S. 115JAA, S. 234C and S. 244A — MAT credit which is available for set-off falls within the meaning of ‘advance tax’. If the credit of MAT u/s.115JAA has to be allowed first before working out the liability of the assessee to pay advance tax, the refund g

In an order passed u/s.154/254 of the Act, the Assessing
Officer (AO) held that the assessee was entitled to tax credit u/s.115JAA of the
Act to the extent of Rs.9,61,45,549. He allowed the credit of this amount as per
provisions of S. 115JAA(1) r.w. S. 115JAA(5) of the Act. He also held that no
interest u/s.244A is to be allowed to the assessee on this amount of tax credit
of Rs.9,61,45,549 in view of the proviso to S. 115JAA(2). The AO had also
charged interest u/s.234C amounting to Rs.55.52 lakhs before giving effect to
MAT credit relief u/s.115JAA. Aggrieved, the assessee preferred an appeal to the
CIT(A) on both the issues.

The CIT(A) allowed the appeal of the assessee on both the
grounds.

Aggrieved by the order of the CIT(A) the Revenue preferred an
appeal to the Tribunal.

The Tribunal noted that the Delhi High Court has in the case
of Jindal Exports Ltd. (314 ITR 137) (Del.) considered the question whether
prior to 1-4-2007, while computing the interest u/s.234B and u/s.234C, credit
for tax paid u/s.115JAA was to be considered and has held that in the year when
the assessee is eligible for tax credit u/s.115JAA, such tax credit represents
tax already paid and available as credit at the beginning of the year and
consequently the assessee cannot be charged interest on something which it had
already paid. Following the ratio of this decision, the Tribunal held that for
charging interest u/s.234C, tax credit available to the assessee u/s.115JAA has
to be reduced from the liability of the assessee for making payment of advance
tax and such interest has to be computed after setting off the tax credit
available to the assessee.

The Tribunal held that the order of the CIT(A) does not call
for any interference because as per the decision of the Delhi High Court in the
case of Jindal Exports, credit of MAT u/s.115JAA has to be allowed first before
working out the liability of the assessee to pay advance tax, therefore, the
refund granted to the assessee is not out of MAT credit available, but is out of
excess amount of advance tax paid by the assessee. There is no dispute that if
the refund is on account of excess payment of advance tax, interest u/s.244A is
allowable to the assessee as per S. 244A(1)(a) of the Act. As to whether the
refund granted is out of MAT credit or out of advance tax, the Tribunal agreed
with the CIT(A) that, following the ratio of the decision of the Delhi High
Court, effect of MAT credit u/s. 115JAA has to be first considered and the
assessee is liable to pay only the balance amount as advance tax and if the
assessee paid lesser amount of advance tax as compared to this amount of advance
tax payable by the assessee after considering MAT credit u/s.115JAA, the
assessee is liable to pay interest u/s.234B and u/s.234C and if such payment of
advance tax by the assessee is in excess than this amount of advance tax payable
by the assessee, then the refund is on account of excess payment of advance tax
which is eligible for interest u/s.244A.

The appeal filed by the Revenue was dismissed by the
Tribunal.