It Was Not Disputed By The Learned Counsel For The Parties Thatquestion No.ii 1S Covered By Our Decision Dated 8.9.2015 In Ita v. M/S Max India Limited)Against The

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.428 of 2010Date of decision: 1.10.2015 Commissioner of Income Tax, Jalandhar I, Jalandhar .....- Appe M/s Max India Limited ....mesponden CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’ BLE MR. JUSTICE RAMENDRA JAIN 1. Whether Reporters of local papers may be allowed to see the judgment?2. To be referred to the Reporters or not? 3. Whether the judgment should be reported 1n the Digest? Present: Mr. Vivek Sethi, Advocate for the appellant-revenue.Mr. Ajay Vohra, Sr. Advocate with Mr. Gaurav Jain, Advocate forthe respondent. | Ajay Kumar Mittal,J, inThe appellant-assessee has filed this appeal under Section 260Aof the Income Tax Act, 1961 (in short, “the Act’) against the order dated1.1.2010, Annexure A.3 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No.102(ASR)/2006 for the assessment year 2000-01, claiming following substantialquestions of law:- *“T. Whether on the facts and circumstances of the case, the [TAwas right in law in allowing the set off of tax credit undersection 115J (correct provision is Section I1I5JAA) for thepurpose of calculation of interest under section 234B of the ITAct ignoring the fact that there is no provision in lawwatranting such set off? II. Whether on the facts and circumstances of the case, the ITATwas right in law in directing that depreciation should be workedout with reference to the WDV computed as a result of orderpassed under section 250(6) of the IT Act for the assessmentyear 1998-99?” ).A tew facts relevant for the decision of the controversy;involved as narrated in the appeal may be noticed. The assessee companyfiled its returns on 30.11.2000 declaring income atLy12,33,12,265/- undersection 115J of the Act which was processed under Section 143(1)(a) of theAct on 30.3.2001. Later on, the assessee company revised its return ofincome on 30.10.2001 declaring income atLv12,22,50,282/- under section115J of the Act which was processed under section 143(1)(a) of the Act on30.4.2002. The case of the assessee was taken up for scrutiny. Noticesunder section 143(2)/142(1) of the Act were issued to the assessee,Assessment was made at total income ofTL15,46,86,210/- under Section 143(3) of the Act on 12.3.2003. The Assessing Officer vide order dated12.3.2003, Annexure A.1| disallowed<a2,31,54,235/- on account of excessdepreciation allowance. Further the Assessing Officer computed the interestunder section 234B of the Act without setting off of the brought forwardtax credit available under Section 1I5JAA of the Act from the tax payable,Agerieved by the order, the assessee filed appeal before the Commissionerof Income Tax (Appeals) [CIT(A)]. Vide order dated 19.1.2006, AnnexureA.2, the CIT(A) allowed the appeal deleting the addition made by theAssessing Officer. Not satisfied with the order, the revenue filed appealbefore the Tribunal. Vide order dated 1.1.2010, Annexure A.3, the Tribunaldismissed the appeal. Hence the instant appeal by the revenue. ITA No.428 of 2010 3)We have heard learned counsel for the parties. 4It was not disputed by the learned counsel for the parties thatquestion No.II 1s covered by our decision dated 8.9.2015 in ITA No.426 of2010 (CIT, Jalandhar f, Jalandhar vs. M/s Max India Limited)against the revenue. Accordingly, question No.II 1s answered against the revenue.| 4 With regard to Question No.I, learned counsel for the revenuerelied upon judgment of the Apex court inJoint CIT vs. M/s Rolta IndiaLimited,(2011) 330 ITR 470 to urge that the set off of tax credit underSection 115JAA of the Act was not admissible for the purpose of calculationof interest under section 234B of the Act. | 6]On the other hand, learned counsel for the assessee submittedthat the issue stands concluded against the revenue by the decision of theApex Court 1n-CIT vs. Tulsyan Nec Limite, (2011) 330 ITR 226 whereinjudgment of the Madras High Court 1nCIT vs. Tulsyan Nec Limited,QQ011)330 [TR 224 was affirmed. revenue. Accordingly, question No.II 1s answered against the revenue.