2018 (3) TMI 465 - AT - Income Tax

Computation of Interest u/s 234B and 234C - MAT credit to be allowed from the assessed tax, and thereafter the interest u/s 234B and C should be computed - AO computed the interest under section 234B and C without considering MAT credit - Held that - Explanation 1 (v) of sub section 1 of section 234B clearly guides that MAT credit set off should be allowed while computing assessed tax . Therefore, it is abundantly clear that in the assessee s case under consideration, the available MAT credit was at ₹ 12,91,616/- up to assessment year 2006-07, and the same should be allowed first, (that is, before computing the interest under section 234B and C of the Act), but, in fact, we note that AO has not allowed this MAT credit to the assessee. We note that Parliament amended Explanation 1 to Section 234B by Finance Act, 2006 w.e.f. 1.4.2007 to provide along with tax deducted or collected at source, MAT credit under Section 115JAA also to be excluded while calculating assessed tax. From the above, it is evident that any tax paid in advance/pre-assessed tax paid can be taken into account in computing the tax payable. Based on the factual position explained above, we direct the assessing officer to allow MAT credit, which is available with the assessee at ₹ 12,91,616/- and , then, interest under section 234B and C, if any, may be charged, that is, after set off of MAT credit, the AO may compute the interest under section 234B and C. - Decided in favour of assessee Also as per assessee while computing assessed tax , the AO has allowed TDS claim at ₹ 4,35,927/- whereas as per assessee it should be ₹ 4,36,617/-. We direct the assessing officer to allow the claim of the assessee for the balance amount of ₹ 670/- (Rs.4,36,617/- ₹ 4,35,927/-), after verification, as per law. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Confirmation of the order by the Commissioner of Income Tax (Appeals) regarding MAT credit.
2. Computation of interest under Sections 234B and 234C without considering MAT credit.
3. Incorrect TDS credit considered in the computation of assessed tax.

Issue-wise Detailed Analysis:

1. Confirmation of the Order by the Commissioner of Income Tax (Appeals) Regarding MAT Credit:
The main grievance of the assessee is that MAT credit of ?12,91,616/- should be allowed from the 'assessed tax' before computing interest under Sections 234B and 234C. The Assessing Officer (AO) computed the interest without considering the MAT credit. The assessee argued that the computation of interest was not in accordance with Explanation 1(v) to Sub-Section (1) of Sections 234B and 234C, and also violated the Supreme Court decision in CIT Vs. Tulsyan NEC Ltd. The CIT(A) confirmed the AO's order, relying on the decision of the Karnataka High Court in M/s. Jindal Thermal Power Co. Ltd. and CBDT Circular No. 13/2001, which clarified that all companies are liable for payment of advance tax under Section 115JB, and consequently, interest under Sections 234B and 234C would be applicable.

2. Computation of Interest under Sections 234B and 234C Without Considering MAT Credit:
The AO noted that the Supreme Court decision in CIT vs. Kwality Biscuits Ltd. related to Section 115J, whereas the assessee was liable to pay tax under Section 115JB. The AO held that the assessee was liable to pay advance tax, and for failure to do so, interest under Sections 234B and 234C was rightly charged. The CIT(A) upheld this view, emphasizing that the AO had rightly levied interest based on the CBDT circular and the Karnataka High Court decision. However, the assessee's counsel argued that the issue was covered by the Supreme Court judgment in Tulsyan NEC Ltd., which held that MAT credit should be excluded while calculating assessed tax. The Delhi High Court in CIT vs. Salora International Ltd. also supported this view, stating that MAT credit should be allowed before charging interest under Sections 234B and 234C.

3. Incorrect TDS Credit Considered in the Computation of Assessed Tax:
The assessee claimed that the AO allowed TDS credit at ?4,35,927/- instead of ?4,36,617/-. The AO's computation of tax payable did not account for the correct TDS amount. The Tribunal directed the AO to verify and allow the correct TDS credit of ?4,36,617/-.

Conclusion:
The Tribunal concluded that the AO should allow the MAT credit of ?12,91,616/- before computing interest under Sections 234B and 234C, in line with the Supreme Court judgment in Tulsyan NEC Ltd. The AO was also directed to verify and allow the correct TDS credit of ?4,36,617/-. Thus, Ground No. 2 raised by the assessee was allowed, and Ground No. 3 was allowed for statistical purposes.

Order Pronouncement:
The order was pronounced in the open court on 07/02/2018.