Madras H.C : the refund had arose on account of the MAT credit and the same could only be carried forward to set off and refund of MAT credit cannot be granted as per section 115JAA(5) and consequently, interest on such refund under Section 244A cannot be granted

High Court Of Madras

CIT, Coimbatore vs. A.B.T. Industries Ltd.

Assessment Year : 2001-02

Section : 244A, 115JAA

Mrs. R. Banumathi And K. Ravichandrabaabu, JJ.

Tax Case (Appeal) No. 31 Of 2010

April  17, 2013

JUDGMENT

K. Ravichandrabaabu, J. – The Revenue is on appeal against the order of the Income Tax Appellate Tribunal in respect of the assessment year 2001-2002.

2. The assessee is a company. The assessment was completed under Section 143(1) of the Income Tax Act on 24.2.2003. The Assessing Officer, while completing the assessment gave credit for TDS amount of Rs. 14,07,235/- only, as against the claim of the assessee for total TDS of Rs. 29,86,639/- The assessee through their letter dated 9.5.2003 informed the assessing Officer that the income pertaining to the TDS credit have been offered for tax in the assessment year 2001-02 and claimed MAT credit before charging surcharge on Income Tax. The claim of the assessee was considered by the assessing Officer by passing order under Section 154 of the Income Tax Act. The assessing Officer found that the claim for MAT credit can be considered only after charging the surcharge on Income Tax. Accordingly, he passed the revised assessment order thereby ordering refund of Rs. 12,91,037/-, however without granting interest under Section 244A on the ground that the refund has arisen as a result of giving MAT credit only. Aggrieved against the said order, the assessee went on appeal before the Commissioner of Income Tax (Appeals) by contending that surcharge should have been calculated after deducting MAT credit and interest under Section 244A should have been granted. The first appellate authority while rejecting the claim of the assessee with regard to charging of surcharge after deduction of MAT credit, had however directed the Assessing Officer to calculate the interest under Section 244A and grant the same. As against the order of the first appellate authority, the Revenue went on appeal before the Tribunal.

3. By following its earlier decision made in the case of Chemplast Sanmar Ltd. v. Dy. CIT [2004] 3 SOT 620 (Chennai) the Tribunal dismissed the appeal filed by the Revenue. Aggrieved against the same, the present tax case appeal is filed by the Revenue by raising the following substantial question of law:-

“Whether on the facts and circumstances of the case, the Tribunal ought to have appreciated the fact that the refund had arose on account of the MAT credit and the same could only be carried forward to set off and refund of MAT credit cannot be granted as per section 115JAA(5) and consequently, interest on such refund under Section 244A cannot be granted?”

4. It is submitted by the learned counsel appearing for the Revenue that the dispute involved in this case is as to whether the assessee is entitled to interest under Section 244A. learned counsel further submitted that the Assessing Officer had given MAT credit to the tune of Rs. 14,39,653/- towards the total tax liability of Rs. 31,35,255/-. Consequently, he has also given credit to TDS to the tune of Rs. 29,86,639/- and accordingly ordered for refund of Rs. 12,91,037/-. As the refund was made as a result of giving MAT credit, the Assessing Officer had rightly rejected the claim of interest under Section 244A.

5. Per contra, the learned counsel appearing for the assessee submitted that as per the decision of the Supreme Court CIT v. Tulsyan NEC Ltd. [2011] 330 ITR 226/196 Taxman 101/[2010] 8 taxmann.com 228, MAT credit has to be given first and thereafter interest is to be computed. Therefore, the learned counsel contended that even after giving MAT credit, the tax liability payable by the assessee is lesser than the TDS amount credit given and therefore the balance amount ordered to be refunded should also carry interest under Section 244A.