| 4 With regard to Question No.I, learned counsel for the revenuerelied upon judgment of the Apex court inJoint CIT vs. M/s Rolta IndiaLimited,(2011) 330 ITR 470 to urge that the set off of tax credit underSection 115JAA of the Act was not admissible for the purpose of calculationof interest under section 234B of the Act. | 6]On the other hand, learned counsel for the assessee submittedthat the issue stands concluded against the revenue by the decision of theApex Court 1n-CIT vs. Tulsyan Nec Limite, (2011) 330 ITR 226 whereinjudgment of the Madras High Court 1nCIT vs. Tulsyan Nec Limited,QQ011)330 [TR 224 was affirmed. Tq The issue herein 1s whether while computing interest underSection 234B of the Act, the tax credit available under Section LISJAA ofthe Act is to be reduced from the taxes payable or not. 8S.The matter 1s no longer res integra. The Apex Court 1nTulsyan Nec Limited'scase (supra) considering identical issue held that theAssessing Officer 1s required to give benefit of tax credit available underSection 115JAA of the Act and determine the interest payable under Section234B of the Act thereafter. Noticing the scheme of Section II5JAA of theAct, it was recorded as under:- ‘6. The relevant provisions underSection 11SJAAof the Act,introduced by|Finance Act, 1997 w.e.f. 1.4.1997, 1.e., applicable for assessment years 1997-98 and onwards, governing the carryforward and set off of credit available in respect of tax paidunderSection |1S5J, show that when tax is paid by theassessee under Section |1S5J, then the assessee becomesentitled to claim credit of such tax in the manner prescribed.Such a right gets crystallized no sooner the tax is paid by theassessee underSection 11S5J, aS per the return of income filedby that assessee for a previous year (Say, year one). [SeeSectionLISJAA(1)|. The said credit gets limited to the tax differencebetween tax payable on book profits and tax payable on incomecomputed under the normal provisions of the Act [seeSectionLISJAAQ)| 1n year one. Such credit 1s, however, allowable fora period of five succeeding assessment years, immediatelysucceeding the assessment year in which the credit becomesavailable (say years 2 to 6) [SeeSection 1IS5JAA(3|. However,MAT credit 1s available for set off against the tax payable insucceeding years where the tax payable on income computedunder the normal provisions of the Act exceeds the tax payableon book profits computed for that year |SeeSection 115JAA(4)'(5)|. At this stage, we would like to emphasize the word"allowed" in all the sub-sections of|Section |1SJAATheStatute envisages under|Section 11ISJA"credit in respect oftax so paid" because the entire tax 1s not an automatic credit buthas to be calculated in accordance with sub-section (2) ofSection LISJAA. Sub-section (4) toSection 11ISJAallows"tax credit" in the year tax becomes payable. Thus, the amountof set off 1s limited to the tax payable on the income computedunder the normal provisions of the Act less the tax payable onbook profits for that year. |Refer —Section 1I5JAA(4)andSection IIS5JAA(5|. The tax credit to be allowed is thefunction of the tax payable on book profits and the tax payableon income computed under the normal provisions of the Act, inyear one. As stated, the difference of the two 1s the amount oftax credit to be allowed. The A.O. may vary the amount of tax Q Q credit to be allowed pursuant to completion of summaryassessment underSection 143(1)or regular assessment underSection 143(3)for year one, in terms ofSection 115JAA(6)ASa consequence of such variation the tax credit to be allowed foryear one 1s liable to change. With every change in the amountof tax payable on book profits and/ or tax payable on incomecomputed under the normal provisions of the Act, the tax creditto be allowed would have to be changed by the A.O. by passingconsequential orders, deriving authority fromSection 11SJAA1,4of the Act. Thus, the tax credit allowable can be set off by;the assessee while computing advance tax/ self-assessment taxpayable for years 2 to 6 limited to the difference between thetax payable on income computed under the normal provisionsand tax payable on book profits 1n each of those years, as perassessee'Ss Own computation. Although the right to avail tacredit gets crystallized in year one, on payment of tax underSection 115JAand the set off thereof follows statutorily, theamount of credit available and the amount of set off to beactually allowed as in all cases of deductions/ allowances underSections 30-37, 1s fluid/ inchoate and subject to finaldetermination only on adjudication of assessment either underSection 143(1)Or under |Section 143(3)._ The fact that thamount of tax credit to be allowed or to be set off 1s not frozenand is ambulatory, does not take away/ destroy the right of theassessee to the amount of tax credit.’ Further, 1t was concluded by the Apex Court as under:- “Q We have discussed herein above the scheme ofSection115JA(1)and |Section 1LSJAA_ The entire scheme ofSections115JA(1)andLISJAAshows that 1f an assessee 1s entitled to a!tax credit as a consequence of the assessee making payment oftax under.Section 115JA(1)in the year one, then, the set off ofsuch tax credit follows as a matter of course once theconditions mentioned in|Section 1ISJAAare fulfilled and the grant of such credit is not dependent upon determination by theA.O. save and except that the ultimate amount of tax credit tobe allowed will be dependent upon the final determination ofthe total income for the first assessment year. There is noprovision underSection 1LSJAAwhich postpones the right ofthe assessee to claim set off to the determination of the totalincome by the A.O. in the first assessment year.Entitlement/right to claim set off is different from thequantum/quantification of that right. Entitlement of MAT creditis not dependent upon any action taken by the Department.However, quantum of tax credit will depend upon theassessment framed by the A.O. Thus, the right to set off arisesas a result of the payment of tax underSection 115JA(1)although quantification of that right depends upon the ultimatedetermination of total income for the first assessment year.Further, an assessee has a right to take into account the set offeven while estimating its liability to pay advance tax on the"current income" in accordance with the provisions of ChapterXVI-C. AlthoughSection 209(1)(d)does not make anyspecific provision either before or after the amendments carriedout by theFinance Act, 2006 to the effect that an assessee 1sentitled to set off the tax credit that would be available in termsof|Section IIS5JAA(1while computing the quantum ofadvance tax that 1s to be paid it must follow that an assesseewould be entitled to do so otherwise it results in absurdity, viz,that an assessee pays advance tax on the footing that it is notentitled (when in fact it 1s so entitled as discussed above) to thecredit and thereafter claims a refund of such advance tax paidas a consequence of the set off. Moreover, when an A.O. makesan intimation underSection 143(1)he accepts the return filedby the assessee to which the A.O. may make an adjustment andconsequently makes a demand or refund. Section 143(1)provides that where a return 1s made underSection 139and 1fany tax or interest 1s found due on the basis of such return after adjustment of any TDS, any advance tax, any tax paid on selfassessment and any amount paid otherwise by way of tax orinterest, then, without prejudice to provisions of sub-section(2), an intimation will be sent to the assessee specifying theamount so payable and such intimation shall be deemed to be anotice of demand under Section 156and all the provisions ofthe Act shall apply thereto. This section itself makes it clearthat whilst the A.O. determines the tax payable he has to givecredit for all taxes paid either by way of deduction at source,advance tax, self assessment tax or tax paid otherwise whichwould include or which cannot exclude tax credit underSectionLISJAA(1)ia 10. _The CIT(A) while accepting the contention of the assesseedirected the Assessing officer to compute the interest under section 234B ofthe Act after reducing the tax credit available under section 115JAA of theAct and giving the credit of the taxes paid. The said finding was affirmed bythe Tribunal. The finding recorded by the CIT(A) on this question readsthus:- ‘For the sake of setting the matter to rest with finally, thecomputation of interest under section 234B as computed by theAO and as per appellant's claim 1s ; r The tax paid as per order under section 154 dated 12.2.2004passed by the AO comes to|zy46,437,542. After considering the matter, | am inclined to agree withthe contentions of the appellant. The AO has clearly erred incomputing interest under section 234B without allowing the setoff of the tax credit available under Section 1I5JAA althoughhe has allowed the tax credit for determining the net taxpayable. The tax credit under section |!15JAA 1s required to bconsidered when quantifying the net amount of advance tax,The following judicial rulings support the clam of the appellant:a) Phillips India Limited vs. ACIT 92 ITD 441 (TATChandigarh) b) Synthetic Industrial Chemicals Limited vs. DCIT 90 ITD 851(ITAT Couchin) c) Chemplast Sanmar Limited vs. DCIT 83 TTJ 427 (TAT Chennai) Respecttully, following the above judgments, | hold thatthe interest under section 234B is to be computed after reducingthe tax credit under section 115JAA from the tax payable. This ground of the appellant therefore, succeeds. Accordingly, the AOis directed to compute the interest under section 234B afterreducing the tax credit available under section II5JAA andgiving the credit of the taxes paid.” The said findings were affirmed by the Tribunal on an appeal by theTEVENUEC 11.Adverting to the judgment in Rolta India Limited's Case(supra) on which learned counsel for the revenue has relied upon, the issuetherein was whether the assessee whose book profits were computed underSections 115J/115JA of the Act, was required to pay interest under Section234B of the Act on the liability determined on that basis where the advancetax fell short thereof. The issue there was totally different. | 12.Consequently, the substantial questions of law as claimed bythe revenue are answered accordingly. The appeal stands dismissed. (Ajay Kumar Mittal)Judge October 1, 2015 :8!: (Ramendra Jain)Judge