2014 (4) TMI 1013 - HC - Income Tax

Eligibility for interest on refund out of MAT credit - Whether the assessee would be entitled to interest on the refund as per Section 244A of the Act Held that - The assessee became entitled to refund consequent upon the deduction given on MAT credit and the TDS - the assessee is entitled to a refund of ₹ 49,67,917/- and the deduction on TDS itself was before granting or charging any interest under any provisions of the Act - the proper course would be to remand the matter back to the AO to work out interest on the refund payable to the assessee on the sum of ₹ 49,67,917/- as ordered in the order of the Assistant Commissioner dated 28.02.2005 in accordance with Section 244A of the Act matter remitted back to the AO - Decided against Revenue.

Summary

Issues:
1. Eligibility for interest on refund arising out of MAT credit under Section 244A of the Income Tax Act, 1961.

Analysis:
1. The High Court of Madras heard an appeal by the Revenue against the Income Tax Appellate Tribunal's order regarding the assessment year 2001-02. The main question raised was whether the assessee is entitled to interest on the refund arising from MAT credit. The Tribunal relied on a previous decision in the case of M/s. Chemplast Sanmar Ltd., which was affirmed by the Supreme Court, in favor of the assessee.

2. The assessee, engaged in offshore oil well drilling, claimed MAT credit under Section 115JAA of the Income Tax Act. The Tribunal directed the Assessing Officer to give MAT credit before TDS and advance tax but did not allow interest on the refund under Section 244A of the Act. The Commissioner of Income Tax (Appeals) upheld this decision, leading to an appeal before the Income Tax Appellate Tribunal.

3. The Income Tax Appellate Tribunal noted that the MAT credit was to be set off against the tax payable by the assessee before adjusting TDS, advance tax, and self-assessment tax. Consequently, the Tribunal directed the Assessing Officer to allow the claim of the assessee for interest on the refund, following the decision in the Chemplast Sanmar Ltd. case.

4. The Court analyzed the facts and determined that the assessee was entitled to a refund of a specific amount after adjusting MAT credit and TDS. The assessee sought interest on the refund under Section 244A of the Act, citing a precedent. The Commissioner of Income Tax (Appeals) rejected the appeal, stating that MAT credit allowed would not bear any interest.

5. The Income Tax Appellate Tribunal allowed the assessee's case, referencing the Chemplast Sanmar Ltd. case. The Court referred to previous decisions, including one concerning the adjustment of MAT credit before charging interest under specific sections of the Act.

6. The Court concluded that the issue before them was distinct from previous cases and remanded the matter to the Assessing Officer to calculate interest on the refund payable to the assessee in accordance with Section 244A of the Act. The Court held that the proper course of action was to grant interest on the refund amount as ordered by the Assistant Commissioner.