2024 (10) TMI 530 - AT - Income Tax

Denial of MAT credit - assessee had failed to claim the MAT credit in the original ITR and had also not filed revised return to make the claim and in absence of the same - AO did not set off the tax liability computed under the normal provisions with the MAT credit (brought forward) available with the assessee and to allow the carry forward of the balance MAT credit u/s 115JAA - allowance and mechanism of set off of tax credit in respect of taxes paid on deemed income u/s 115JB of the Act with the tax payable under the normal provisions of the Act and the carry forward of amount of tax credit determined under sub section (2A) of this section and the extent and the timing of the set off available in Section 115JAA HELD THAT - As per provisions of section 115JAA of the Act, it is held that the credit in respect of tax so paid u/s 115JB of the Act shall be allowed to the assessee in accordance with the provisions of section 115JAA of the Act, wherein, there is no condition/restriction that such MAT credit will not be allowable to the assessee if it had failed to carry forward the same in the return of income filed by the assessee in the particular assessment year in which such MAT credit is claimed. In this case, after giving appeal effect, vide order u/s 250/143(3) the total income as per the normal provisions of the Act was determined on which tax liability was determined payable and, therefore, as per the provisions of sub-section 4 of section 115JAA, the tax credit amounting available under MAT to the assessee was eligible for set off against the tax determined under the normal provisions of the Act and thereafter to allow the carry forward of balance MAT credit to the assessee for set off in future in accordance with the provisions as laid down u/s 115JAA of the Act. We, therefore, hold that the action of the AO in not allowing to set off the tax liability computed under the normal provisions with the MAT credit (brought forward) available with the assessee and to allow the carry forward of the balance MAT credit u/s 115JAA in the order u/s 250/143(3) and the consequent rejection of the rectification application by an order is not justified and the same is reversed. We, therefore, set-aside the order of the CIT(A) and direct the AO to allow set off the tax liability computed under the normal provisions determined vide order u/s 250/143(3) with the MAT credit (brought forward) available with the assessee and to carry forward the balance MAT credit u/s 115JAA as claimed by the assessee, after necessary verification. Appeal of assessee allowed.

Summary

Issues Involved:

1. Denial of MAT credit for AY 2016-17 due to non-claim in the original income tax return.
2. Rejection of rectification application for MAT credit set-off against tax liability.
3. Legal interpretation of Section 115JAA regarding the carry forward and set-off of MAT credit.

Issue-wise Detailed Analysis:

1. Denial of MAT Credit for AY 2016-17:

The primary issue revolves around the denial of Minimum Alternate Tax (MAT) credit to the assessee for the Assessment Year (AY) 2016-17. The Assessing Officer (AO) did not allow the MAT credit accumulated from AY 2010-11 to AY 2015-16 to be set off against the tax liability for AY 2016-17. This denial was based on the fact that the assessee failed to claim the MAT credit in the original income tax return filed for AY 2016-17. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, emphasizing the absence of a claim in the original return and the lapse of the deadline for filing a revised return.

2. Rejection of Rectification Application:

The assessee filed a rectification application under Section 154, seeking to adjust the MAT credit against the tax liability. The AO rejected this application, citing the Supreme Court's decision in Goetze (India) Ltd. vs. CIT, which restricts the AO from allowing claims not made in the original return. The CIT(A) also dismissed the appeal against this rejection, maintaining that the assessee had not filed a revised return to claim the MAT credit.

3. Legal Interpretation of Section 115JAA:

The Tribunal examined the provisions of Section 115JAA, which governs the carry forward and set-off of MAT credit. It highlighted that Section 115JAA is a complete code in itself, providing the mechanism for tax credit set-off without imposing a condition that it must be claimed in the return of income. The Tribunal noted that the MAT credit is a statutory right and should be allowed as per the provisions of Section 115JAA, irrespective of its mention in the return.

The Tribunal referred to various judicial precedents, including CIT vs. Tulsyan NEC Ltd. and CIT v. Bharat Aluminium Co. Ltd., which support the unconditional allowance of MAT credit. The Tribunal concluded that the AO's action in denying the MAT credit was unjustified, as the statutory provisions did not stipulate the requirement of claiming it in the return.

Conclusion:

The Tribunal set aside the CIT(A)'s order and directed the AO to allow the set-off of the tax liability of Rs. 7,33,534/- against the MAT credit brought forward by the assessee. It also instructed the AO to carry forward the balance MAT credit of Rs. 11,38,46,270/- for future set-off, subject to necessary verification. Consequently, the appeal of the assessee was allowed, reinforcing the principle that statutory tax credits should not be denied due to procedural lapses in return filing.