2009 (4) TMI 415 - HC - Income Tax

High Court dismisses Revenue's appeal on MAT credit treatment, upholds ITAT order.

The High Court of Madras dismissed the Revenue's appeal against the ITAT order regarding the treatment of Minimum Alternate Tax (MAT) credit. The court ... Minimum Alternate Tax- The assesseee for the assessment year 2002-03 was assessed on a total income of Rs. 35,88,383/- determining the tax and surcharge at Rs. 12,81,053. After determining the tax the Assessing Officer deducted tax at source and advance tax calculated interest under section 234B and 234C of the Act and thereafter allowed brought forward tax credit under section 115JA. According to the assessee, the tax credit could have been treated on par with the tax deducted at source and tax credit should have been given right at the beginning. The appeal filed by the assessee was allowed by the Commissioner (Appeals). This was upheld by the Tribunal. Held that- dismissing the appeal, that the credit under section 115JAA should be given effect charging of interest under section 234B and 234C. Issues:Appeal by Revenue against ITAT order - Treatment of MAT credit - Order of giving credit - Appeal outcome - Question of law regarding MAT credit and interest under sections 234B and 234C.Analysis:The High Court of Madras heard an appeal by the Revenue against the Income-tax Appellate Tribunal (ITAT) order dated February 17, 2006, in I. T. A. No. 554/ Mds/2004. The appeal concerned the treatment of Minimum Alternate Tax (MAT) credit for the assessment year 2002-03. The assessee, a company, was assessed on a total income of Rs. 35,88,383, with tax and surcharge of Rs. 12,81,053. The Assessing Officer allowed the brought forward MAT credit under section 115JAA after deducting TDS, advance tax, and interest under sections 234B and 234C. The assessee contended that the MAT credit should have been treated on par with TDS, and credit should have been given at the beginning. The Commissioner of Income-tax (Appeals) allowed the appeal, which was upheld by the ITAT based on a previous judgment in the case of Chemplast Sanmar Limited.The main question of law formulated by the Revenue was whether the ITAT was correct in holding that the MAT credit should be set off before charging interest under sections 234B and 234C of the Income-tax Act, 1961. The High Court considered a similar issue in a previous case and upheld the assessee's position, agreeing with the reasoning of the Delhi High Court. The court emphasized that the intention of the Legislature was to give tax credit to tax and not to tax and interest. It was concluded that the MAT credit under section 115JAA should be given effect before charging interest under sections 234B and 234C. The court also highlighted that Form I cannot dictate the order of priority of adjustment of TDS, advance tax, and MAT credit contrary to the provisions of the Act.Given the Division Bench's previous judgment in a similar case, the High Court dismissed the appeal as the question of law had already been decided in favor of the assessee. The court found no error or illegality in the ITAT's order and upheld the decision, emphasizing that the order was in accordance with the law. Therefore, the questions raised by the Revenue were answered in favor of the assessee, and the appeal was dismissed based on the precedent set by the Division Bench.