2018 (7) TMI 1722 - AT - Income Tax

Tribunal: MAT tax credit must be deducted before interest calculation under sections 234B & 234C.

The Tribunal held that MAT tax credit, including surcharge and education cess, should be deducted from the total tax determined on income before ... Rectification of mistake u/s 154 - MAT credit allowed by revenue, while processing the return u/s 143(1), is not in accordance with law - Held that:- The amount of advance tax and TDS etc. rank pari passu with the amount of MAT tax credit available u/s 115JAA. Secondly, the amount of tax payable for the year is determined after reducing the amount of advance tax, TDS and MAT credit. Thirdly, the resultant amount arrived at after making such deductions is the amount of tax, which the assessee is liable to pay. Fourthly, the amount of interest payable under any provision of this Act is calculated on the resultant amount. This shows that the amount of interest under the Act is liable to be paid on the amount of tax payable determined after deducting, inter alia, the amount of MAT tax credit. We, therefore, hold that the amount of the MAT tax credit, inclusive of surcharge and education cess etc., if any, should be reduced from the amount of tax determined on the total income after adding surcharge and education cess, etc. Only the resultant amount payable will suffer interest under the relevant provisions of the Act. Since the amount of MAT tax credit is uncertain, we set aside the impugned order and remit the matter to the file of the AO for ascertaining the correct amount of MAT tax credit available with the assessee inclusive of surcharge and education cess etc., if any, and then allow tax credit as indicated above. - Decided in favour of assessee for statistical purposes. Issues:Allowance of MAT credit under section 115JAA - Deduction stage determination.Analysis:The appeal concerned the correctness of allowing MAT credit under section 115JAA in the computation of total tax payable by the assessee. The dispute revolved around the stage at which the tax credit should be allowed - whether before or after the levy of surcharge and education cess. The section provides for tax credit based on the difference between tax paid under section 115JB and tax payable on total income computed under other provisions of the Act. The contention was that the tax component should be deducted before surcharge and the education cess component should be reduced from the surcharge and cess payable. The Tribunal analyzed the provisions of section 115JAA and emphasized that tax and surcharge etc. are integral components of the total tax. It held that the tax credit, including surcharge, should be allowed immediately after loading the total tax with surcharge and education cess. This approach prevents the risk of losing the benefit of surcharge due to variations in rates. The Tribunal highlighted that interest under sections 234B and 234C is calculated on the net tax amount after deducting MAT tax credit, similar to advance tax and TDS deductions.The Tribunal referred to section 140A, which outlines the self-assessment process, to support its interpretation. It noted that advance tax, TDS, and MAT tax credit are treated equally in determining the tax payable. The Tribunal clarified that interest under the Act is levied on the tax payable amount after deducting the MAT tax credit. Therefore, it concluded that the MAT tax credit, inclusive of surcharge and education cess, should be subtracted from the total tax determined on the income, including surcharge and education cess. Only the resulting amount should be subject to interest under the relevant provisions of the Act. Due to the uncertainty regarding the exact amount of MAT tax credit, the Tribunal set aside the previous order and remitted the matter to the Assessing Officer for determining the correct MAT tax credit amount, including surcharge and education cess. The assessee was granted a reasonable opportunity for a hearing in this regard. Ultimately, the appeal was allowed for statistical purposes, emphasizing the importance of correctly determining and allowing MAT tax credit in the tax computation process.