1. The only issue involved in this appeal of the assessee is relating to the treatment of set-off of MAT credit Under Section 115JAA and charging of interest Under Sections 234B and 234C of the income-tax Act. 1961 3. The relevant facts briefly stated are that the assessee is a company engaged in the sale and manufacture of lamps, fluorescent tubes and glass shells. For the- assessment year 2002-2003, the assessee filed its return of income on 31st Oct., 2002 admitting taxable income of Rs. 32,90,54,720 and the tax payable thereon was determined at Rs. 11,76,77,896 including interest Under Section 234C of Rs. 205361. The AO processed the return Under Section 143(1) by intimation dated 21.2.03. While computing the tax, the AO did not adjust the carry forward of MAT credit available to the assessee before charging interest Under Section 234B of Rs. 1,17,64,830 and Section 234C of Rs. 56,51,754 and accordingly raised a net demand of Rs. 1,64,86,519.
4. The assesse filed appeal before the CIT(A) contending that MAT credit was to be set off Under Section 115JAA(4) in the year when the tax becomes payable. It was accordingly contended that the set-off of tax credit was to be allowed against the demand before calculation of interest Under Sections 234B and 234C besides adjustment of TDS of Rs. 4,49,527 was also to be made. The CIT(A) decided the issue against the assessee with reference to Schedule G of Form No. 1 being the return of income under which the set-off of tax credit was to be allowed after Calculation of interest Under Section 234B and 234C, However, with regard to the adjustment of TDS, the AO was directed to verify the claim of the assessee.
5. The Id. Counsel for the assessee contended that assessee was required to pay advance tax in respect of the current income. Since advance tax had become payable, the set-off of MAT credit was available to the assessee as per Sub-section (4) of Section 115JAA. Assessee had accordingly paid advance tax after availing of the set-off of MAT credit. The view expressed by the revenue authorities is contrary to the provisions of the Act insofar as assesses, according to the revenue, is required to first pay advance tax and then claim the refund of the MAT credit. According to the Id. Counsel, in the light of the view expressed, by the revenue authorities, assessee would not be entitled to any set-off against tax payable as assessee would be required to pay the entire tax by way of advance tax or TDS. The interpretation put forth by the revenue authorities on the provisions of Section 115JAA is unjustified and unreasonable keeping in view the legislative spirit and the fact that the benefit available to the assessee is denied on the basis of income tax return form being Form No. 1, which doss not specifically provide the mode for calculation of interest. Reliance was placed on the decision of Chennai Bench of the ITAT in the case of Chemplast Sanmar Ltd. v. DCIT, 83 TTJ 427, wherein the issue has been decided in favour of the assessed, it was accordingly pleaded that the appeal of the assessee may be allowed.
6. The learned Departmental Representative, on the other hand, relied upon the orders of the revenue authorities. Particular reference was made to the income tax return form prescribed under Rules. Ld. D.R.contended that since as per the order given in the return of income interest Under Sections 234B and 234C was to be calculated before allowing the set off of MAT credit. It was pointed out that the Income-tax Act empowers the Board to make the Rules and Such rules are no less than the Act, it was pleaded that the appeal of the assessee may thus be dismissed.
7. We have given our careful consideration to the rival contentions.
The issue relating to the computation of interest Under Sections 234B and 234C in this case is dependent on set off of MAT credit provided Under Section 115JAA. The Chennai Bench of the ITAT in the case of Chemplast Sanmar Ltd. v. DCIT, supra, has decided the issue in favour of the assesses and since no contrary decision has been brought to our notice and since we also agree with the conclusion of the Chennai Bench of the ITAT, it was not necessary for us to pass a detailed order in regard to the issue involved in this appeal. So, however, since the interest levied is more than Rs, 1.5 crores and the issue was contested hotly, we feel obliged to give our own reasons for subscribing to the view expressed by the Chennai Bench of the Tribunal.
8. In order to appreciate the issue it will be relevant to refer to the provisions of the Act giving rise to the controversy involved in this appeal. It may be recalled that Finance Act, 1987 incorporated Chapter XIIB in the Income-tax Act, 1961 providing special provisions relating to certain companies for payment of minimum tax. Section 115J provided taxation of book profits @ 30% in respect of such companies where the profits computed in accordance with the provisions of the Income-tax Act, 1961 worked out to be less than 30% of the book profits w.e.f.
