2010 (3) TMI 858 - HC - Income Tax

High Court: Interest cannot be charged under sections 234B/234C before allowing credit for MAT under section 154.

The High Court held that charging interest under sections 234B and 234C of the Income-tax Act before allowing credit for minimum alternate tax under ... Rectification of mistake - Whether u/S 154 it was permissible to charge interest u/s 234B and 234C before allowing credit for minimum alternate tax - Held that:- Any issue of law on which there may conceivably be two opinions, or where the issue is debatable, cannot form part of proceedings under section 154 of the Act. In the facts of the present case, the order made by the AO on September 11, 2003, itself indicates that the issue requires debate and deliberation. Hence, the same cannot be termed to be a mistake apparent on record so as to levy interest under sections 234B and 234C of the Act without granting credit for minimum alternate tax. Issue restired back to file of Tribunal for reconsideration. Issues:1. Interpretation of provisions under sections 234B and 234C of the Income-tax Act, 1961 before allowing credit for minimum alternate tax under section 154.2. Whether interest under sections 234B and 234C can be charged without giving credit for minimum alternate tax under section 154.Analysis:Issue 1:The High Court was tasked with determining whether it was permissible to charge interest under sections 234B and 234C of the Income-tax Act, 1961 before allowing credit for minimum alternate tax under section 154. The order dated April 10, 2008, by the Income-tax Appellate Tribunal did not address this crucial issue. The Assessing Officer had charged interest under sections 234B and 234C before allowing credit for minimum alternate tax in the assessment year 2002-03. The Commissioner of Income-tax (Appeals) partially allowed relief, directing rectification of the order under section 154. The Tribunal upheld the Commissioner's order, citing reliance on previous cases. However, the High Court emphasized that section 154 is meant to rectify apparent mistakes on record, not to resolve debatable issues.Issue 2:The High Court highlighted that the Tribunal failed to consider whether the Assessing Officer's actions were permissible under the scope of section 154. It was established that the issue required debate and deliberation, indicating it was not a mistake apparent on record. Therefore, charging interest under sections 234B and 234C without granting credit for minimum alternate tax was deemed impermissible. Consequently, the High Court quashed the Tribunal's order dated April 10, 2008, and restored the appeal to file for further consideration. The Tribunal was instructed to address the issue in question first before delving into the merits, emphasizing the importance of resolving the interpretational issue before proceeding.In conclusion, the High Court's judgment clarified the limitations of section 154 in rectifying apparent mistakes and highlighted the necessity of resolving debatable issues before charging interest under relevant sections of the Income-tax Act. The decision underscored the importance of due consideration and debate on legal issues before making financial assessments, ensuring fair and just application of tax laws.