Commissioner Of Income Tax,Chennai v. M/S.sundaram Brake Liningslimited, Padi,Chennai-600 050

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 11.09.2018 CORAM : THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.1351 to 1353 of 2008 Commissioner of Income Tax,Chennai. .. Appellant in all the appeals Vs. M/s.Sundaram Brake LiningsLimited, Padi,Chennai-600 050. .. Respondent in all the appeals * * *Prayer : Tax Case Appeals filed under Section 260A of the Income Tax Act, 1961 against the order ofthe Income Tax Appellate Tribunal Madras 'C' Bench, dated 12.10.2007 in ITA No.45, 41 and42/Mds/2006 for the Assessment Years 1998-1999, 2000-2001 and 2001-2002.* * * For Appellant in : Mr.T.Ravikumarall these appeals Senior Standing Counsel For Respondent in : Mr.R.Vijayaraghavanall these appeals C O M M O N J U D G M E N T [Judgment of the Court was delivered by T.S.Sivagnanam, J.] T.C.A.(A)No.1351 of 2008 :This appeal filed by the Revenue is directed against the order passed by the Income Tax AppellateTribunal Bench �C�, Chennai, dated 12.10.2007 in ITA No.45/Mds/2006 for the Assessment Year1998-1999. 2. This appeal has been admitted vide order dated 28.08.2008 on the following substantial questionof law: �Whether in the facts and circumstances of the case, the Tribunal was right in allowing deductionu/s 80HHC on the basis of book profits u/s 115JA even though the eligible profits u/s 80HHC was Nilas per normal computation ?� 3. Heard Mr.T.Ravikumar, learned Senior Standing Counsel for the appellant/Revenue andMr.R.Vijayaraghavan, learned counsel for the respondent/assessee. 4. An identical issue came up for consideration before us in the case of Commissioner of Income TaxV. Bannari Amman Sugars Limited (T.C.A.No.163 of 2009, dated 30.07.2018). In the said case, wenoted that the legal issue was considered by the Hon'ble Supreme Court in the case of AjantaPharma Ltd. v. Commissioner of Income Tax reported in 2010 (327) ITR 0305. Furthermore, in theimpugned order passed by the Tribunal in the said appeal, the decision of the Special Bench in thecase of DCIT v. Syncome Formulations (I) Ltd. and others reported in 292 ITR 144 (AT) has beenrelied on. The said decision has been approved by the Hon'ble Supreme Court in the case ofCommissioner of Income Tax v. Bhari informations Technology System (P) Limited reported in 2012(340) ITR 0593. The operative portion of the judgment dated 30.07.2018 reads as follows :�5. The legal issue was considered by the Hon'ble Supreme Court in the case of Ajanta Pharma Ltd.v. Commissioner of Income Tax reported in 2010 (327) ITR 0305 and it was held that clause (iv) ofExplanation to Section 115 JB covers full export profits of 100% as "eligible profits" and the samecannot be reduced to 80% by relying on Section 80 HHC(1B) and the argument of the Departmentthat both "eligibility" as well as "deductibility" of the profit have to be considered together forworking out the deduction as mentioned in clause (iv) of Explanation to Section 115JB is devoid ofmerits. 6. Thus, the decision of the Hon'ble Supreme Court in Ajanta Pharma Ltd. (cited supra) applies tothe case on hand, as identical question has been framed for consideration. Further, we note that thedecision of the said fact in Syncome Formulations (I) Ltd. (cited supra) was considered by theHon'ble Supreme Court along with other decisions and the decision of the Tribunal was confirmed inthe case of Commissioner of Income Tax v. Bhari informations Technology System (P) Limitedreported in 2012 (340) ITR 0593.� 5. We may note that a Division Bench of this Court in the case of Commissioner of Income Tax,Chennai Vs. M/s.Three Bags India P.Ltd., 2016 SCC Online Mad 27408, after taking note of thedecision in Ajanta Pharma Ltd. (cited supra), decided the above question in favour of the assesseeand against the Revenue. 6. In the light of the aforesaid discussion, the substantial question of law, which has been framed forconsideration, is answered against the Revenue and in favour of the assessee. 7. Accordingly, this Tax Case Appeal stands dismissed. No costs. 5. We may note that a Division Bench of this Court in the case of Commissioner of Income Tax,Chennai Vs. M/s.Three Bags India P.Ltd., 2016 SCC Online Mad 27408, after taking note of thedecision in Ajanta Pharma Ltd. (cited supra), decided the above question in favour of the assesseeand against the Revenue. 6. In the light of the aforesaid discussion, the substantial question of law, which has been framed forconsideration, is answered against the Revenue and in favour of the assessee. 