1.4.88 up to 31.3.91. Section 115JA, which was inserted by the Finance (No. 2) Act, 1996 w.e.f. 1.4.97, indicated a similar provision for payment of taxes by the companies whose profit determined in accordance with provisions of the Act worked out to less than 30% of the book profits to be taxed on 30% of the book profits. Section 115JAA was also incorporated by the Finance Act, 1997 w.e.f. 1.4.97 to provide for tax credit in respect of tax paid on deemed income relating to certain companies. It will be worthwhile to reproduce Section 115JAA which is the subject matter of interpretation for the purpose of deciding the issue involved in this appeal:- "115JAA.(1) Where any amount of tax is paid under Sub-section (1) of Section 115JA by an assessee being a company for any assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this Section.
(2) The tax credit to be allowed under Sub-section (1) shall be the difference of the tax paid for any assessment year under Sub-section (1) of Section 115JA and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of the Act.
(3) The amount of tax credit determined under Sub-section (2) shall be carried forward and set off in accordance with the provisions of Sub-section (4) and Sub-section (5) but such carry forward shall not be allowed beyond the fifth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under Sub-section(1).
(4) The tax credit shall be allowed set-off in a year when tax becomes payable on the total income computed in accordance with the provisions of Section of this Act, other than Section 115JA or Section 115JB, as the case may be.
(5) Set off in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on his total income and the tax which would have been payable under the provisions of Sub-section(1) of Section 115JA or Section 115JB, as the case may be for that assessment year.
(6) Where as a result of an order under Sub-section (1) or Sub-section (3) of Section 143, Section 144, Section 147, Section 154, Section 155, Sub-section(4) of Section 245D, Section 250, Section 254, Section 260, Section 262. Section 263 or Section 264, the amount of tax payable under this Act is reduced or increased, as the case may be the amount of tax credit allowed under this section shall also be increased or reduced accordingly." A perusal of Section 115JAA reproduced above reveals that assesses who has paid tax Under Section 115JA is entitled to set off and carry forward of tax so paid in excess of the tax payable by the assessee on his total income computed in accordance with the other provisions of the Act. Sub-section (4) of Section 15JAA reproduced above provides for set off of tax credit paid Under Section 115JA in a year when tax becomes payable on the total income computed in accordance with provisions of the Act other than Section 115JA.9. In this case, it is not disputed that in the year under appeal, the income is computed in accordance with the provisions of the Act, 1961 other than Section 115JA and, therefore, assesses is entitled to the set off of carried forward MAT credit of tax. There is no dispute in regard to eligibility of the assesses for set off of tax paid Under Section 115JA. The dispute is only in regard to priority of adjustment for the MAT credit. The revenue depends upon income tax Form No. 1, Annexure-G. It is the claim of the revenue that form No. 1, as amended from 17.8.2001, provides in order of preference for determination of total tax payable on the returned income, the interest chargeable Under Sections 234B and 234C and other provisions of the Act and thereafter adjustment of MAT credit. According to the revenue, since interest is to be calculated Under Sections 234B and 234C before adjustment of MAT credit, the said interest is chargeable with reference to the entire tax before set off of MAT credit. Sub-section (4) of Section 115JAA may give an impression that whether the assessee is liable to pay tax in accordance with provisions of Section 115JA or in accordance with other previsions of the Act, can be determined only after the end of the year at the stage of determination of tax payable by the assessee, which according to the revenue, would be at the time of assessment or processing of the return. On the other hand, the assessee's plea is that the question of payment of tax would arise at the point of payment of advance tax. The assessee for the purpose of payment of advance tax has to first determine the current income on which tax payable is to be calculated such tax becomes payable in advance and that is the stage at which the set off of tax is permissible according to assessee's version. Therefore, it is necessary for us to consider when the tax becomes payable.
