Commissioner of Income Tax vs Aban Loyd Chiles Offshore Ltd.

Chitra Venkataraman, J.—The Revenue is on appeal as against the order of the Income-tax Appellate Tribunal relating to the assessment year 2001-02. At the time of admission, the following question of law was raised:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is eligible for the interest on refund arising out of MAT credit?"

However, on going through the order of the Income-tax Appellate Tribunal, we find that it applied the decision of the Income-tax Appellate Tribunal in the case of (2004) 83 TTJ 427, which was the subject matter of consideration before this court in the decision in the case of The Commissioner of Income Tax Vs. Chemplast Sanmar Limited, which was affirmed in the decision in the case of Commissioner of Income Tax, Chennai Vs. Tulsyan NEC Ltd., in favour of the assessee.

The assessee is engaged in the business of offshore oil well drilling. In respect of the claim for the MAT credit under section 115JAA of the Income-tax Act, 1961 (hereinafter called as "the Act"), by order in I.T.A. 268/Mds/2004, the Income-tax Appellate Tribunal directed the Assessing Officer to give the MAT credit before TDS and advance tax for the year under consideration. While giving effect to the same, the Assessing Officer did not allow any interest on refund under section 244A of the Act.

The assessee went on appeal before the Commissioner of Income-tax (Appeals), who upheld the order of the Assessing Officer and dismissed the appeal. Thereupon, the assessee went on further appeal before the Income-tax Appellate Tribunal.

In considering the issue, the Income-tax Appellate Tribunal pointed out that while giving effect to the Income-tax Appellate Tribunal''s order dated February 28, 2005, it was noted that the assessee had TDS of Rs. 1,72,90,710 and the MAT credit available was Rs. 83,73,659. Thus, out of total tax of Rs. 2,06,96,452, after giving credit to the MAT credit of Rs. 83,73,659, the TDS was adjusted resulting in a refund of Rs. 49,67,917. In the order passed by the Assessing Officer on March 16, 2005, the Assessing Officer pointed out that for the purpose of finding out the liability to payment of advance tax, the credit of MAT must first be given and then, on the balance of the tax payable, the liability to advance tax was to be worked out for the purpose of charging interest under section 234B and section 234C of the Act; the Assessing Officer also pointed out that since the tax deducted at source was exceeding the liability, the question of interest under section 234B and section 234C did not arise. Thus, the Income-tax Appellate Tribunal pointed out that once the MAT credit is to be set off against any tax payable by the assessee on the basis of the normal computation and there-afterwards credit for TDS, advance tax and self-assessment tax could be given and, accordingly, the interest be charged or allowed to the assessee under section 234B, section 234C or section 234A of the Act.

In the light of the results giving effect to the Income-tax Appellate Tribunal order, the Income-tax Appellate Tribunal directed the Assessing Officer to allow the claim of the assessee on interest on refund. To that end, the Tribunal followed the decision of (2004) 83 TTJ 427.

In view of the facts as noted above, the question that would arise herein is as to whether the assessee would be entitled to interest on the refund as per section 244A of the Act.

A reading of the order passed on February 28, 2005, giving effect to the order of the Income-tax Appellate Tribunal reveals that on the total tax liability of Rs. 2,06,96,452, the adjusted MAT credit under section 115JAA of the Act leaves the tax payable at Rs. 1,23,22,793, after deducting TDS Rs. 1,72,90,710 the Assessing Officer had shown the refund due as Rs. 49,67,917.

The assessee in its appeal before the Commissioner of Income-tax (Appeals) apparently sought for interest on the amount of refund due as per section 244A of the Act contending that the Assessing Officer had not granted interest while refunding the excess TDS. It pointed out that as per section 244A of the Act, interest has to be granted up to the date of refund. To that end, the assessee relied on the decision in the case of Commissioner of Income Tax Vs. T.V. Sundaram Iyengar and Sons Ltd., , The Commissioner of Income-tax (Appeals), however, rejected the appeal holding that the MAT credit allowed would not bear any interest; consequently, the Assessing Officer did not grant any interest on the MAT credit.

On appeal preferred before the Income-tax Appellate Tribunal, the Tribunal, however, referred to the decision in the case of (2004) 83 TTJ 427 and allowed the assessee''s case.

As far as the decision reported in The Commissioner of Income Tax Vs. Chemplast Sanmar Limited, which was an appeal against the Income-tax Appellate Tribunal before this court is concerned, the issue was as to whether the Tribunal was right in holding that carry forward MAT credit available to the assessee was to be adjusted first, before charging interest under sections 234B and 234C of the Act. Confirming the view of the Tribunal, this court held that the credit under section 115JAA only should be given effect to and not to the tax and interest therefore and that interest under sections 234A, 234B and 234C of the Act should be given after giving the MAT credit under section 115JAA. In so holding in favour of the assessee, this court referred to the decision of the Delhi High Court in the case of Commissioner of Income Tax Vs. Jindal Exports Ltd. and Others, holding that the credit under section 115JAA should be given effect to before charging of interest under sections 234A, 234B and 234C of the Act. This was confirmed by the apex court in the decision reported in the case of Commissioner of Income Tax, Chennai Vs. Tulsyan NEC Ltd., .

Thus, the issue before this court is totally different from what was considered in the case of The Commissioner of Income Tax Vs. Chemplast Sanmar Limited, ; consequently, we do not think the decisions would be safely relied on by either parties before us.

As is evident from the reading of the order of the Assessing Officer dated February 28, 2005, the assessee became entitled to refund consequent upon the deduction given on the MAT credit and the TDS. Thus, going by the factual details, the assessee is entitled to a refund of Rs. 49,67,917 and the deduction on TDS itself was before granting or charging any interest under any provisions of the Act. Hence, we hold that the proper course herein would be to remand the matter back to the Assessing Officer to work out interest on the refund payable to the assessee on the sum of Rs. 49,67,917 as ordered in the order of the Assistant Commissioner dated February 28, 2005, in accordance with section 244A of the Act.