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TMI Blog2004 (3) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... cause the legislature by insertion of sub-s. (5) to s. 115JAA has intended to give set off of MAT credit against the difference between the tax on total income of the assessee and the tax which would have been payable under the provisions of sub-s. (1) of s. 115JA, and not on the total amount of tax and interest under ss. 234B and 234C as understood by the rule-making authority. Hence in our considered opinion, Sch. G to Form No. 1 is totally against the intention of the legislature which has been clearly prescribed in s. 115JAA. As has been already pointed out in the earlier paragraphs, rules cannot be contrary to the provisions of sections or the intention of the legislature. Hence, as we have already held that Sch. G to Form No. 1 is contrary to the provisions of s. 115JAA, we are inclined to allow the claim of the assessee by directing the AO to give set off of the MAT credit of Rs. 8,64,72,445 first, before the charging of interest under ss. 234B and 234C of the IT Act, 1961. Thus, looking the point at issue, both from logical and legal angles, we are unable to uphold the orders of the first appellate authority in denying the claim of the assessee. In the result, the appeal fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is something in the context in which the word is used which would justify a departure from the meaning. As per sub-s. (4) of s. 115JAA the tax credit shall be allowed set off in a year when tax becomes payable on the total income computed in accordance with the provisions of this Act other than s. 115JA. Hence, the provision of s. 115JAA has to be applied first before charging interest under ss. 234B 234C. 7. The learned CIT has failed to appreciate that the provision of s. 115JAA is a special provision and has to be applied first as it is a tax credit or prepaid taxes with Government available to the appellant for set off before applying the provisions of ss. 234B and 234C." 2. The facts of the case are that the assessee is a company engaged in the manufacture and sale of PVC resins, caustic soda, chloromethane, refrigerant gases, promotion of new ventures, undertakings, companies and operation of ships, etc. For the asst. yr. 2002-03 the assessee filed its return of income on 31st Oct., 2002, admitting a taxable income of Rs. 32,90,54,720 and the tax payable thereon was determined at Rs. 11,76,77,896 including the interest under s. 234C of Rs. 2,05,361. The AO processed the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Aban Lloyd Chiles Offshore Ltd., Chennai. By placing the above materials on record the learned counsel for the assessee, apart from reiterating the grounds of appeal raised before us as his contentions, to say in brief, that: 4.1 MAT credit, advance tax and TDS are sufficient to meet the tax liability. It is the contention of the Department that as the appellant has not paid sufficient sums by way of advance tax and interest under ss. 234B and 234C are leviable and for that purpose the MAT is not taken into account. In other words, it is the contention of the Department that the appellant should have paid advance tax to the full extent notwithstanding the availability of MAT credit and obtained refund. 4.2 Sec. 115JAA(1) provides for credit for tax paid under s. 115JA. Under sub-s. (2) of s. 115JAA the tax credit is the difference between the tax payable under MAT and the tax payable under the normal computation under the IT Act. Under the proviso to that section no interest shall be allowable on the credit. Under sub-s. (3) the credit amount shall be carried forward and set off in accordance with sub-s. (4) and the carry forward will be for a period of four years. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on . The tax credit is set off against the tax payable and hence the tax payable in any year is only the amount after set off of the credit under s. 115JAA. For the purpose of computing the interest the amount of tax payable after the set off only should be taken. 4.6 Under ss. 90 and 91 also tax paid in foreign country is set off before determining the tax liability as well as interest. 4.7 The Madras High Court in the case of CIT vs. T.T. Investments Trades (P) Ltd. (1984) 42 CTR (Mad) 48 : (1984) 148 ITR 347 (Mad) has held that any ad hoc amount paid before the end of the previous year and adjusted against the tax liability should be treated as advance tax. 4.8 Computation of credit, carry forward and set off is mandatorily provided in the statute. It will lead to absurd result if the assessee is expected to pay advance tax to the extent of MAT credit and expected to get refund at the time of assessment. Such interpretation is to be avoided. 4.9 When a literal interpretation leads to absurd and unintended results, the language can be modified to accord with the intention of the Parliament and avoid absurdity. In this connection the ratio of the following case law may be looked i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her assessees contention in similar cases. He has now held that in view of the changed form of the return from 17th Aug., 2001, the interpretation has changed. Sections cannot be interpreted on the basis of forms of return. In this connection the decision of the Kerala High Court in the case of CIT vs. M.M. George (2001) 254 ITR 45 (Ker) is relied upon. 5. On the other hand, the learned Departmental Representative relied upon the order of the CIT(A) and reiterated the contents of the same as his submissions. His emphasis was mainly on Sch. G to Form 1 to the IT Rules, which has been discussed in the impugned order by the CIT(A). 