CIT, Alwar v. Gillate India Ltd
[Citation -2017-LL-0516-70]

Citation 2017-LL-0516-70
Appellant Name CIT, Alwar
Respondent Name Gillate India Ltd.
Court HIGH COURT OF RAJASTHAN
Relevant Act Income-tax
Date of Order 16/05/2017
Judgment View Judgment
Keyword Tags adjustment of mat credit • method of computation • minimum alternate tax • exchange fluctuation • payment of interest • foreign exchange • credit balance • advance tax • tax credit
Bot Summary: We have discussed hereinabove the scheme of Section 115JA(1) and Section 115JAA. The entire scheme of Sections 115JA(1) and 115JAA shows that if an Assessee is entitled to a tax credit as a consequence of the Assessee making payment of tax under Section 115JA(1) in the year one the set off of such tax credit follows as a matter of course once the conditions mentioned in Section 115JAA are fulfilled and the grant of such credit is not dependent upon determination by the A.O. save and except that the ultimate amount of tax credit to be allowed will be dependent upon the final determination of the total income for the first assessment year. Quantum of tax credit will depend upon the assessment framed by the A.O. Thus, the right to set off arises as a result of the payment of tax under Section 115JA(1) although quantification of that right depends upon the ultimate determination of total income for the first assessment year. Section 143(1) provides that where a return is made under Section 139 and if any tax or interest is found due on the basis of such return after adjustment of any TDS, any advance tax, any tax paid on self assessment and any amount paid otherwise by way of tax or interest without prejudice to provisions of Sub-section, an intimation will be sent to the Assessee specifying the amount so payable and such intimation shall be deemed to be a notice of demand under Section 156 and all the provisions of the Act shall apply thereto. This section itself makes it clear that whilst the A.O. determines the tax payable he has to give credit for all taxes paid either by way of deduction at source, advance tax, self assessment tax or tax paid otherwise which would include or which cannot exclude tax credit under Section 115JAA(1). To answer, we need to look at Section 234B. Under that section, assessed tax means the tax on the total income determined under Section 143(1) or on regular assessment under Section 143(3) as reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income. From the above, it is evident that any tax paid in advance/pre-assessed tax paid can be taken into account in computing the tax payable subject to one caveat, viz, that where the Assessee on the basis of self computation unilaterally claims set off or MAT credit, the Assessee does so at its risk as in case it is ultimately found that the amount of tax credit availed was not lawfully available, the Assessee would be exposed to levy of interest under Section 234B on the shortfall in the payment of advance tax. The consequence ITA-626/2008 of adopting the case of the Department would mean that MAT credit would lapse after five succeeding assessment years under Section 115JAA(3); that no interest would be payable on such credit by the Government under the proviso to Section 115JAA(2) and that the Assessee would be liable to pay interest under Sections 234B and C on the shortfall in the payment of advance tax despite existence of MAT credit standing to the account of the Assessee.


HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 626/2008 C I T Alwar Appellant Versus M/S Gillate India Ltd Respondent D.B. Income Tax Appeal No. 291/2008 C I T Alwar Appellant Versus M/S Gillate India Ltd Respondent D.B. Income Tax Appeal No. 873/2008 C I T Alwar Appellant Versus M/S Gillate India Ltd Respondent For Appellant(s) : Mrs. Parinitoo Jain For Respondent(s) : Mr. Sanjay Jhanwar HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 16/05/2017 In all these appeals, identical question of law and facts are involved and as they relate to same assessee, they are decided by common judgment. (2 of 6) [ITA-626/2008] 1. By way of these appeals, appellants have assailed judgment and order of Tribunal whereby Tribunal has party allowed appeal of assessee and dismissed appeal filed by department. 2. This court while admitting appeals framed following substantial question of law:- Appeal No.626/2008 admitted on 20.1.2009 (i) Whether on facts and circumstances of case and in law, Tribunal was justified in holding that first stage of tax payable is advance tax and assesee is entitled to set off MAT credit at this stage whereas total income is computable only after closing of financial year, not at state of payment of advance tax therefore set off credit for MAT to be allowed after allowing credit of advance tax u/s 219 of IT Act, 1961? Appeal No. 291 / 2008 admitted on 6.11.2008 (i) Whether, on facts and in circumstances of case and in law, Tribunal was justified in holding that first stage of tax payable is advance tax and assessee is entitled to set off MAT credit at this stage whereas total income is computable only after closing of financial year, not at stage of payment of advance tax therefore set off of credit for MAT to be allowed after allowing credit of advance tax u/s 219 of IT Act, 1961? (ii) Whether Minimum Alternate Tax is at par with Advance tax on TDS/TCS or regular tax as envisaged in Act? (iii) Whether on facts and in circumstances of case, Tribunal was justified in holding that tax credit available to assessee u/s 115JAA reduces liability of assessed tax and in turn reduces liability towards advance tax also even when definition of Assessed Tax has been amended by Finance Act, 2006 applicable w.e.f. 1.4.2007? Appeal No. 873 / 2008 admitted on 10.3.2010 (1) Whether findings of Tribunal are (3 of 6) [ITA-626/2008] perverse in allowing foreign exchange fluctuation loss specifically when at end of financial year, same was neither crystalised, nor ascertained, quantified and paid? (2) Whether under facts and circumstances of case and in law Tribunal was justified in allowing fluctuation loss on basis of Accounting Standard and Mercantile System of Accounting specifically in absence of any material on record? 