2019 (9) TMI 726 - AT - Income Tax

Revision u/s 263 - MAT credit under section 115JAA - entitled to claim carried forward MAT credit of the amalgamating company - assessee challenged the reduction of MAT credit in an appeal filed before the first appellate authority - HELD THAT - Commissioner (Appeals) the assessee had raised a ground claiming MAT credit pertaining to the assessment year 2006 07. While deciding the said ground, he has clearly observed that in the original assessment order, the Assessing Officer has not made any discussion on the issue. Accordingly, he directed AO to allow credit as per law. It is further seen, as against the MAT credit of more than ₹ 58 crore claimed by the assessee before the Commissioner (Appeals), the AO allowed credit for ₹ 20,12,95,237. In these circumstances, it cannot be said that the order giving effect to is nothing but an implementation of direction of Commissioner (Appeals). Exercise of jurisdiction under section 263 of the Act does not suffer on account of either limitation or merger with learned Commissioner (Appeals) s order. Undisputedly, learned CIT has exercised the power under section 263 of the Act on the issue of allowance of MAT credit relating to Ambuja Cement Eastern Ltd. which amalgamated with the assessee company. It is the reasoning of learned CIT that the provisions of section 115JAA of the Act allows set off of MAT credit only in respect of company in whose case such MAT credit has arisen. According to her, carry forward of MAT credit of amalgamating company cannot be allowed in case of amalgamated company. On a reading of the provisions of section 115JAA of the Act, we do not find any such restriction with regard to allowance of MAT credit of an amalgamating company at the hands of the amalgamated company. Rather, a plain reading of the aforesaid provision reveals that MAT credit is allowed to be carried forward for a specific period. In case of Skol Breweries Ltd. 2011 (3) TMI 578 - ITAT, MUMBAI while deciding identical issue has held that carried forward MAT credit of the amalgamating company can be claimed by the amalgamated company. In view the assessment order passed in case of amalgamating company the principle which emerges is, the carried forward MAT credit of amalgamating company can be taken credit of by amalgamated company. Viewed in the aforesaid perspective, the decision of the Assessing Officer in allowing set off of carried forward MAT credit of ₹ 6,99,46,873, at the hands of the assessee cannot be considered to be erroneous. Therefore, one of the conditions of section 263 of the Act is not satisfied. That being the case, the exercise of power under section 263 of the Act to revise such an order is invalid.

Summary

Issues:
Challenge to order dated 27th March 2018 by the assessee regarding Minimum Alternate Tax (MAT) credit for the assessment year 2007-08.

Analysis:
The appeal filed by the assessee was against the order passed by the Commissioner of Income Tax (LTU), Mumbai, for the assessment year 2007-08. The Assessing Officer allowed MAT credit under section 115JAA of the Act for an amount of &8377; 6,99,46,873, which the assessee challenged before the first appellate authority. The Commissioner (Appeals) directed the Assessing Officer to allow MAT credit as per law, resulting in the Assessing Officer granting MAT credit of &8377; 20,12,95,237. However, the Commissioner, under section 263 of the Act, found the MAT credit of &8377; 6,99,46,873 pertaining to an amalgamated company inadmissible for deduction, leading to a notice to the assessee. The assessee argued that by virtue of amalgamation, it was entitled to the MAT credit of the amalgamating company. The Commissioner disagreed, directing the Assessing Officer not to grant the MAT credit. The assessee contended that the revision under section 263 was invalid as the issue was not in dispute before the Commissioner (Appeals) and that the MAT credit was allowable on merit.

The Tribunal considered the history of MAT credit claims and observed that the Assessing Officer had allowed MAT credit of &8377; 6,99,46,873 initially, and the Commissioner (Appeals) directed further verification. The subsequent order gave effect to the Commissioner (Appeals) order, allowing a higher MAT credit. The Tribunal noted that the limitation for revision should be counted from the date of the order giving effect to the Commissioner (Appeals) order. It also found that the order giving effect to was not merely an implementation of the Commissioner (Appeals) direction, as the issue was not discussed in the original assessment order. Therefore, the Tribunal held that the revision under section 263 was not barred by limitation or merger with the Commissioner (Appeals) order.

Regarding the merits of the issue, the Tribunal analyzed the provisions of section 115JAA of the Act and relevant case law. It concluded that the assessee was entitled to claim the carried forward MAT credit of the amalgamating company. Citing precedents, the Tribunal found that the Assessing Officer's decision to allow the set-off of MAT credit was not erroneous. As one of the conditions of section 263 was not satisfied, the Tribunal quashed the Commissioner's order, allowing the appeal and dismissing certain grounds.

In conclusion, the Tribunal ruled in favor of the assessee, holding that the revision under section 263 was invalid, as the assessee was entitled to claim the MAT credit of the amalgamating company and the Assessing Officer's decision was not erroneous.