10. Where income was determined in respect of various companies with reference to Section 115J, some of the taxpayers claimed that when income is determined at 30% of the book profits, assessee would not be required to pay advance tax as the stage of determination of tax Under Section 115J could arise only at the time of filing of the return after completion of books of account and not at the time of payment of advance tax during the financial year, it was thus claimed that interest Under Sections 215, 216 and 217 corresponding to Sections 234A, 234B and 234C was not chargeable. This view was upheld by the Delhi Bench of the Tribunal in the case of Steel Authority of India Ltd. v. DCIT, 38 ITD 193. However, Special Bench of the ITAT (Hyd.) in the case of Surana Steels (P) Ltd. v. DCIT, 45 ITD 1, took a contrary view. The Special Bench held that provisions relating to payment of advance tax apply also in such cases where tax was payable Under Section 115J. Thus as per the ratio of the decision of Special Bench of the Tribunal in the case of Surana Steels (P) Ltd. v. DCIT, (supra), Sub-section (4) of Section 115 JAA cannot be interpreted differently.
All the provisions of the Act including the provisions relating to payment of advance tax will apply. The crucial question that arises for consideration is as to when the tax becomes payable on the total income computed in accordance with provisions of the Act. Further, the issue that assumes importance is as to whether the assessee is entitled to set off of MAT credit in respect of payment of advance tax or it is necessary for the assessee to pay the entire tax payable in respect of the current income and refrain from taking credit for the tax paid Under Section 115JA to which he is eligible Under Section 115JAA(4). At this stage, it will be relevant to reproduce the provisions of Sections 207 and 208 of the Income-tax Act, 1961 which are as under:- "207. Tax shall be payable in advance during any financial year, in accordance with the provisions of Sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as "current income".
"208. Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is five thousand rupees or more." It is evident from Sections 207 and 208 that every assessee the tax liability of whom exceeds Rs. 5,000 is required to pay tax in advance.
Sub-section (4) of Section 115JAA makes the assessee eligible to set off MAT credit against the tax payable on the total income computed in accordance with the provisions bf the Act other than Section 115JA.Section 208 reproduced above also refers to the amount of tax payable by the assessee during the year as computed in accordance with the provisions of Chapter XVII i.e. part of the Income-tax Act. Thus, assessee is entitled to set off of MAT credit at the stage at which the tax has become payable. Section 209 of the Act provides for computation of advance tax. As per the said Section, the assessee is required to compute the advance tax payable as provided therein. Section 115JAA(4) provides for set off of MAT credit against tax payable.
11. The first stage for computation of advance tax for any company is to estimate the current income. After determination of current income, assessee is obliged to work out the tax payable on the current income.
In our considered view, this is the stage when assessee has to take into account the tax credit available Under Section 115JAA. The Tax payable by a company who is entitled to tax credit and set off under MAT would be tax payable on the current income less the set off of credit available to the assessee. In our view, that will be the tax payable in advance by the assessee out of which tax deducted or collected at source would have to be deducted and the remaining amount would be tax payable in advance. In this view of the matter, the calculation of interest shall have to be made in case there is any shortfall of advance tax so payable by the assessee.
12. It may be useful to give an example. The current income of the assessee may be Rs. 1 crore. Tax @ 35% would be Rs. 35 lacs. MAT Credit may be available @ Rs. 10 lacs. The tax payable after the MAT credit would be Rs. 25 lacs. The assessee would be required to pay Rs. 25 lacs in instalments as advance tax. The default in payment of advance tax has got to be determined with reference to Rs. 25 lacs only.
13. To support our view expressed above, it will be relevant to reproduce proviso to Section 115JAA(2), which provides that no interest shall be payable on the tax credit allowed under Sub-section (1).- "115JAA(2) - The tax credit to be allowed under Sub-section (1) shall be the difference of the tax paid for any assessment year under Sub-section(1) of Section 115JA and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of the Act." Provided that no interest shall be payable on the tax credit allowed under Sub-section (1).