3. Counsel for respondent has relied upon decision of Supreme Court in Commissioner of Income Tax vs. Tulsyan Nec Ltd. reported in (2011) 330 ITR 226 wherein it has been held as under:- 9. We have discussed hereinabove scheme of Section 115JA(1) and Section 115JAA. entire scheme of Sections 115JA(1) and 115JAA shows that if Assessee is entitled to tax credit as consequence of Assessee making payment of tax under Section 115JA(1) in year one, then, set off of such tax credit follows as matter of course once conditions mentioned in Section 115JAA are fulfilled and grant of such credit is not dependent upon determination by A.O. save and except that ultimate amount of tax credit to be allowed will be dependent upon final determination of total income for first assessment year. There is no provision under Section 115JAA which postpones right of Assessee to claim set off to determination of total income by A.O. in first assessment year. Entitlement/right to claim set off is different from quantum/quantification of that right. Entitlement of MAT credit is not dependent upon any action taken by Department. However, quantum of tax credit will depend upon assessment framed by A.O. Thus, right to set off arises as result of payment of tax under Section 115JA(1) although quantification of that right depends upon ultimate determination of total income for first assessment year. Further, Assessee has right to take into account set off even while estimating its liability to pay advance tax on "current income" in accordance with provisions of Chapter XVII-C. Although Section 209(1)(d) does not make any specific provision either before or after amendments carried out by Finance Act, 2006 to effect that Assessee is (4 of 6) [ITA-626/2008] entitled to set off tax credit that would be available in terms of Section 115JAA(1) while computing quantum of advance tax that is to be paid it must follow that Assessee would be entitled to do so otherwise it results in absurdity, viz, that Assessee pays advance tax on footing that it is not entitled (when in fact it is so entitled as discussed above) to credit and thereafter claims refund of such advance tax paid as consequence of set off. Moreover, when A.O. makes intimation under Section 143(1) he accepts return filed by Assessee to which A.O. may make adjustment and consequently makes demand or refund. Section 143(1) provides that where return is made under Section 139 and if any tax or interest is found due on basis of such return after adjustment of any TDS, any advance tax, any tax paid on self assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to provisions of Sub-section (2), intimation will be sent to Assessee specifying amount so payable and such intimation shall be deemed to be notice of demand under Section 156 and all provisions of Act shall apply thereto. This section itself makes it clear that whilst A.O. determines tax payable he has to give credit for all taxes paid either by way of deduction at source, advance tax, self assessment tax or tax paid otherwise which would include or which cannot exclude tax credit under Section 115JAA(1). However, question before us is of priority of adjustment for MAT credit. In this connection, it is important to bear in mind that credit allowed is excess of normal tax liability over MAT liability in subsequent years. In this connection following illustration on MAT credit be seen: Particulars Amount (Rs.) Year 1 1,600 115JB liability Normal tax liability 400 Credit which can be carried forward-I 1200 Year 2 600 115JB liability (A) Normal tax liability (B) 1400 (5 of 6) [ITA-626/2008] Tax liability= 1400 (B) (since B is higher than A) MAT credit available for set off in year 2 800 [(A)-(B)]-II Net tax liability for year 2 (B-II) 600 MAT credit to be carried forward (I-II) 400 11. To answer, we need to look at Section 234B. Under that section, "assessed tax" means tax on total income determined under Section 143(1) or on regular assessment under Section 143(3) as reduced by amount of tax deducted or collected at source in accordance with provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income. definition, thus, at relevant time excluded MAT credit for arriving at assessed tax. This led to immense hardship. position which emerged was that due to omission on one hand MAT credit was available for set off for five years under Section 115JAA but same was not available for set off while calculating advance tax. This dichotomy was more spelt out because Section 115JAA did not provide for payment of interest on MAT credit. To avoid this situation, Parliament amended Explanation 1 to Section 234B by Finance Act, 2006 w.e.f. 1.4.2007 to provide along with tax deducted or collected at source, MAT credit under Section 115JAA also to be excluded while calculating assessed tax. 12. From above, it is evident that any tax paid in advance/pre-assessed tax paid can be taken into account in computing tax payable subject to one caveat, viz, that where Assessee on basis of self computation unilaterally claims set off or MAT credit, Assessee does so at its risk as in case it is ultimately found that amount of tax credit availed was not lawfully available, Assessee would be exposed to levy of interest under Section 234B on shortfall in payment of advance tax. We reiterate that we cannot accept case of Department because it would mean that even if Assessee does not have to pay advance tax in current year, because of his brought forward MAT credit balance, he would nevertheless be required to pay advance tax, and if he fails, interest under Section 234B would be chargeable. consequence (6 of 6) [ITA-626/2008] of adopting case of Department would mean that MAT credit would lapse after five succeeding assessment years under Section 115JAA(3); that no interest would be payable on such credit by Government under proviso to Section 115JAA(2) and that Assessee would be liable to pay interest under Sections 234B and C on shortfall in payment of advance tax despite existence of MAT credit standing to account of Assessee. Thus, despite MAT credit standing to account of Assessee, liability of Assessee gets increased instead of it getting reduced. 3.1 In decision of Gujarat High Court in Commissioner of Income Tax-I vs. Alembic Limited Tax Appeal No.1099/2006 decided on 15.7.2016 wherein it has been held as under:- [F] Whether, on facts and in circumstances of case, Tribunal was right in law in directing to adjust MAT credit before calculating interest under Section 234B and 234C, despite specific machinery provided in these provisions not admitting adjustment of MAT credit before computation of these interest and despite specific method of computation given in form No. 1 prescribed under Rule 12(1)(a) read with Section 139(1) having effect of declaring relevant rule as ultra vires, which is beyond authority of Tribunal, creature of Income Tax Act ? 4. Counsel for appellant was not able to come out of Supreme Court judgment. Therefore, issue is answered in favour of assessee and against department. All these appeals are dismissed. copy of this judgment be placed in each file. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Brijesh 263, 54 & 55. CIT, Alwar v. Gillate India Ltd
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