MAT credit is to be reduced before charging interest under chapter XVII-F

[Harshavardhana Datar]

In the matter of CIT v Apar Industries Ltd (ITA.No. 1036 of 2009) Hon Bombay High Court has held as under :

(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 provision 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 provision of the Act including the MAT credit which is available under Section 115JAA;

(v) The amendment to Explanation (1) of Section 234B by the Finance Act of 2006 is clarificatory;

(vi) The tax credit which is allowed to the assessee 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 stands
paid, the levy of interest under Section 234A thereon would not arise

Judgment of the Hon Delhi High Court in Commissioner of Income Tax V/s. Jindal Exports Limited 314 ITR 137 has been followed

and hence

interest u/s. 244A of the Income Tax Act, 1961 was allowable on the refundable taxes arrived after giving credit of brought forward MAT from the gross demand

Copy of judgment is as under:

http://www.mediafire.com/file/mmht1qeyzdw/BOM HC on MAT credit for 234A B C.pdf