2016 (11) TMI 209 - HC - Income Tax

High Court rules in favor of assessee on MAT credit set off against tax under Income Tax Act

The High Court of Madras ruled in Tax Case Appeals concerning MAT credit set off against tax payable under the Income Tax Act. Referring to precedent, the ... MAT credit to be set off from the tax payable before levying interest under section 234B and 234C - Held that:- We notice that the issues raised in the substantial question of law in the above appeals have been considered and the question was decided in favour of the assessee by the judgment of this Court in Commissioner of Income Tax Vs. Chemplast Sanmar Ltd, reported in (2009 (4) TMI 61 - MADRAS HIGH COURT ) affirmed in the case reported in Commissioner of Income Tax Vs. Tulsyan Nec Ltd.(2010 (12) TMI 23 - Supreme Court of India ), wherein held MAT credit would lapse after five succeeding assessment years under section 115JAA(3); that no interest would be payable on such credit by the Government under the proviso to section 115JAA(2) and that the assessee would be liable to pay interest under sections 234B and 234C on the shortfall in the payment of advance tax despite existence of the MAT credit standing to the account of the assessee. Thus, despite the MAT credit standing to the account of the assessee, the liability of the assessee gets increased instead of it getting reduced - Decided in favour of assessee Issues:1. MAT credit set off against tax payable before levying interest under sections 234B and 234C of the Income Tax Act, 19612. Priority of MAT credit set off against tax payable contrary to Schedule G of Form 1Analysis:The High Court of Madras heard Tax Case Appeals challenging the orders of the Income Tax Appellate Tribunal for assessment years 2001-02 and 2003-04. The substantial questions of law raised in the appeals pertained to MAT credit set off and priority against tax payable. The Court referred to a previous judgment in Commissioner of Income Tax Vs. Chemplast Sanmar Ltd, affirmed by the Supreme Court in Commissioner of Income Tax Vs. Tulsyan Nec Ltd. The Supreme Court highlighted that adopting the Department's case would lead to negative consequences for the assessee, including the lapse of MAT credit, no interest payable by the Government, and increased liability for the assessee despite having MAT credit. Consequently, the Court answered the substantial questions against the department and in favor of the assessee, resulting in the rejection/dismissal of the tax case appeals with no costs. The connected miscellaneous petitions were closed as a result of this judgment.