(PER : HONOURABLE MS JUSTICE SONIA GOKANI ) 1. Revenue is in appeal against the order of the Tribunal dated 18.11.2011 proposing following questions of law for our consideration:
“A. Whether on facts and circumstances of the case and in law, the Tribunal has erred in law in setting aside the orders of the lower authorities and directing to take into consideration the credit of MAT before calculating interest under Section 234 B of the Act?
B. Whether on facts and circumstances of the case and in law, the Tribunal has erred in law by holding that amendment of Section 234 B w.e.f. 1.4.2007 is retrospective in nature?”
2. Brief facts of the case relevant for deciding the said questions are being reproduced:
2.1 For the assessment year 1999-2000, the return of income was filed by the assessee declaring the total income of his at Rs. 76,85,000/- (rounded off). Scrutiny assessment was done and the Deputy Commissioner of Income Tax assessed the total taxable income at Rs. 95 lacs (rounded off).
2.2 Aggrieved by the same, this was challenged before the Commissioner of Income Tax (Appeals). It allowed partially the appeal of the assessee on 27.02.2009. The issue of MAT was when challenged before the appellate forum. It upheld the version of the Assessing Officer holding that the amendment brought into the act was prospective in nature and not retrospective, and therefore, the Assessing Officer was right in not allowing the assessee to treat the MAT credit for advance tax.
2.3 This was challenged before the Income Tax Appellate Tribunal (ITAT for short) and the Tribunal, vide its impugned order, partially allowed the appeal of the assessee directing the Assessing Officer to reconsider the credit of MAT before calculating the interest for default in payment of advance taxes, holding the amendment as retrospective in nature and applying the same to the year under consideration. Resultantly, this appeal raising the aforementioned questions.
3. The Tribunal, while considering this issue, has relied upon the decision of the Madras High Court in case of Commissioner of Income Tax Vs. Roots Multiclean Ltd. reported in [2010] 327 ITR 65 (Mad) as also decision of the Bombay High Court in case of Commissioner of Income Tax Vs. Apar Industries Ltd. reported in [2010] 323 ITR 411 [Bom].
4. Madras High Court while answering the question of law proposed before it, answered the same as follows:
"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the provisions of Section 115JAA and Section 234B and 234C of the Act concluded that the MAT credit shall be set off before charging interest under Section 234B and 234C of the Income Tax Act, 1961 is valid.?”
We heard ... ... ... .. on record.
The very same issue has been considered by the Division Bench of this Court in T.C.A.Nos.887 of 2004 etc. batch on 09.04.2009 and Division Bench has answered the issues in favour of the assessee and against the revenue by observing thus:
"7.In respect of the first question of law, the arguments advanced by the counsel on either side are the same as the one advanced before the Delhi High Court cited supra. The Delhi High Court has considered the relevant provisions and dealt with the matter in detail and held that the credit under Section 115JAA should be given effect to before charging of interest under Section 234A, 234B and 234C of the Act. We are in agreement with the reasoning given by the Delhi High Court. The learned counsel appearing for the revenue has not produced any materials or given compelling reasons to take a contrary view with that of the Delhi High Court. In such circumstances, we answer the first question in favour of the assessee and against the Revenue......
"18. In the present case, the intention of the legislature is to give tax credit to tax and not to the tax and interest. Once the intention is clear, the revenue cannot rely on the Form-I to say that the MAT credit under Section 115JAA should be given only after tax and interest. Further we have answered the first question of law in favour of the assessee i.e. the MAT credit under Section 115JAA should be given effect to before charging the interest under Section 234B and 234C. Rule 12(1)(a) and Form-I cannot go beyond the provisions of the Act. Form-I cannot lay down the order of priority of adjustment of TDS, advance Tax, MAT credit under Section 115JAA which is contrary to the provisions of the Act. The order passed by the Tribunal is in accordance with law and we do not find any error or illegality in the order of the Tribunal so as to warrant interference. Accordingly, we answer the questions 2 and 3 also in favour of the assessee and as against the Revenue.”
5. Bombay High Court in case of Commissioner of Income Tax Vs. Apar Industries Ltd.(supra) has also answered this question on the same line. It would be profitable to be reproduced some of the relevant observations and findings.
