relation to tax credit under Section 115JAA.

Analysis:
The judgment pertains to an appeal by the revenue against an order of the Income Tax Appellate Tribunal related to the assessment year 1998-99. The assessee's total income was initially determined at Rs. 39,83,430, which was reduced to Rs. 31,58,950 by the Commissioner of Income Tax (Appeals). Subsequently, the Assessing Officer issued a rectification order under Section 154 to charge interest under Sections 234B and 234C, adjusting the MAT credit available to the assessee. The Commissioner of Tax (Appeals) directed the assessment officer to recalculate the interest considering the MAT credit. The Tribunal upheld this decision, leading to the revenue's appeal on the issue of interest computation.

The key question raised in the appeal was whether the Tribunal was correct in holding that the tax credit under Section 115JAA must be set off against the tax payable before computing interest under Sections 234B and 234C, despite the absence of a legal provision for such adjustment. The Court, after hearing arguments and reviewing the case record, referred to a previous Division Bench decision where it was held that interest under Sections 234B and 234C should be calculated after considering the MAT credit. As the issue had already been decided against the revenue in a prior judgment, the Court dismissed the appeal, affirming the Tribunal's decision.

In conclusion, the judgment reinforces the principle that for the computation of interest under Sections 234B and 234C, the tax credit under Section 115JAA should be taken into account and set off against the tax payable before calculating the interest, even in the absence of specific legal provisions mandating such adjustment. The decision highlights the importance of consistent application of tax laws and judicial precedents in determining tax liabilities and credits for assesses under the Income Tax Act.