2018 (9) TMI 1247 - HC - Income Tax

Set off of MAT Credit - MAT credit set off from the tax payable before setting off the Tax Deducted at Source and Advance Tax paid - Held that - The issue has no longer res integra and has been settled by the Hon ble Supreme Court in the case of CIT V. Tulsyan NEC Ltd.(2010 (12) TMI 23 - SUPREME COURT OF INDIA). The issue involved in the batch of appeals before the Supreme Court filed by the Department was relating to the question as to whether MAT Credit admissible in terms of Section 115JAA has to be set off against the tax payable (assessed tax) before calculating interest under Section 234A, 234B and 234C - Substantial questions of law Nos.1 and 2 are answered in terms of the decision of the Hon ble Supreme Court in Tulsyan NEC Limited 2010 (12) TMI 23 - SUPREME COURT OF INDIA . Interest u/s 234D - Held that - The date from which interest is leviable is not an issue before this Court and it is not a substantive question of law framed for consideration in this appeal. Nevertheless, the submission of the learned counsel for the Assessee has been noted because it would be a consequential proceedings, which will flow from the answers given by us to the substantial questions of law 3 and 4. Therefore, it is well open to the Assessee to canvass all these issues before the Assessing Officer, while computation of interest takes place. With the above observations, the Tax Case Appeal filed by the Revenue is allowed

Summary

Issues:
1. MAT credit set off before TDS and Advance Tax
2. Priority of MAT credit set off against tax payable
3. Levying interest u/s 234D for assessment years pre and post introduction
4. Liability of interest from the date of refund pre-2003

Analysis:

Issue 1: MAT credit set off before TDS and Advance Tax
The appeal raised questions regarding the setting off of MAT credit against tax payable before TDS and Advance Tax. The Hon'ble Supreme Court in CIT V. Tulsyan NEC Ltd. clarified that MAT credit under Section 115JAA must be set off against the tax payable before calculating interest under Section 234A, 234B, and 234C. The Court resolved this issue in favor of the Revenue based on the Supreme Court's decision.

Issue 2: Priority of MAT credit set off against tax payable
The Court also addressed the priority of MAT credit set off against tax payable, contrary to the scheme of Schedule G of Form 1. Following the Supreme Court's decision in Tulsyan NEC Limited, the Court answered this issue in line with the Supreme Court's interpretation, ensuring MAT credit is set off against tax payable before interest calculation.

Issue 3: Levying interest u/s 234D for assessment years pre and post introduction
Regarding the levying of interest u/s 234D for assessment years pre and post its introduction, the Supreme Court clarified that Section 234D, introduced in 2003, applies to pending assessments before 2003. Citing CIT V. Reliance Energy Limited, the Court ruled in favor of the Revenue, emphasizing the retrospective application of Section 234D from 2003.

Issue 4: Liability of interest from the date of refund pre-2003
The Court discussed the liability of interest from the date of refund pre-2003, emphasizing the prospective application of interest levies unless expressly stated otherwise. Referring to precedents like J.K.Synthetics Limited V. CTO and Director of IT V. Jacabs Civil Incorporated, the Court concluded that interest liability begins from the enforcement date of relevant provisions, in this case, from June 1, 2003.

In conclusion, the Tax Case Appeal filed by the Revenue was allowed, and the substantial legal questions were answered based on the interpretations provided by the Hon'ble Supreme Court and relevant precedents. The Court highlighted that further issues related to interest computation should be addressed by the Assessee before the Assessing Officer.