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2009 (2) TMI 58 - HC - Income TaxHeld that that interest under sections 234B and 234C is to be charged after the tax credit (MAT credit) available under section 115JAA is set off against tax payable on the total income - Tribunal was correct in law in holding that rectification could not be made by the Assessing Officer under Section 154 of the Income Tax Act, 1961 as the issue regarding charging of interest under Section 234-B of the Act without giving set off of MAT credit available to the Assessee was highly debatable
Issues Involved:
1. Whether the Income Tax Appellate Tribunal was correct in law in holding that rectification could not be made by the Assessing Officer under Section 154 of the Income Tax Act, 1961 regarding charging of interest under Section 234-B of the Act without giving set off of MAT credit available to the Assessee was highly debatable. 2. Whether the Income Tax Appellate Tribunal was correct in law in holding that credit of tax paid under Section 115-JAA can be given before computing interest under Section 234C of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Rectification under Section 154 and Section 234-B Arguments by Revenue: - The Revenue argued that prior to the amendments effective from 01.04.2007, there was no statutory prescription for setting off MAT credit before computing interest under sections 234B and 234C. - They contended that the amendments were substantive and prospective, and thus the Tribunal erred in holding that interest under these sections should be computed only after giving effect to the set off. - They also argued that the language of sections 234B and 234C was clear and unambiguous, leaving no scope for debate, and thus rectification proceedings under section 154 were in order. Arguments by Assessees: - The Assessees argued that sections 234B and 234C were compensatory in nature, and since MAT credit was available, no loss was caused to the Revenue. - They contended that the amendments were curative and clarificatory, reflecting the legal position even before 01.04.2007. - They also argued that the issue was highly debatable and could not be corrected through rectification proceedings under section 154. Court's Analysis: - The Court examined sections 234B, 140A, and 115JAA, noting that MAT credit is akin to tax already paid. - It concluded that the available MAT credit should be set off before computing interest under sections 234B and 234C. - The Court held that the Tribunal was correct in law in holding that rectification could not be made by the Assessing Officer under Section 154 as the issue was highly debatable. Issue 2: Credit of Tax Paid under Section 115-JAA and Interest under Section 234C Arguments by Revenue: - The Revenue argued that MAT credit could not be set off before computing interest under sections 234B and 234C prior to the amendments effective from 01.04.2007. - They contended that the amendments were substantive and prospective, and thus the Tribunal erred in holding that interest should be computed only after giving effect to the set off. Arguments by Assessees: - The Assessees argued that the provisions of sections 234B and 234C were compensatory in nature, and since MAT credit was available, no loss was caused to the Revenue. - They contended that the amendments were curative and clarificatory, reflecting the legal position even before 01.04.2007. - They also argued that the available MAT credit should be set off mandatorily against the tax payable before computing interest under sections 234B and 234C. Court's Analysis: - The Court examined sections 115JA and 115JAA, noting that MAT credit is akin to tax already paid. - It concluded that the available MAT credit should be set off before computing interest under sections 234B and 234C. - The Court held that the Tribunal was correct in law in holding that credit of tax paid under Section 115-JAA can be given before computing interest under Section 234C. Conclusion: - The Court answered both questions against the Revenue and in favor of the Assessees. - The appeals were dismissed, and the parties were left to bear their own costs.
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