Whether interest on refund u/s 244A, is to be granted on sum after adjustment of MAT credit first and then TDS - Case remanded: HC

THE issues before the Bench are - Whether interest on refund u/s 244A, is to be granted on on the sum after adjustment of MAT credit first and then Advance Tax and TDS and Whether carry forward MAT credit available to the assessee is to be adjusted first, before charging interest under sections 234B and 234C. And the case is remanded to the AO.

Facts of the case

The assessee, company is engaged in the business of Offshore oil well drilling. In respect of the claim for MAT credit u/s 115JAA, Tribunal had directed the AO to give MAT credit before TDS and advance tax for the year under consideration. While giving effect to the same, the AO did not allow any interest on refund u/s 244A. On appeal, CIT(A) upheld the order of the AO and dismissed the appeal. On further appeal, Tribunal had pointed out that while giving effect to the ITAT's order, it was noted that the assessee had TDS of Rs.1,72,90,710/- and the MAT credit available was Rs.83,73,659/-. Thus out of total tax of Rs.2,06,96,452/-, after giving credit to MAT credit of Rs.83,73,659/-, the TDS was adjusted resulting in a refund of Rs.49,67,917/-. In the order passed by the AO, the AO pointed out that for the purpose of finding out the liability to payment of advance tax, the credit of MAT must first be given and then, on the balance of the tax payable, the liability to advance tax was to be worked out for the purpose of charging interest u/s 234B and 234C; the AO also pointed out that since the TDS was exceeding the liability, the question of interest u/s 234B and 234C did not arise. Thus, the Tribunal had pointed out that once MAT credit was to be set off against any tax payable by the assessee on the basis of normal computation and thereafterwards credit for TDS, advance tax and self assessment tax could be given and accordingly, the interest be charged or allowed to the assessee u/s 234B, 234C or 234A. In the light of the results giving effect to the ITAT order, Tribunal directed the AO to allow the claim of the assessee on interest on refund. To that end, the Tribunal followed the decision of Chemplast Sanmar Ltd., Vs. DCIT decision reported in (2004) 83 TTJ Chennai 427.

Held that,

++ a reading of the order passed on 28.02.2005 giving effect to the order of ITAT reveals that on the total tax liability of Rs.2,06,96,452/-, the adjusted MAT credit under Section 115JAA of the Act leaves the tax payable at Rs.1,23,22,793/-, after deducting TDS Rs.1,72,90,710/- the Assessing Officer had shown the refund due as Rs.49,67,917/-. The assessee in its appeal before the CIT(A) apparently sought for interest on the amount of refund due as per Section 244A contending that the Assessing Officer had not granted interest while refunding excess TDS. It pointed out that as per Section 244A of the Act, interest has to be granted upto the date of refund. To that end, the assessee relied on the decision in the case of CIT Vs. T.V.Sundaram Iyengar and Sons Ltd., reported in 236 ITR 524. The CIT(A), however rejected the appeal holding that MAT credit allowed would not bear any interest; consequently, the Assessing Officer did not grant any interest on the MAT credit. On appeal preferred before the Income Tax Appellate Tribunal, the Tribunal, however referred to the decision in the case of Chemplast Sanmar Ltd. Vs. DCIT reported in (2004) (83 TTJ Chennai 427) and allowed the assessee's case;

++ as far as the decision 2009-TIOL-206-HC-MAD-IT relating to CIT Vs. Chemplast Sanmar Limited, which was an appeal against the Income Tax Appellate Tribunal before this Court is concerned, the issue was as to whether the Tribunal was right in holding that carry forward MAT credit available to the assessee was to be adjusted first, before charging interest under sections 234B and 234C of the Act. Confirming the view of the Tribunal, this Court held that credit under Section 115JAA only should be given effect to and not to the tax and interest therefor and that interest under Sections 234A, 234B and 234C should be given after giving MAT credit under Section 115JAA. In so holding in favour of the assessee, this Court referred to the decision of the Delhi High Court in the case of CIT Vs. Jindal Exports Ltd., 2009-TIOL-69-HC-DEL-IT holding that the credit under Section 115JAA should be given effect to before charging of interest under Sections 234A, 234B and 234C. This was confirmed by the Apex Court in the decision 2010-TIOL-114-SC-IT-LB in the case of CIT Vs. Tulsyan Nec Ltd.,

++ thus the issue before this Court is totally different from what was considered in the case of Commissioner of Income-Tax Vs. Chemplast Sanmar Limited,Chemplast Sanmar 2009-TIOL-206-HC-MAD-IT; consequently, we do not think the decisions would be safely relied on by either parties before us. As is evident from the reading of the order of the Assessing Officer dated 28.02.2005, the assessee became entitled to refund consequent upon the deduction given on MAT credit and the TDS. Thus, going by the factual details, the assessee is entitled to a refund of Rs.49,67,917/- and the deduction on TDS itself was before granting or charging any interest under any provisions of the Act. Hence, we hold that the proper course herein would be to remand the matter back to the Assessing Officer to work out interest on the refund payable to the assessee on the sum of Rs.49,67,917/- as ordered in the order of the Assistant Commissioner dated 28.02.2005 in accordance with Section 244A.