7. Accordingly, this Tax Case Appeal stands dismissed. No costs. T.C.A.Nos.1352 and 1353 of 2008 : 8. These appeals filed by the Revenue are directed against the order passed by the Income TaxAppellate Tribunal Bench �C�, Chennai, dated 12.10.2007 in ITA Nos.41 and 42/Mds/2006 for theAssessment Years 2000-2001 and 2001-2002. 9. These appeals have been admitted vide order dated 28.08.2008 on the following substantialquestions of law: �1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that MATcredit is to be set off from the tax payable before setting off the Tax Deducted at Source andAdvance Tax paid ? 2. Whether on the facts and circumstances of the case, the MAT credit can be given priority of set offagainst tax payable, contrary to the scheme of Schedule G of Form 1 ?� 10. Heard Mr.T.Ravikumar, learned Senior Standing Counsel for the appellant/Revenue and 11. The learned Senior Standing Counsel for the Revenue submitted that the above referred tosubstantial questions of law have been answered against the Revenue by the Hon'ble Supreme Courtin the case of CIT V. Tulsyan NEC Ltd., (2011) 330 ITR 0226. The operative portion of the judgmentreads as follows : �The issue which crops up for decision is � how should the advance tax be calculated when thecompany has MAT credit ? To answer, we need to look at section 234B. Under that section, �assessed tax� means the tax on thetotal income determined under section 143(1) or on regular assessment under section 143(3) asreduced by the amount of tax deducted or collected at source in accordance with the provisions ofChapter XVII on any income which is subject to such deduction or collection and which is taken intoaccount in computing such total income. The definition, thus, at the relevant time excluded the MATcredit for arriving at assessed tax. This led to immense hardship. The position which emerged wasthat due to omission on one hand the MAT credit was available for set off for five years under section115JAA but the same was not available for set off while calculating advance tax. This dichotomy wasmore spelt out because section 115JAA did not provide for payment of interest on the MAT credit. Toavoid this situation, Parliament amended Explanation 1 to section 234B by the Finance Act, 2006with effect from April 1, 2007 to provide along with tax deducted or collected at source, the MATcredit under section 115JAA also to be excluded while calculating assessed tax. From the above, it is evident that any tax paid in advance/pre-assessed tax paid can be taken intoaccount in computing the tax payable subject to one caveat, viz., that where the assessee on thebasis of self-computation unilaterally claims set off or the MAT credit, the assessee does so at its riskas in case it is ultimately found that the amount of tax credit availed of was not lawfully available,the assessee would be exposed to levy of interest under section 234B on the shortfall in the paymentof advance tax. We reiterate that we cannot accept the case of the Department because it wouldmean that even if the assessee does not have to pay advance tax in the current year, because of hisbrought forward MAT credit balance, he would nevertheless be required to pay advance tax, and ifhe fails, interest under section 234B would be chargeable. The consequence of adopting the case ofthe Department would mean that the MAT credit would lapse after five succeeding assessment yearsunder section 115JAA(3); that no interest would be payable on such credit by the Government underthe proviso to section 115JAA(2) and that the assessee would be liable to pay interest under sections234B and 234C on the shortfall in the payment of advance tax despite existence of the MAT creditstanding to the account of the assessee. Thus, despite the MAT credit standing to the account of theassessee, the liability of the assessee gets increased instead of it getting reduced.� 12. Thus, following the above decision of the Hon'ble Supreme Court, the substantial questions oflaw are answered against the Revenue and in favour of the Assessee. 13. Accordingly, these Tax Case Appeals stand dismissed. No costs. (T.S.S., J.) (V.B.S., J.) 11.09.2018Index : Yes / No Internet : Yes gg To 1.The Income Tax Appellate Tribunal Madras 'C' Bench,Chennai.2.The Commissioner of Income Tax,Chennai.3.The Commissioner of Income Tax (Appeals),Chennai. T.S.SIVAGNANAM, J.andV.BHAVANI SUBBAROYAN, J. gg T.C.A.Nos.1351 to 1353 of 2008 11.09.2018