Interest u/s. 234B and 234C—Credit for minimum alternate tax has to be set off from the tax payable before levy of interest u/s. 234B and 234C of the Act.

In a group of appeals filed by the Revenue before the Delhi High Court a common issue was involved, namely, whether interest u/s. 234B and 234C is to be charged before the tax credit (commonly referred to as MAT credit) available u/s. 115 JAA is set off against tax payable on total income or after it is set off? And additional issue was whether this question was debatable and therefore, the provisions of section 154 could not have been invoked.

The High Court dismissing the appeals of the Revenue held that interest u/s. 234B and 234C is to be charged after the tax credit (MAT credit) available u/s. 115JAA is set off against tax payment on total income of the year in question. The High Court further held that the decision of Benches of the Tribunal at Chandigarh and Chennai did indicate that the Tribunal was correct in law in holding that rectification could not be made by the Assessing Officer u/s. 154 of the Act as the issue regarding charging of interest u/s. 234B of the Act without giving set off of the MAT credit available to the assessee was highly debatable.

On a Special Leave Petition being filed before the Revenue before the Supreme Court, the Court noted that a short question which arose for its determination in the appeals before it was, whether the Department was entitled to charge interest u/s. 234B of the Act on the assessee bringing forward the tax credit balance into the year of account relevant to the assessment year 2001-02. According to the Supreme Court this question has been answered in favour of the assessee by its judgment in the case of CIT vs. Tulsyan NEC Ltd., (2011) 330 ITR 226 (SC). Consequently, the Supreme Court dismissed the appeals filed by the Department.

Note: Sections 234A/234B/234C have been amended to provide such set-off by the Finance Act, 2006 w.e.f. Asst.Year 2007-08.