By TIOL News Service

CHANDIGARH , DEC 17, 2015: THE issue is - Whether while computing interest under Section 234B of the Act, the tax credit available under Section 115JAA of the Act is to be reduced from the taxes payable. YES is the answer.

Facts of the case

The assessee company filed its returns on 30.11.2000 declaring income at Rs. 12,33,12,265/- under section 115J of the Act which was processed under Section 143(1)(a) of the Act on 30.3.2001. Later on, the assessee company revised its return of income on 30.10.2001 declaring income at Rs. 12,22,50,282/- u/s 115J which was processed under section 143(1)(a) of the Act on 30.4.2002. The case of the assessee was taken up for scrutiny. Notices under section 143(2)/142(1) were issued to the assessee. Assessment was made at total income of Rs. 15,46,86,210/- u/s 143 (3) on 12.3.2003. The AO vide order dated 12.3.2003, Annexure A.1 disallowed Rs. 2,31,54,235/- on account of excess depreciation allowance. Further the AO computed the interest u/s 234B without setting off of the brought forward tax credit available u/s 115JAA from the tax payable. On appeal, CIT(A) allowed the appeal deleting the addition made by AO. On further appeal, Tribunal dismissed the appeal.

Held that,

++ the SC in Tulsyan Nec Limited's case considering identical issue held that the AO is required to give benefit of tax credit available u/s 115JAA and determine the interest payable u/s 234B thereafter. Further, it was concluded by the SC that the entire scheme of Sections 115JA(1) and 115JAA shows that if an assessee is entitled to a tax credit as a consequence of the assessee making payment of tax under Section 115JA(1) in the year one, then, the set off of such tax credit follows as a matter of course once the conditions mentioned in Section 115JAA are fulfilled and the grant of such credit is not dependent upon determination by the A.O. save and except that the ultimate amount of tax credit to be allowed will be dependent upon the final determination of the total income for the first AY. There is no provision u/s 115JAA which postpones the right of the assessee to claim set off to the determination of the total income by the A.O. in the first AY. Entitlement/right to claim set off is different from the quantum/quantification of that right. Entitlement of MAT credit is not dependent upon any action taken by the Department. However, quantum of tax credit will depend upon the assessment framed by the A.O. Thus, the right to set off arises as a result of the payment of tax under Section 115JA(1) although quantification of that right depends upon the ultimate determination of total income for the first assessment year;

++ further, an assessee has a right to take into account the set off even while estimating its liability to pay advance tax on the "current income" in accordance with the provisions of Chapter XVII-C. Although Section 209(1)(d) does not make any specific provision either before or after the amendments carried out by the Finance Act, 2006 to the effect that an assessee is entitled to set off the tax credit that would be available in terms of Section 115JAA(1) while computing the quantum of advance tax that is to be paid it must follow that an assessee would be entitled to do so otherwise it results in absurdity, viz, that an assessee pays advance tax on the footing that it is not entitled (when in fact it is so entitled as discussed above) to the credit and thereafter claims a refund of such advance tax paid as a consequence of the set off. Moreover, when an A.O. makes an intimation u/s 143(1) he accepts the return filed by the assessee to which the A.O. may make an adjustment and consequently makes a demand or refund. CIT(A) while accepting the contention of the assessee directed the Assessing officer to compute the interest u/s 234B after reducing the tax credit available u/s 115JAA and giving the credit of the taxes paid. The said finding was affirmed by the Tribunal. Adverting to the judgment in Rolta India Limited's case on which counsel for the revenue has relied upon, the issue therein was whether the assessee whose book profits were computed u/s 115J/115JA, was required to pay interest u/s 234B on the liability determined on that basis where the advance tax fell short thereof. The issue there was totally different. Consequently, the substantial questions of law as claimed by the revenue are answered accordingly. The appeal stands dismissed.

(See 2015-TIOL-2820-HC-P&H-IT)