2014 (3) TMI 387 - HC - Income Tax

Mat credit Levy of Interest u/s 234-A, 234-B and 234-C of the Act - Whether the Tribunal were correct in holding that the difference between the tax payable on its total income and tax payable by it under the provisions of Section 115JB of the Act Held that - The decision in COMMISSIONER OF INCOME TAX v. M/s. DECCAN CREATIONS PVT. LTD. 2011 (1) TMI 1174 - Karnataka High Court followed MAT credit should be given before charging interest under Sections 234B and 234C of the Act - when once this benefit is confirmed from 01.04.2007, when Section 115JAA was introduced, the legal position is the same and the Explanation introduced by Finance Act, 2006, which came into effect from 01.04.2007, is only clarificatory thus, the condition is not applicable for the assessee for the period prior to 01.04.2007 Decided against Revenue.

Summary

Issues:
Interpretation of tax laws regarding MAT credit and its impact on advance tax collection.

Analysis:
The High Court of Karnataka addressed the issue of whether the Appellate Authorities correctly held that the difference between the tax payable on total income and tax payable under Section 115JB, considering the surcharge, should be considered as the amount of brought forward tax credit for set-off, leading to the levy of interest under Sections 234-A, 234-B, and 234-C of the Income Tax Act. The appeal stemmed from a previous order by the Income Tax Appellate Tribunal, Bangalore Bench 'A,' against an assessment order by the Commissioner of Income Tax (Appeals)-VI, Bangalore. The appellant argued that the issue was covered by a Supreme Court judgment regarding MAT credit and advance tax collection.

The High Court reviewed the Supreme Court judgment in 'COMMISSIONER OF INCOME-TAX v. TULSYAN NEC LTD.,' which highlighted the exclusion of MAT credit for calculating assessed tax, causing hardship. The Supreme Court emphasized that MAT credit should be excluded while calculating advance tax to avoid discrepancies. The Court further clarified that if an assessee unilaterally claims set-off or MAT credit, they do so at their own risk, potentially facing interest charges under Section 234B for any shortfall in advance tax payment.

In a separate case, 'COMMISSIONER OF INCOMETAX v. M/s. DECCAN CREATIONS PVT. LTD.,' the High Court reiterated that MAT credit should be considered before charging interest under Sections 234B and 234C of the Income Tax Act. The Court emphasized that the legal position regarding MAT credit remained the same after amendments, and the benefit of MAT credit should be confirmed for the relevant period.

Based on the precedents and legal principles established by the Supreme Court and previous High Court decisions, the High Court of Karnataka concluded that MAT credit should be granted to the assessee before charging interest under Sections 234B and 234C of the Act. Consequently, the Court ruled in favor of the assessee, disposing of the appeal by answering the questions against the revenue.