“30. Having regard to the background in which the amendment was brought into force, it must be regarded as being clarificatory in nature. The amendment clearly removes a cause of ambiguity in the interpretation of sections of section 234B, more particularly sub-section (2) as well as the entire scheme envisaged in sections 140A and 143(1) clearly require due account being taken of the MAT credit to which assessee was entitled under section 115JAA. Consequently, even prior to the amendment the credit to which the assessee was entitled under section 115JAA could not be ignored in determining the liability to pay interest under section 234B. There was a certain element of ambiguity in the Explanation to sections 140A and 234B. Parliament considered it appropriate to step in an resolve an area of ambiguity, particularly having regard to the circumstance that representations were received from several quarters, as noticed in the circular issued by the Central Board of Direct Taxes. An amendment which is intended to remove an ambiguity in the interpretation of a section must of necessity be regarded as clarificatory. If it is clarificatory in nature, it is expressive of a position in law which Parliament intended to hold the field at all material time and must consequently be regarded as operating with retrospective effect. The fact that Parliament has brought the provision into effect from April 1, 2007 by the Finance Act of 2006 would not be dispositive of the question as to whether the amendment is clarificatory. If the amendment is clarificatory as we hold it is, it must apply in respect of the previous years as well.
39. A Division Bench of the Madras High Court has taken the same view as we have taken in respect of the form on which reliance was placed by the Revenue in CIT Vs. Chemplast Sanmar Ltd. [2009] 314 ITR 231 (Mad).
40. The attention of the court has been drawn to the judgement of the Delhi High Court in CIT Vs. Jindal Exports Ltd. [2009] 314 ITR 137 (Delhi). The division Bench of the Delhi High Court has held that (I) MAT credit under section 115jAA is credit for tax paid under section 115JA;(ii) The sum represented by the available MAT credit would fall within the expression “tax already paid under any provisions of this Act” in section 140A(1); (iii) The expression “such tax” in section 140A(1) would mean the tax payable on the return, minus, the available MAT credit which represents the tax already paid under a provision (section 115JA) of the Act; (iv) The expression tax paid “otherwise” in section 234B(2) would take within its sweep any tax paid under a provisions of the Act including the MAT credit which is available under section 115JAa; (v) The amendment to Explanation 1 to section 234B by the Finance Act of 2006 is clarificatory; (vi) The tax credit which is allowed to the asessee and obtained in a particular year is a part of the minimum alternative tax of that year. It represents tax paid by the assessee to the exchequer. In the year in which such tax credit is sought to be set off in terms of section 115JA, the tax credit is available on the first day of that year and hence the tax deducted to the extent it can be set off represents tax already paid and available as credit at the beginning of the year; (vii) The assessee cannot, therefore, be charged interest on something which he has already paid; (viii) The provisions of section 234A are compensatory. Since the tax due to the extent of available MAT credit stand paid, the levy of interest under section 234A thereon would not arise.
41. We are in respectful agreement with the view expressed by the Delhi High Court in Jindal Exports Ltd. [2009] 314 ITR 137.”
6. It would be profitable to reproduce Section 234-B of the Act:
“234B: (1) Subject to the other provisions of this section, where in any financial year, an assessee who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessee under the provisions of section 210 is less than ninety per cent of the assessed tax, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year [to the date of determination of total income under sub-section (1) of section 143 [and where a regular assessment is made, to the date of such regular assessment, on an amount] equal to the assessed tax of, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.
[Explanation 1. In this section, “assessed tax” means the tax on the total income determined under sub- section (1) of section 143 and where a regular assessment is made, the tax on the total income determined under such regular assessment as reduced by the amount of.-
(i) any tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income;
(ii) any relief of tax allowed under section 90 on account of tax paid in a country outside India;
(iii) any relief of tax allowed under section 90A on account of tax paid in a specified territory outside India referred to in that section;
(iv) any deduction, from the Indian income-tax payable, allowed under section 91, on account of tax paid in a country outside India; and
(v) any tax credit allowed to be set off in accordance with the provisions of section 115JAA] Explanation 2- Where, in relation to an assessment year, an assessment is made for the first time under section 147 [or section 153A], the assessment so made shall be regarded as a regular assessment for the purposes of this section.
Explanation 3- In Explanation 1 and in sub-section (3) “tax on the total income determined under sub-section (1) of section 143” shall not include the additional income-tax, if any, payable under section 143]
2) Where, before the date of [determination of total income under sub-section (1) of section 143 or] completion of a regular 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.
