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2019 (8) TMI 1331 - AT - Income TaxCarry forward and set off of MAT credit - in the hand of demerged company OR resulting company after sanctioning the scheme of demerger - HELD THAT - Whatever, MAT credit available to the assessee prior to that date even though, the same is arised on account of SEZ units, the credit for such MAT credit needs to be allowed to the assessee, but not to the demerged SEZ units. We further noted that TCS Ltd has not claimed credit for MAT credit in their return of income, which is evident from the fact that the AO of TCS Ltd in their assessment has categorically stated that MAT credit of TCS e-serve International Ltd will be available to the TCS e-serve International Ltd. Only. We, further stated that MAT credit should go into entity, but not with resulting company. Therefore, we are of the considered view that the Ld.CIT(A) has rightly considered the issue in light of provision of Act and also, the scheme of demerger approved by the Hon ble Bombay High Court, while directing the AO to allow carry forward and set off of MAT credit. We are of the considered view that the Ld.CIT(A) has rightly directed the AO to allow carry forward and set off of MAT credit to the assessee and hence, we are inclined to uphold the findings of the Ld.CIT(A) and dismissed appeal filed by the revenue.
Issues Involved:
1. Allowability of carry forward and set off of Minimum Alternate Tax (MAT) credit to the assessed company post-demerger. 2. Verification and carry forward of unutilized MAT credit to subsequent assessment years. 3. Alternative claim regarding the allowance of MAT credit to the resulting company if not allowed to the assessee. Detailed Analysis: 1. Allowability of Carry Forward and Set Off of MAT Credit Post-Demerger: The primary issue revolves around whether the assessee company can carry forward and set off MAT credit following the demerger of its SEZ units to another company. The revenue contended that the MAT credit should not be allowed as the units to which the MAT credit pertained were no longer part of the assessee company. However, the Commissioner of Income Tax (Appeals) [CIT(A)] directed the Assessing Officer (AO) to allow the carry forward and set off of MAT credit, relying on the Bombay High Court's order sanctioning the demerger scheme. The High Court had specified that all taxes paid or payable by the assessee before the appointed date (01/04/2013) would be on account of the assessee, and post that date, on account of the resulting company. The Tribunal upheld the CIT(A)'s decision, stating that MAT credit represents excess tax paid under MAT over the normal tax payable, and thus belongs to the assessee. The Tribunal emphasized that the High Court’s order, which has statutory recognition, should be followed in the absence of specific provisions in the Income Tax Act regarding the carry forward and set off of MAT credit in a demerger scenario. 2. Verification and Carry Forward of Unutilized MAT Credit: The assessee raised an issue regarding the carry forward of the unutilized MAT credit of ?45,67,01,244/-. The CIT(A) had directed the AO to allow the MAT credit, but there was no specific finding on the carry forward of the unutilized portion. The Tribunal directed the AO to verify the facts regarding the availability of the unutilized MAT credit after setting off the current year's tax liability and to allow the carry forward of the unutilized MAT credit to subsequent years if the claim is found to be correct. 3. Alternative Claim Regarding Allowance of MAT Credit to Resulting Company: The assessee made an alternative plea that if the MAT credit is not allowed to it, then it should be allowed to the resulting company (TCS Ltd.). However, since the Tribunal upheld the CIT(A)'s decision to allow the MAT credit to the assessee, this alternative claim was rendered infructuous and dismissed as not maintainable. Conclusion: The Tribunal dismissed the revenue's appeal and partly allowed the assessee's cross-objection. It upheld the CIT(A)'s direction to allow the carry forward and set off of MAT credit to the assessee and directed the AO to verify and allow the carry forward of the unutilized MAT credit to subsequent years. The alternative plea by the assessee was dismissed as it was no longer relevant.
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