TaxTMI 
TaxTMI 
2009 (2) TMI 58
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....ITED Ms Prem Lata Bansal, Mr Mohan Prasad Gupta and Ms Anshul Sharma [in ITA Nos. 402/2005, 708/2007, 719/2007, 829/2007, 992/2007, 1350/2007, 271/2008, 272/2008, 295/2008, 344/2008, 453/2008, 456/2008, 462/2008, 476/2008, 477/2008, 701/2008, 893/2008, 989/2008] Mr Sanjeev Sabharwal [in ITA Nos. 1474/2006, 802/2008] for the Appellants. Mr Ajay Vohra with Ms Kavita Jha and Mr Sriram Krishna [in ITA Nos. 907/2007, 344/2008, 701/2008] Mr R. M. Mehta [in ITA No. 1063/2007] Dr. Rakesh Gupta, Ms Aarti Saini, Ms Poonam Ahuja [in ITA No. 986/2007, 989/2008] Mr M.S. Syali, Sr. Advocate with Mr Satyen Sethi, Mr Aseem Mawar and Ms Mahua C. Kalra [in ITA Nos. 1474/2006, 453/2008] Mr V.P. Gupta and Mr Basant Kumar[ in ITA NoS.719/2007, 791/2007, 829/2007, 271/2008, 476/2008, 546/2008, 893/2008] Mr C.S. Aggarwal, Sr. Advocate with Mr Prakash Kumar and Mr Ravi Pratap Mall[in ITA Nos. 402/2005, 802/2008 and 989/2008 Mr Satyen Sethi and Mr Johnson Bara [in ITA Nos. 708/2007, 1350/2007, 801/2008] Mr Karan Khanna in [ITA Nos. 456/2008 and 462/2008] Mr S. Nanda Kumar and Mr Achin Goel [in ITA No. 992/07] Mr R.M. Mehta [in ITA No. 1063/2007] Mr Rajesh Mahna and Mr Ramanand Roy in ITA No.791....
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....as no statutory prescription for first setting off the tax credit and then computing the interest under sections 234B and 234C of the said Act. Therefore, the revenue contended, the Tribunal erred in holding that interest under sections 234B and 234C was to be computed only after giving effect to the set off. With regard to the rectification proceedings under section 154, it was contended that the language of the provisions of section 234B and section 234C was clear and unambiguous and, as such, there was no scope for any debate. Thus, it was submitted, that rectification proceedings were in order. 4. The learned counsel who appeared for the assessees/respondents submitted that the provisions of sections 234B and 234C were compensatory in nature. On the basis of this premise they contended that since the tax credit (MAT credit) was available with the revenue, no loss was caused to the revenue and, therefore, the question of compensation itself would not arise. It was also contended that the amendments to the said Explanation 1 after section 234B(1) and the Explanation after section 234C(1) were merely curative and clarificatory of the legal position that applied even before 01.0....
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....ction or collection and which is taken into account in computing such total income. Here, too, according to the revenue, the only reduction permissible is in respect of TDS. 7. It was further contended that this was the position in law prior to 01.04.2007. Since this was causing hardship, various representations were received by the Central Board of Direct Taxes to treat the tax credit under section 115JAA (MAT credit) as advance tax. Subsequently, the amendment to Explanation 1 after section 234B(1) was brought about so as to specifically provide for reduction of the tax determined under section 143(1) or upon a regular assessment by, inter alia, the available tax credit under section 115JAA in addition to the existing reduction of TDS so as to arrive at the figure of assessed tax which formed the basis of the charge of interest. A similar amendment was brought about in the Explanation after 234C(1). 8. In this context, the learned counsel for the revenue drew our attention to Circular No.14/2006 which contains the Explanatory Notes on provisions relating to Direct Taxes under the Finance Act, 2006. The relevant portions of the said circular are as under:- "38. Credit for....
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....it was contended that reduction of MAT credit prior to computation of interest under sections 234B and 234C is permissible only after 01.04.2007, that is, for assessment year 2007-2008 onwards. Since all these appeals relate to prior assessment years, MAT credit cannot be set off prior to the computation of interest under sections 234B and 234C. 10. Referring to the provisions of chapter XVII-C relating to advance tax, it was submitted by the learned counsel for the revenue that section 207 imposes the liability for payment of advance tax and that section 208 stipulates that the advance tax must be paid in the financial year itself. Section 209 prescribes the mode of computation of advance tax and, as per sub-clause (d) of sub-section (1) thereof, only the amount of TDS is to be reduced for arriving at the figure of advance tax. A reference was then made to section 140A which lays down the procedure for payment and computation of self-assessment tax. This, too, according to the learned counsel for the revenue, speaks of reduction of only the TDS amount from the tax payable. It was submitted that whether it is the computation of advance tax or self-assessment tax, the only reduct....
