Commissioner of Income Tax vs Pothys Cotton Products (P) Ltd.

K. Raviraja Pandian, J.—The revenue on appeal against the order of the Income Tax Appellate Tribunal, Madras ''C'' Bench, Chennai, dated 27.10.2006 passed in ITA No. 2897/Mds/2004 for the assessment year 1997-98.

The assessee is a private limited company engaged in the business of manufacture and sale of grey cloth in export markets. The assessee filed a return and admitted an income of Rs. 11,27,281/- as total income u/s 115JA of the Income Tax Act. The return was processed u/s 143(1)(a) of the Act without any adjustment and the assessing officer raised a demand of Rs. 4,65,326/-, which mainly consists of interest u/s 234A, 234B and 234C of the Act. On appeal by the assessee, the Commissioner of Income Tax (Appeals) upheld the order of the assessing officer and dismissed the appeal. On further appeal to the Tribunal, the Tribunal followed the order of the apex Court in the case of Kwality Biscuits Ltd. 284 ITR 434, wherein it was held that when the total income is determined by applying provisions of Section 115JA of the Act, interest u/s 234A, 234B and 234C of the Act cannot be charged and allowed the appeal in favour of the assessee. Thus, the revenue is before us.

The appeal was admitted by this Court on the following substantial questions of law:

Whether in the facts and circumstances of the case, the Tribunal was right in holding that the assessee is entitled to adjust the MAT credit before charging interest u/s 234B and 234C of the Act?

Whether on the facts and circumstances of the case the MAT credit can be given priority of set off against tax payable, contrary to the scheme of Schedule G of Form 1?.

We heard the arguments of the learned Counsel for the appellant and perused the materials available on record.

The very same issues have been considered by the Division Bench of this Court in T.C.A. Nos. 887 of 2004 etc. batch on 09.04.2009. In respect of the first question of law, the Division Bench has answered in favour of the assessee and against the revenue by observing as follows by concurring with CIT v. Jindal Experts Ltd. (2009) 222 CTR 8 (Del):

In respect of the first question of law, the arguments advanced by the counsel on either side are the same as the one advanced before the Delhi High Court cited supra. The Delhi High Court has considered the relevant provisions and dealt with the matter in detail and held that the credit u/s 115JAA should be given effect to before charging of interest u/s 234A, 234B and 234C of the Act. We are in agreement with the reasoning given by the Delhi High Court. The learned Counsel appearing for the revenue has not produced any materials or given compelling reasons to take a contrary view with that of the Delhi High Court. In such circumstances, we answer the first question in favour of the assessee and against the revenue.

In respect of the 2nd question of law, the Division Bench has observed as follows:

In the present case, the intention of the legislature is to give tax credit to tax and not to the tax and interest. Once the intention is clear, the revenue cannot rely on the Form-I to say that the MAT credit u/s 115JAA should be given only after tax and interest. Further we have answered the first question of law in favour of the assessee i.e. the MAT credit u/s 115JAA should be given effect to before charging the interest u/s 234B and 234C. Rule 12(1)(a) and Form-I cannot go beyond the provisions of the Act. Form-I cannot lay down the order of priority of adjustment of TDS, advance Tax, MAT credit u/s 115JAA which is contrary to the provisions of the Act. The order passed by the Tribunal is in accordance with law and we do not find any error or illegality in the order of the Tribunal so as to warrant interference. Accordingly, we answer the questions 2 and 3 also in favour of the assessee and as against the Revenue.

Thus both the questions of law have been answered against the revenue in favour of the assessee.

Following the Division Bench Judgment in T.C. (As) Nos. 887 of 2004 etc. batch dated 09.04.2009, referred to supra and for the reasons stated therein, the appeal is dismissed.