2023 (8) TMI 282 - AT - Income Tax

Appellate Tribunal favors assessee in tax credit case under Income-tax Act, 1961.

The Appellate Tribunal ruled in favor of the assessee in a case concerning the revision order under section 263 of the Income-tax Act, 1961 related to tax ... Revision u/s 263 - MAT tax credit u/s. 115JAA allowed - as per CIT if the tax credit for these years had been allowed by the AO, determined by him for AYs 2013-2014 and 2014-2015 respectively, no tax credit would be available for being allowed to the assessee for the current year - HELD THAT:- All the facts and figures, duly tabulated from the record by the Pr. CIT in his order, are undisputed. The AO has only allowed the tax credit as available on record. AO cannot presume utilization of tax credit for these two earlier years, i.e., where the same has not been actually allowed, and proceed on that basis. That is, he could not take cognizance of sums that had not crystallized upon passing of the requisite orders. That would be, plainly, presumptuous. Tax liability, unless admitted, it may be appreciated, is only as determined by following the due process of law. On the contrary, it is the non-allowance of the tax credit, exigible on the basis of record, that would make the assessment as liable to be questioned in its respect. True, the ld. Pr. CIT stating that no credit would be available if the AO had allowed the tax credit for AYs. 2013-2014 and 2014-2015 is arithmetically correct, as the combined credit liable to be utilized for these years is Rs. 40.74 crore, as against the available credit of Rs. 26.15 cr. The inclusion of tax credit for AYs. 2008-09 and 2009-10, available since 26.6.2020, would decrease, but not eliminate, this shortfall. That would not though make the assessment for the current year as erroneous. Rather, as apparent and admitted, it is the assessment for those years that could be said to be so. And as we shall see, erroneous to the prejudice of the assessee, and not the Revenue. As giving appeal effect for these two years would result in the assessee’s tax liability for these years, as for the earlier years, being determined on the basis of tax under the MAT regime, rather than under the normal provisions of the Act, only in which, latter, case does the occasion to allow tax credit arise. That apart, the entire book-profit would be eligible to be allowed as credit for the subsequent years, including AY 2017-18. That is, rather than being a case of allowance of tax credit for AYs. 2013-14 & 2014-15, the said two years as the earlier years, would yield refund to the assessee. This explains the non-giving of appeal-effect for these years by the Revenue. In sum, the tax credit being allowed for AYs. 2013-14 & 2014-15, as the ld. Pr. CIT requires, without it being actually allowed by passing the relevant orders, apart from being hypothetical and presumptuous, would be without observing the due process of law, only whereby can tax liability under law arise, and be given cognizance to. Besides, it would be inconsistent with the law as clarified by the Hon’ble jurisdictional High Court in Cochin International Airport [2017 (8) TMI 1190 - KERALA HIGH COURT] as indeed the assessment for the earlier years. Assessee appeal allowed. Issues involved:The judgment involves the issue of revision order under section 263 of the Income-tax Act, 1961 concerning the tax credit allowed under section 115JAA of the Act.Comprehensive details of the judgment:Issue 1: Tax Credit under Section 115JAAThe only issue in the appeal was whether the Assessing Officer (AO) acted in accordance with the law in allowing tax credit u/s. 115JAA of the Act at Rs. 18.17 crore for the current year. The Principal Commissioner of Income-tax contended that the tax credit was not liable to be allowed, rendering the assessment order as erroneous and prejudicial to the interests of the Revenue.The background facts of the case revealed that the assessee had claimed deduction u/s. 80-IA as an infrastructure facility for a period of 10 years, but the deduction was not allowed by the authorities until the matter reached the Hon'ble Apex Court. The decision by the Hon'ble Court validated and reinstated the returns filed by the assessee for the relevant years. However, the AO did not allow the tax credit against tax paid on book-profit for the earlier years, leading to the current dispute.The Appellate Tribunal found that the AO's order was not erroneous or prejudicial to the interest of the Revenue. The tax credit available at the time of assessment for the current year was correctly allowed by the AO based on the available record. The Tribunal emphasized that the AO could not presume the utilization of tax credit for earlier years that had not been actually allowed. The non-allowance of tax credit for the earlier years was the crux of the issue, and the assessment for those years could be questioned, not the current year.In conclusion, the Tribunal held that the tax credit for the earlier years should not be allowed without following the due process of law. Allowing the tax credit without the relevant orders being passed would be hypothetical and inconsistent with legal precedents. Therefore, the assessee succeeded in its challenge, and the appeal was allowed.Order pronounced on July 31, 2023 under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963.