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.... and section 234C. 13. It must be pointed out that this decision was in the context of section 115J, the question being - Whether interest under section 234B and section 234C is chargeable even in a case where tax liability arises only by applicability of section 115J? The question was answered in the affirmative in favour of the revenue and against the assessee. Of course, the questions in the present appeals are entirely different. 14. With regard to the issue of rectification proceedings, it was submitted that the provisions are clear. There is no scope for debate. Moreover, the provisions being mandatory and automatic, there is no question of waiver. That being the position, it was submitted, if interest under section 234B or 234C is not originally charged, the same can be corrected in proceedings under section 154 of the said Act. Reliance was placed by the learned counsel for the revenue on CIT v. Malayala Manorama Co. Ltd: 253 ITR 791 (Ker) and Nicco Corporation Ltd v. CIT: 272 ITR 58 (Cal). 15. Lastly, it was argued that hardship or inequity is no ground for not charging interest under sections 234B and 234C before allowing MAT credit. It was contended that it i....
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.... the form of exemptions, deductions and high rates of depreciation. The rate of minimum tax was kept at a modest figure deeming 30 per cent of book profits as total income. This modest amount is likely to go down further with the downward revision of corporate tax rate to 35 per cent and abolition of surcharge. xxxx xxxx xxxx xxxx 45.4 The Act also inserts a new section 115JAA to provide for a tax credit scheme by which the MAT paid can be carried forward for set-off against regular tax payable during the subsequent five-year period subject to certain conditions:-- (1) When a company pays tax under MAT, the tax credit earned by it shall be an amount which is the difference between the amount payable under MAT and the regular tax. The regular tax in this case means the tax payable on the basis of normal computation of total income of the company. (2) MAT credit will be allowed carry forward facility for a period of five assessment years immediately succeeding the assessment year in which MAT is paid. Unabsorbed MAT credit will be allowed to be accumulated subject to the five-year carry-forward limit. (3) In the assessment year when regular tax becomes payable, the dif....
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....id. The argument raised on behalf of the revenue that such payment of tax did not strictly comply with the meaning of advance tax and would therefore have to be disregarded for the purposes of charging interest under section 234A, was rejected. The court also held that interest under section 234A was compensatory in nature and unless any loss was caused to the revenue, the same could not be charged from the assessee. Inter alia, referring to the definition of advance tax in section 2(1) of the said Act, the court also observed as under:- The interpretation clause, as is well known, is not a positive enactment. The interpretation clause also begins with the word unless the context otherwise requires. Advance tax has been defined to mean the advance tax payable in accordance with the provisions of Chapter XVII-C. Such a definition is not an exhaustive one. If the word advance tax is given a literal meaning, the same apart from being used only for the purpose of Chapter XVII-C may be held to be tax paid in advance before its due date, i.e., tax paid before its due date. The matter might have been otherwise, had there been an exhaustive definition of the said provision. The scheme o....
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....y, it was submitted by Mr Aggarwal, in the context of applicability of section 154, that, in any event the issue was highly debatable. This was so because, according to him, the Tribunal in several cases had concluded that MAT credit has to be given prior to computation of advance tax liability. Reference was made to 92ITD 441 (Chandigarh) and 83 TTJ 427 (Chennai). These demonstrate that the issue was debateable and could not have the subject matter of section 154 proceedings. 23. Mr Syali, senior advocate, appeared for the respondent/assessee in ITA 1474/2006 in which the issue was with regard to section 234C. In addition to the arguments of Mr C S Aggarwal in respect of section 234B, which, according to Mr Syali, would also be relevant in respect of section 234C, he (Mr Syali) submitted that the revenue's contention, that interest under section 234C has to be computed before the MAT credit is set off, is untenable. He submitted that the absurdity of such a contention was obvious: the department expects an assessee to first pay advance tax to the extent of MAT credit already available and then claim refund of the same amount. 24. He submitted further that the nature of inter....