6. Heard the learned counsel appearing for either side.

7. We have perused the order of the Assessing Officer made under Section 154, wherein he has given MAT credit under Section 115JA to the tune of Rs. 14,39,653/- towards to the total tax liability of Rs. 31,35,255/-. Thereafter, he has also given credit to TDS payment made by the assessee to the tune of Rs. 29,86,639/-. Thus, it made him to make an order of refund of Rs. 12,91,037/- to the assessee. From the said order of the Assessing Officer, it is very clear that the refund was not made only due to the grant of MAT credit and on the other hand it is in pursuant to the TDS credit also to the tune of Rs. 29,86,639/-. Therefore, the reasoning of the Assessing Officer is factually incorrect in refusing to grant interest under Section 244A. When the said order of the Assessing Officer was challenged by the assessee before the first appellate authority, it appears, two grounds were raised viz., (i) surcharge should have been calculated after deducting MAT credit and (ii) interest under Section 244A should have been granted.

8. The first appellate authority rejected the claim of the assessee, insofar as the first ground is concerned, by holding that the MAT credit is to be treated on par with TDS payment and therefore surcharge cannot be calculated after giving credit to MAT credit. However, insofar as the claim of interest under Section 244A is concerned, the first appellate authority found that refund had arisen out of the excess TDS payment and therefore the assessee is entitled to interest under Section 244A. He has also specifically found that the proviso to Section 115JAA(2) was not applicable to the facts of the case. Accordingly, he directed the Assessing Officer to calculate the interest under Section 244A and grant the same.

9. It is seen that as against the said order of the first appellate authority, only the Revenue went on appeal before the Tribunal. When we perused the order of the Tribunal, we could see that the Tribunal considered only the issue in respect of giving MAT credit before set off of TDS and advance tax from the tax payable by the assessee. No doubt, such issue is now settled in view of the decision made by the Apex Court Tulsyan NEC Ltd. (supra) wherein the Apex Court has held that the MAT credit admissible in terms of section 115JAA of the Income Tax Act, 1961, has to be set off against the assessed tax payable, before calculating interest under Sections 234A, 234B and 234C. It is further held therein that if an assessee is entitled to a tax credit as a consequence of the assessee making payment of tax under Section 115JA(1) in year one, then, the set off such tax credit follows as a matter of course once the conditions mentioned under Section 115JAA are fulfilled and the grant of such credit is not dependent upon determination by the Assessing Officer. Thus, the Apex Court decided the issue in favour of the assessee therein. The decision of the Madras High Court CIT. v. Chemplast Sanmar Ltd. [2009] 314 ITR 231/180 Taxman 335 was also affirmed by the Apex Court in the said decision. Thus, in view of the decision of the Apex Court, as discussed supra, the issue with regard to grant of MAT credit has already been settled. Therefore, the only grievance of the Revenue before the Tribunal could be against the order of the first appellate authority directing the Assessing Officer to grant interest under Section 244A. The Tribunal, on the other hand, has rejected the Revenue’s appeal by following its earlier order Chemplast Sanmar Ltd.’s case (supra). There is absolutely no discussions, whatsoever, with regard to the interest payments under Section 244A except by extracting a paragraph from the order of the Tribunal in Chemplast Sanmar Ltd case.

10. It appears that the Tribunal had concentrated only on the issue as to whether giving credit for MAT before set off of TDS and advance tax from the tax payable by the assessee is correct or not. The Tribunal adverted its attention to the Chemplast Sanmar Ltd’s., case to answer the said issue and consequently rejected the Revenue’s appeal. The grounds of appeal raised in this appeal by the Revenue also indicate that the issue before the Tribunal was only with regard to interest payable under Section 244A and not with regard to the adjustment of MAT credit.

11. Even though the Tribunal dismissed the appeal filed by the Revenue as against the order of the first appellate authority, such order of dismissal was not in reference to the issue with regard to payment of interest under Section 244A. Under these circumstances, we would have normally remitted the matter back to the Tribunal to reconsider the issue. However, we are not resorting to do so as we have already pointed out that the refund had arisen not as a result of giving MAT credit alone as observed by the Assessing Officer, but had arisen out of the excess TDS payment made by the assessee. Therefore, the assessee is entitled to interest under Section 244A. The first appellate authority has rightly considered the said issue and directed the Assessing Officer to grant the same. Consequently, there is no necessity for remitting the matter to the Tribunal. On the other hand, we are of the view that dismissal of this appeal would give quietus to the matter.

12. Considering all these facts and circumstances, we find no merits in this appeal and accordingly reject the same by answering the question of law accordingly. No costs.

[Citation : 356 ITR 195]