6.1 We have heard the rival submissions and considered the facts and the materials on record including the case law cited by the learned counsel for the assessee and the Budget Speech for 1997-98 of the Finance Minister, copy of the relevant extract of which has been filed on record by the learned counsel for the assessee. 6.2 The simple point at issue awaiting our adjudication is whether the MAT credit available for set off against the tax payable for the asst. yr. 2002-03 is to be adjusted against the tax payable for the assessment year arrived at by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 234C and has allowed this credit only after charging the interest under s. 234B and 234C from the resultant figure. The Department had already kept with it the tax already paid by the assessee in earlier years under s. 115JAA of the Act and enjoyed the benefit of the amount available with it. The Government has also promised the assessee that in the year in which the assessee is liable to pay tax under the normal provisions of the Act such MAT credit would be adjusted against the tax that would have to be paid in the assessment year in which the assessee is liable to pay the tax under the normal provisions of the Act. In other words, the Government has promised the assessee one thing but had not complied with such promise by charging interest under ss. 234B and 234C first before adjustment of such MAT credit. From the Budget Speech delivered by the Finance Minister for the financial year 1997-98 (para 99 of that Budget Speech) it can be seen that the Finance Minister has expressed that there was case for review of the manner in which the tax is charged and collected and, therefore, he proposed to make certain changes in the provisions of MAT. Pursuant to such decision the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax payable in any year is only the amount after set off of the credit under s. 115JAA. The reliance of the learned counsel for the assessee on the decision of the Madras High Court in the case of T.T. Investments and Trades (P) Ltd., which had held that any ad hoc amount paid before the end of the previous year and adjusted against the tax liability should be treated as advance tax is also more relevant. Even applying the ratio of this decision the MAT credit available for the assessee to set off against the tax payable during the relevant assessment year is to be atleast treated as advance tax and interest under ss. 234B and 234C is to be charged only after adjustment of such tax credit available. 6.6 Now, let us turn to the legal aspect of the issue. The learned CIT(A) has upheld the action of the AO under s. 143(1) of the Act merely for the reason that the order of priority of adjustment of TDS, advance tax and tax credit under s. 115JA has not been spelt out in the Act and that one has to take recourse to the IT Rules, 1962, for this purpose and that r. 12(1)(a) of the IT Rules, 1962, laid down that in the case of a company the return of income required to be furnished sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act or to whittle down its effect see CIT vs. Taj Mahal Hotel 1973 CTR (SC) 480 : (1971) 82 ITR 44 (SC). 6.8 The well-established rule of interpretation is that the same expressions contained in the Act as well as in the Rules framed thereunder have to receive an identical construction [CWT vs. Vasantha (1973) 87 ITR 17, 21 (Mad)]. Sec. 20 of the General Clauses Act, 1897, specifically provides that where, by any Central Act or Regulation, a power to issue any notification, order, scheme, rule, form or bye-law is conferred, then, expression used in the notification, etc., shall, unless there is anything repugnant in the subject or context, have the same respective meanings as in the Act or Regulation conferring the power. A rule made by the rule making authority cannot enlarge or expand the meaning of a word used in a section [CIT vs. Aruna Sugars Ltd. (1980) 123 ITR 619, 624 (Mad)], or the meaning of the section. If a rule goes beyond what the section contemplates, the rule must yield to the statute. 6.9 The rule-making authority is given to the end that the provisions of the statute may be better carried out into effect and not with a view to neutralising or contradicting those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the order of priority of adjustment of TDS, advance tax and MAT credit is totally against the intention of the legislature because the legislature by insertion of sub-s. (5) to s. 115JAA has intended to give set off of MAT credit against the difference between the tax on total income of the assessee and the tax which would have been payable under the provisions of sub-s. (1) of s. 115JA, and not on the total amount of tax and interest under ss. 234B and 234C as understood by the rule-making authority. Hence in our considered opinion, Sch. G to Form No. 1 is totally against the intention of the legislature which has been clearly prescribed in s. 115JAA. As has been already pointed out in the earlier paragraphs, rules cannot be contrary to the provisions of sections or the intention of the legislature. Hence, as we have already held that Sch. G to Form No. 1 is contrary to the provisions of s. 115JAA, we are inclined to allow the claim of the assessee by directing the AO to give set off of the MAT credit of Rs. 8,64,72,445 first, before the charging of interest under ss. 234B and 234C of the IT Act, 1961. 6.11 Thus, looking the point at issue, both from logical and legal angles, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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