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....against tax payable, therefore, for computing interest under sections 234B and 234C also, the tax credit is to be set-off first and only thereafter the deductions of the TDS amount and the advance tax paid are to be made. 27. In similar vein to what Mr Aggarwal had submitted, Mr Syali also contended that it is a settled principle of law that literal construction may be the general rule in construing taxing enactments, but that does not mean that it should be adopted even if it leads to a discriminatory or incongruous result. When a literal interpretation leads to an absurd or unintended result, the language of the statute can be modified to accord with the intention of the legislature and to avoid absurdity. Reliance was placed on CWS (India) Ltd v. CIT: 208 ITR 649 (SC) and CIT v. J.H. Gotla: 156 ITR 323 (SC). It was also submitted that where two views are reasonably possible, the view in favour of the assessee should be preferred. For this proposition, reliance was placed on UOI v. Onkar S. Kanwar: 258 ITR 761 (SC) and CIT v. Kulu Valley Transport Co. P. Ltd: 77 ITR 518. 28. Mr Syali, lastly, submitted that the amendments to Explanation 1 after section 234B(1) and the Expla....
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....s of the said act being compensatory in nature, had to be paid by the government even on refund of interest paid by the assessee under the provisions of the act. In other words, the Supreme Court directed grant of interest on interest on the principle that interest being compensatory in character had to be paid to the assessee to compensate for deprivation of the use of money, for the period such monies were illegally detained by the government. He submitted that the Supreme Court held that even outside the provisions of the said act, interest had to be granted by the government, in a situation where the government had withheld refund of taxes and interest was determined to be due to the assessee. Based on the said decision, it was submitted that MAT credit available to an assessee for being set-off against the tax payable under the statutory enactment cannot be ignored while determining shortfall of tax payable for the purposes of calculation of interest under sections 234A, 234B and 234C of the said Act. To the extent of the availability of MAT credit, monies are held by the government and the assessee cannot be charged interest on the shortfall of the tax, excluding the amount o....
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....njunction with s. 24(2) in this case for the present purpose. If the purpose of a particular provision is easily discernible from the whole scheme of the Act, which in this case is to counteract the effect of the transfer of assets so far as computation of income of the assessee is concerned, then bearing that purpose in mind, we should find out the intention from the language used by the Legislature and if strict literal construction leads to an absurd result, i.e., a result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction… (underlining added) 33. The fourth and final submission of Mr Vohra was that the amendments made in sections 234A, 234B and 234C of the said Act were curative and, therefore, had retrospective operation. The a....
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....able 28,03,867 21,54,483 Less: MAT credit 5,48,075 -- Total Tax + interest liability 22,55,792 21,54,483 Difference 1,01,309 36. The above table clearly illustrates the difference in the stands adopted by the parties. While the MAT credit is the same, the point at which it is set off makes all the difference. As per the department the MAT credit is to be set off after interest under sections 234B and 234C are computed. On the other hand, as per the assessee, the MAT credit has to be set off against the tax payable, prior to the computation of interest. Rejoinder on behalf of the Revenue 37. In rejoinder, the learned counsel for the revenue/appellant submitted that the case of Dr Prannoy Roy (supra) was not applicable as the tax had been paid in the year in question. It was also contended that availability of MAT credit could not be equated to advance tax actually paid. The case of refunds was referred to. The learned counsel submitted that each year is treated as an independent year and it cannot be assumed that if there is refund for an earlier year, advance tax to that extent for a later year stands paid. The respondents'....
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....lar assessment, tax is paid by the assessee under section 140A or otherwise,-- (i) interest shall be calculated in accordance with the foregoing provisions of this section up to the date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section; (ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax. xxxx xxxx xxxx xxxx (emphasis supplied) 39. Under sub-section (1), liability to pay interest for defaults in payment of advance tax can arise in two situations. Both situations, of course, are predicated on the liability of the assessee to pay advance tax under section 208 of the said Act. The first situation arises where an assessee who is liable to pay advance tax under section 208, fails to pay such tax. The liability to pay interest is fixed at the prescribed rate on the assessed tax. The second situation arises where an assessee who is liable to pay advance tax under section 208, pays advance tax but to an extent less than 90% of the assessed tax. In this situation, the lia....
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....of the said Act. Both the sections are part of the said act. MAT credit is granted for tax already paid under section 115JA. Thus, the sum represented by the available MAT credit would fall within the expression tax….already paid under any provision of this Act. This means that the expression such tax referred to in section 140A(1) would mean the tax payable on the basis of the return minus, inter alia, the available MAT credit which represents the tax already paid under a provision (section 115JA) of the said Act. The adjustment or the set off in respect of the available MAT credit is implicit in the meaning of such tax. However, after the amendment introduced by the Finance Act, 2006, this has been made explicit. This would be immediately clear by reading the section 140A(1) as it stands today, that is, after the said amendment:- "140A. Self-assessment.--(1) Where any tax is payable on the basis of any return required to be furnished under section 139 or section 142 or section 148 or section 153A or, as the case may be, section 158BC, after taking into account,— (i) the amount of tax, if any, already paid under any provision of this Act ; (ii) any tax deducted or col....
