Commissioner of Income Tax vs Swathy Chemicals Ltd.

K. Raviraja Pandian, J.—The revenue is on appeal against the order of the Income Tax Appellate Tribunal, Madras ''B'' Bench, Chennai, dated 28.09.2006 passed in ITA No. 1714/Mds/2006.

The assessment year involved in this case is 2002-03. For the preceding assessment year, the assessee paid Maximum Alternate Tax (MAT) u/s 115JA of the Income Tax Act and the MAT credit was carried u/s 115JAA to be set off against the tax payable for the assessment year 2001-02. The assessing officer did not grant MAT credit in the proceedings u/s 143(1) of the Act and petition filed u/s 154 of the Act by the assessee was dismissed. The assessee appealed against the order of assessment to the Commissioner of Income Tax (Appeals), who allowed the appeal holding that MAT credit is nothing but the assessee''s credit lying with the Government available to the assessee for adjustment against tax due in the subsequent years on normally computed income and the tax credit brought forward has to be automatically adjusted. The revenue carried the matter to the Tribunal, the Tribunal following its earlier order in the case of M/s. Chemplast Sanmar Ltd., and held that the assessee is entitled to adjust the MAT credit first before charging of interest u/s 234B and 234C of the Act. The revenue is thus before us in this appeal.

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 MAT credit is to be set off from the tax payable before setting off the tax deducted at source and advance tax paid?

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?

Whether on the facts and in the circumstances of the case, the interest u/s 234B and 234C had to be calculated after giving the MAT credit against the tax payable on the basis of normal computation?

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. The Division Bench has answered the issues 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 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 all the questions of law have been answered against the revenue in favour of the assessee.

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