MAT credit must be set off before interest is computed; rules and forms cannot override the Income-tax Act's priority.

MAT credit under Section 115JAA of the Income-tax Act must be adjusted before computing interest under Sections 234B and 234C, because the statutory credit is to be given effect against tax payable before consequential interest is charged. The Court also held that Rule 12(1)(a) and Form I cannot override the Act or impose a different order of priority for set-off of TDS, advance tax and MAT credit. The legislative scheme therefore controls the sequence of adjustment, and the revenue's contrary challenge was rejected.

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Issues: Whether MAT credit under Section 115JAA of the Income-tax Act, 1961 is to be given effect to before computing interest under Sections 234B and 234C, and whether the order of set-off suggested by Form I can prevail over the Act.

Analysis: The Court followed the earlier Division Bench view that the legislative intent is to allow tax credit against tax payable and not against tax and interest together. It held that credit under Section 115JAA must be adjusted before charging interest under Sections 234B and 234C. It also held that Rule 12(1)(a) and Form I cannot override the Act or prescribe a contrary order of priority for adjustment of TDS, advance tax, and MAT credit.

Conclusion: MAT credit has priority of set-off before charging interest under Sections 234B and 234C, and the revenue's challenge failed.

Ratio Decidendi: A statutory tax credit must be given effect according to the Act and before consequential interest is computed, and a prescribed form or rule cannot override that legislative priority.

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