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TMI Blog2004 (10) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... intimation dated 21-2-2003. While computing the tax, the Assessing Officer did not adjust the carry forward of MAT credit available to the assessee before charging interest under section 234B of Rs. 1,17,64,830 and section 234C of Rs. 56,51,754 and accordingly raised a net demand of Rs. 1,64,86,519. 4. The assessee filed appeal before the CIT(A) contending that MAT credit was to be set off under section 115JAA(4) in the year when the tax becomes payable. It was accordingly contended that the set-off of tax credit was to be allowed against the demand before calculation of interest under sections 234B and 234C besides adjustment of TDS of Rs. 4,49,527 was also to be made. The CIT(A) decided the issue against the assessee with reference to Schedule G of Form No. 1 being the return of income under which the set-off of tax credit was to be allowed after calculation of interest under sections 234B and 234C. However, with regard to the adjustment of TDS, the Assessing Officer was directed to verify the claim of the assessee. 5. The ld. Counsel for the assessee contended that assessee was required to pay advance tax in respect of the current income. Since advance tax had become payable, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue involved in this appeal. So, however, since the interest levied is more than Rs. 1.5 crores and the issue was contested hotly, we feel obliged to give our own reasons for subscribing to the view expressed by the Chennai Bench of the Tribunal. 8. In order to appreciate the issue it will be relevant to refer to the provisions of the Act giving rise to the controversy involved in this appeal. It may be recalled that Finance Act, 1987 incorporated Chapter XII-B in the Income-tax Act, 1961 providing special provisions relating to certain companies for payment of minimum tax, Section 115J provided taxation of book profits @ 30% in respect of such companies where the profits computed in accordance with the provisions of the Income-tax Act, 1961 worked out to be less than 30% of the book profits w.e.f. 1-4-1988 up to 31-3-1991. Section 115JA, which was inserted by the Finance (No. 2) Act, 1996 w.e.f. 1-4-1997, indicated a similar provision for payment of taxes by the companies whose profit determined in accordance with provisions of the Act worked out to less than 30% of the book profits to be taxed on 30% of the book profits, section 115JAA was also incorporated by the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income computed in accordance with the other provisions of the Act. Sub-section (4) of section 115JAA reproduced above provides for set off of tax credit paid under section 115JA in a year when tax becomes payable on the total income computed in accordance with provisions of the Act other than section 115JA. 9. In this case, it is not disputed that in the year under appeal, the income is computed in accordance with the provisions of the Act, 1961 other than section 115JA and, therefore, assessee is entitled to the set off of carried forward MAT credit of tax. There is no dispute in regard to eligibility of the assessee for set off of tax paid under section 115JA. The dispute is only in regard to priority of adjustment for the MAT credit. The revenue depends upon income tax Form No. 1, Annexure-G. It is the claim of the revenue that Form No. 1, as amended from 17-8-2001, provides in order of preference for determination of total tax payable on the returned income, the interest chargeable under sections 234B and 234C and other provisions of the Act and thereafter adjustment of MAT credit. According to the revenue, since interest is to be calculated under sections 234B and 234C befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted in accordance with provisions of the Act. Further, the issue that assumes importance is as to whether the assessee is entitled to set off of MAT credit in respect of payment of advance tax or it is necessary for the assessee to pay the entire tax payable in respect of the current income and refrain from taking credit for the tax paid under section 115JA to which he is eligible under section 115JAA(4). At this stage, it will be relevant to reproduce the provisions of sections 207 and 208 of the Income-tax Act, 1961 which are as under: - "207. Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as 'current income'. 208. Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is five thousand rupees or more." It is evident from sections 207 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (1) shall be the difference of the tax paid for any assessment year under subsection (1) of section 115JA and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of the Act. Provided that no interest shall be payable on the tax credit allowed under sub-section (1)." The proviso to section 115JAA(2) assumes importance in the light of interpretation put forth by the revenue in regard to the issue involved in this appeal. As already pointed out, it is the case of the revenue that assessee is not entitled to set off of MAT credit at the time of computation of advance tax. In other words, assessee would be required to pay the advance tax in full in respect of current income without taking into account the MAT credit and the set off of MAT credit would be allowed only at the stage of assessment. If this interpretation were to hold good, then the Legislature would not have provided specifically that interest shall not be payable on the tax credit allowed under sub-section (1) to section 115JA as in that case no question of payment of interest would arise. The question of payment of interest to the assessee would arise on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the judgment is reproduced hereunder: - "A statutory provision must be so construed, if possible, that absurdity and mischief is avoided." 15. In our view, the interpretation given by the Revenue Authorities leads to absurdity insofar as proviso to section 115JAA(2) is rendered superfluous when assessee is required to pay advance tax to the extent of MAT credit and thereafter claim refund of the advance tax so paid. In such eventuality, proviso to section 115JAA(2) is rendered superfluous. This could not be the intention of the Legislature. The intention of the Legislature is unambiguous insofar as assessee has been made eligible to set off of tax, which is recovered in respect of the deemed income under section 115JA against the tax payable for the years for which section under section 115JA is not attracted (sic). Section 115JA(4) provides that all other provisions of the Act shall apply to every assessee being a company mentioned in that section. When all the provisions of the Act apply, there can be no doubt that the provisions relating to payment of advance tax as well as the provisions of set off apply. Therefore, in our considered view, the provisions of sections 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akh, the total tax and interest works out to Rs. 36 lakhs. As per the return, the tax credit, say for example, Rs. 20 lakhs is to be adjusted, the balance tax and interest payable will be Rs. 16 lakhs. 17. We may now calculate the tax and interest in the order of priority as would be ideal in the circumstances of this case. We first calculate the tax payable by the company on the returned income of Rs. 1 crore which is Rs. 35 lakhs. We set off the MAT credit i.e. Rs. 20 lakhs. Balance payable works out to Rs. 15 lakhs. Interest under sections 234B and 234C, which has been presumed by us at Rs. 1 lakh, is to be added to Rs. 15 lakhs. The total demand including the interest would work out to Rs. 16 lakhs. It is thus seen that there is no difference in the calculation of interest under sections 234B and 234C when the set-off MAT credit is allowed either before calculation of interest under sections 234B and 234C or after allowing the credit. It may be stated at the cost of repetition that interest calculation is not affected by giving priority to it in adjustment. We are, therefore, of the considered opinion that Form No. 1 does not have any effect of influencing the interpretation i ..... 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