Section 244/244A, Proviso to S. 115JAA and Circular No. 763 issued by CBDT — Income-tax Act, 1961 — Assessment Year 2003-04 — Whether where after giving credit for MAT paid in earlier years, there is still tax payable and further credit is given to TDS an

Hyundai Motor India Ltd. vs. DCIT

A.Y. : 2003-2004.

Date of Order : 21.11.2008

Section 244/244A, Proviso to S. 115JAA and Circular No. 763
issued by CBDT — Income-tax Act, 1961 — Assessment Year 2003-04 — Whether
where after giving credit for MAT paid in earlier years, there is still tax
payable and further credit is given to TDS and Advance Tax, can refund, if
any, be said to have been originating from payment of Advance Tax or credit of
TDS —Held : Yes. Whether such a refund becomes entitled to interest in terms
of S. 244 and S. 244A —Held : Yes.

 

Facts :

Vide an order passed u/s. 154 of the Act, the Assessing
Officer (AO) granted credit for MAT at Rs.6,36,82,480. After having granted
credit for MAT the AO gave credit for TDS and Advance Tax and there was a net
refund due to the assessee. No interest was granted on such refund due to the
assessee.

The CIT(A) rejected the claim of the assessee on the basis
of Circular No. 763, dated 18.2.1998, which clarifies that credit allowed
against MAT will not bear any interest.

Aggrieved, the assessee preferred an appeal to the
Tribunal.

Held :

The Tribunal upon considering the provisions of S. 115JAA
of the Act held that the only interpretation which could be given to the
Circular which has explained the proviso to S. 115JAA is that interest cannot
be allowed for intervening period. That is, if MAT is paid, for example, in AY
2001-02 and the same is credited in AY 2003-04, then for the intervening years
of 2001-02 and 2002-03 no interest is payable on such MAT credit. However, for
the year in which ultimately MAT credit is given and credit for other tax
payments is also given, then refund becomes due not because of MAT credit but
because of other tax. This legal position is absolutely clear from the fact
that payment of MAT is not refundable and it can only be used as a matter of
credit, that too, subject to the conditions laid down in S. 115JAA of the Act.

The Tribunal noted that the issue about priority of various
credits to be allowed against tax payable by an assessee was considered by the
Delhi Bench of the Tribunal in the case of Ajanta Offset
(2008-TIOL-164-ITAT-Del) and concurred with the Delhi Bench that first of all
the credit for MAT has to be given and then only credit for TDS and Advance
Tax, etc. has to be given.

The Tribunal noted that the AO had himself, in the order
passed u/s. 154, allowed the MAT credit before the credit for TDS and Advance
Tax. It stated that it is absolutely clear that refund is originating not
because of MAT credit but because of TDS and Advance Tax and, therefore, the
assessee has to be paid interest on such excess payment of TDS or Advance Tax.

The Tribunal set aside the order of CIT(A) and directed the AO to allow
interest in accordance with law.