3) Where, as a result of an order of reassessment or re- computation under section 147 [or action 153A], the amount on which interest was payable under sub-section (1) is increased, the assessee shall be liable to pay simple interest at the rate of [one] per cent for every month or part of a month comprised in the period commencing on the day following [the date of determination of total income under sub-section (1) of section 143 [and where a regular assessment is made as is referred to in sub-section (1) following the date of such regular assessment]] and ending on the date of the reassessment or recomputation under section 147 [or section 153A], on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined [under sub-section (1) of section 143 or] on the basis of the regular assessment aforesaid.”
7. Section 115JAA is reproduced as under:
[Tax Credit in respect of tax paid on deemed income relating to certain companies.
115JAA. (1) Where any amount of tax is paid under sub- section (1) of section 115JA by an assessee 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.
[(1A) Where any amount of tax is paid under sub-section (1) of section 115JB by an assessee, being a company for the assessment year commencing on the 1st day of April, 2006 and any subsequent 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).
(2A) The tax credit to be allowed under sub-section (1A) shall be the difference of the tax paid for any assessment year under sub-section (1) of section 115JB 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 (1A).
(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-sections (4) and (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).
(3A) The amount of tax credit determined under sub- section (2A) shall be carried forward and set off in accordance with the provisions of sub-section (4) and (5) but such carry forward shall not be allowed beyond the [tenth] assessment year immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1A).]
(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 [or section 115JB, as the case may be].
(5) Set off and in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on this total income and the tax which would have been payable under the provisions of sub-section (1) of section 115JA [or section 115JB, as the case may be] for that assessment year.
8. Scope of Section 243B and that Section 115JAA alongwith amended Explanation 1 to Section 234B for computation of tax paid in advance is explained elaborately by the Apex Court.
9. It would be apt to refer to the decision of the Apex Court in case of Commissioner of Income Tax Vs. Tulsyan Nec Ltd. reported in [2011] 330 ITR 266 (SC) wherein the decision of the Madras High Court has been upheld by the Apex Court answering the question as follows:
“ To answer, we need to look at section 234B. Under that section, “assessed tax” means the tax on the total income determined under section 143(1) or on regular assessment under section 143(3) as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income. The definition, thus, at the relevant time excluded the MAT credit for arriving at assessed tax. This led to immense hardship. The position which emerged was that due to omission on one hand the MAT credit was available for set of for five years under section 115JAA but the same was not available for set off while calculating advance tax. This dichotomy was more spelt out because section 115JAA did not provide for payment of interest on the MAT credit. To avoid this situation, Parliament amended Explanation 1 to section 234B by the Finance Act, 2006 with effect from April 1, 2007 to provide along with tax deducted or collected at source, the MAT credit under section 115JAA also to be excluded while calculating assessed tax.
11. From the above, it is evident that any tax paid in advance/pre-assesed tax paid can be taken into account in computing the tax payable subject to one caveat, viz, that where the assessee on the basis of self-computation unilaterally claims set off or the MAT credit, the assessee does so at its risk as in case it is ultimately found that the amount of tax credit availed of was not lawfully available, the assessee would be exposed to levy of interest under section 234B on the shortfall in the payment of advance tax. We reiterate that we cannot accept the case of the Department because it would mean that even if the assessee does not have to pay advance tax in the current year, because of his brought forward MAT credit balance, he would nevertheless be required to pay advance tax, and if he fails, interest under section 234B would be chargeable. The consequence of adopting the case of Department would mean that the MAT credit would lapse after five succeeding assessment years under section 115JAA(3); that no interest would be payable on such credit by the Government under the proviso to section 115JAA(2) and that the assessee would be liable to pay interest under sections 234B and 234C on the shortfall in the payment of advance tax despite existence of the MAT credit standing to the account of the assessee. Thus, despite the MAT credit standing to the account of the assessee, the liability of the assessee gets increased instead of it getting reduced.”
10. Considering the scheme of bringing about clarification, it can be said that the amendment in the tax statute was for the purpose of removal of the ambiguity which needs to be held as retrospective in nature. Tribunal was therefore, right in following Madras High Court in setting aside orders of both, the Assessing Officer and the CIT (Appeals) which has been confirmed in the Apex Court.
11. Issue having been squarely covered by the Apex Court, no entertainment of the question proposed is necessary. Resultantly, the tax appeal is dismissed. Rule stands discharged.
(AKIL KURESHI, J.) Jyoti (MS SONIA GOKANI, J.)