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....ng company assessees to pay a minimum tax each year. It is for this reason that credit is given to the assessee for such payment and the assessee can, as a matter of right, subject to certain conditions, carry forward and set off the tax credit against the tax payable in a subsequent year. There can be no doubt that the entire amount of MAT paid under section 115JA would be towards tax. Part of it may be towards tax for that year and part of it, for which credit is given, is towards tax for a subsequent year. Thus the tax credit which has been carried forward and is available for set off under the provisions of section 115JAA in a subsequent year would qualify as tax paid otherwise. Since, it is available at the beginning of the subsequent year, it is obvious that such tax credit would be tax paid by the assessee before the date of determination of total income under section 143(1) or completion of regular assessment. 44. This means that whether we take the route of section 140A or otherwise, the available tax credit under section 115JAA would fall within the meaning of tax paid prior to the date of determination of total income under section 143(1) or completion of regular asse....
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....see being a company for any assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section. (2) The tax credit to be allowed under sub-section (1) shall be the difference of the tax paid for any assessment year under sub-section (1) of section 115JA and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act: Provided that no interest shall be payable on the tax credit allowed under sub-section (1). (3) The amount of tax credit determined under sub-section (2) shall be carried forward and set off in accordance with the provisions of sub-section (4) and sub-section (5) but such carry forward shall not be allowed beyond the fifth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1). (4) The tax credit shall be allowed set-off in a year when tax becomes payable on the total income computed in accordance with the provisions of this Act other than section 115JA. (5) Set off in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the dif....
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.... payable (T0) on actual total income would also be less than the tax payable (TJA0) on the deemed total income. This brings in the provisions of section 115JAA which stipulate that credit shall be allowed to the company assessee to the extent of the excess of tax paid (TJA0) under section 115JA and the tax payable (T0) under the normal provisions of the said Act ie., Tax Credit in respect of year 0 (TC0) = TJA0 T0. Though such tax credit (TC0) is allowed in respect of year 0, no interest is payable thereon by the revenue. Such tax credit is to be carried forward for no more than five years and is permitted to be set off in a year when the total income of the company assessee as computed under the normal provisions of the Act exceeds 30% of its book profits or, to put it simply, where the actual total income exceeds the deemed total income under section 115JA. Furthermore, by virtue of sub-section (5) of section 115JAA, the set off in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on total income and the tax which would have been payable under the provisions of sub-section (1) of section 115JA for ....
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....tion 234B is compensatory in character. It is not penal in nature. So also, interest under section 234C is compensatory in character. It is for this reason that section 234B does not envisage grant of hearing in so far as levy of interest is concerned. The levy is automatic on it being proved that the assessee has committed a default as governed by section 234B. This reasoning also applies to levy of interest under section 234C." 52. We are also of the view that sections 234A, 234B and 234C are of the same genre. On going through these provisions it is clear that interest is sought to be charged because the government is denied of its revenues at the due dates. Under section 234A interest is charged where tax which is payable upon self assessment at the time of filing of a return is not paid at that point of time. Section 234B provides for charging of interest for default in payment of advance tax and under section 234C interest is charged for deferment in the payment of advance tax from the appointed dates of payment. Under the Act, Income tax is payable at different stages and through different modes. Where specific dates by which parts of the tax are to be paid are clearly st....
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....Purposive meaning to be ascribed to "advance tax" 54. We feel that it would be fruitful to remember what was said by Sinha CJ (as his lordship then was), while speaking for a Division Bench of this court in Dr. Prannoy Roy v. Commissioner of Income-tax: 254 ITR 755 (Del), with regard to the interpretation to be placed on the term advance tax as defined in section 2(1) of the said Act. It was observed that an interpretation clause, as is well known, is not a positive enactment. It was specifically noticed that section 2 of the said Act began with the word unless the context otherwise requires. The Division Bench held that though advance tax has been defined to mean the advance tax payable in accordance with the provisions of Chapter XVII-C, such a definition is not an exhaustive one and that advance tax, apart from being used only for the purpose of Chapter XVII-C, may be held to be tax paid in advance before its due date. In other words, the term advance tax is not restricted to mean the advance tax payable in accordance with the provisions of Chapter XVII-C. If the context requires, advance tax may extend beyond the territory of Chapter XVII-C and could very well refer to any t....