The proviso to Section 115JAA(2) assumes importance in the light of interpretation put forth by the revenue in regard to the issue involved in this appeal. As already pointed out, it is the case of the revenue that assessee is not entitled to set off of MAT credit at the time of computation of advance tax. In other words, assessee would be required to pay the advance tax in full in respect of current income without taking into account the MAT credit and the set off of MAT credit would be allowed only at the stage of assessment. If this interpretation were to hold good, then the Legislature would not have provided specifically that interest shall not be payable on the tax credit allowed under Sub-section (1) to Section 115JA as in that case no question of payment of interest would arise. The question of payment of interest to the assessee would arise only if the set off of MAT credit is allowed against the advance tax payments. To appreciate it better, reference to Section 214 would be relevant which is reproduced hereunder:- "214(1) - The Central Government shall pay simple interest at fifteen per cent per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable Under Sections 207 to 213 exceeds the amount of the assessed tax from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year during which it is payable by reason of the provisions of Section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment.
"Provided that in respect of any amount refunded on a provisional assessment under Section 141A, no interest shall be paid for any period after the date of such provisional assessment." If MAT credit were not set off against the tax payable in advance, there would be no occasion for the Govt. to pay interest to the assessee under Section 214.
14. It is well-settled principle of law that no word or expression used in any statute can be said to be redundant or superfluous. Not to concentrate too much on one word and pay too little attention to other words. No provision in the statute and no word of any Section can be construed in isolation. Reliance in this regard is placed on the judgments of Supreme Court in the cases of Grasim Industries Ltd. v.Collector of Customs, reported in (2002) 128 STC 349 (SC) and Prakash Nath Khanna and Anr. v. CIT and Anr., 266 ITR 1. In the case of CIT v.Distributors (Baroda) P. Ltd., 83 ITR 377, the Hon'ble Supreme Court has held as under :- "That no part of a provision of a statute can be just ignored by saying that the Legislature enacted it not knowing what it was saying. Where an expression is used by the Legislature the court must assume that the Legislature deliberately used that expression and that it intended to convey some meaning thereby." Their Lordships of the Supreme Court in the case of K.V. Varghese v.ITO, 131 ITR 597, laid down that any interpretation, which leads to absurdity, is to be avoided. The relevant portion of the judgment is reproduced hereunder :- "A statutory provision must be so construed, if possible, that absurdity and mischief is avoided," 15. In our view, the interpretation given by the Revenue Authorities leads to absurdity insofar as proviso to Section 115JAA(2) is rendered superfluous when assessee is required to pay advance tax to the extent of MAT credit and thereafter claim refund of the advance tax so paid.
In such eventuality, proviso to Section 115JAA(2) is rendered superfluous. This could not be the intention of the Legislature. The intention of the Legislature is unambiguous insofar as assessee has been made eligible to set off of tax, which is recovered in respect of the deemed income Under Section 115JA against the tax payable for the years for which Section Under Section 115JA is not attracted. Section 115JA(4) provides that all other provisions of the Act shall apply to every assessee being a company mentioned in that Section. When all the provisions of the Act apply, there can be no doubt that the provisions relating to payment of advance tax as well as the provisions of set off apply. Therefore, in our considered view, the provisions of Sections 207, 208 and 209 cannot be ignored in determining the stage at which the tax becomes payable by the assessee for the purpose of set off of tax credit. We are, therefore, of the considered view that assessee is entitled to set off the MAT credit of the tax paid Under Section 115JA even at the time of computation of advance tax payable for the relevant year in which provisions of Section 115JA are not attracted.
16. Before parting, we consider it necessary to deal with the contention advanced on behalf of the revenue that Form No. 1 provides for adjustment of MAT credit after calculation of interest Under Sections 234B, 234C. Form No. 1 being return form provides for calculation of interest Under Section 234B and 234C has been provided before adjustment of set off of tax credit. It has to be borne in mind that in Form No. 1, the rulemaking authority has nowhere provided the manner of calculation of interest Under Sections 234B and 234C.The manner of calculation of interest not having been provided under form No. 1, the mere fact that the quantum of interest is to be added first to the tax payable as per the returned income does not necessarily advance the contention on behalf of the revenue that interest has got to be calculated before the set off of tax credit available Under Section 115JAA. In our considered view, once the tax payable on the returned income is calculated, the interest Under Sections 234B and 234C has got to be calculated with reference to the tax payable in advance and not with reference to the tax payable on the returned income. Though provision for set off before calculation of interest Under Sections 234B and 234C would have been ideal, yet providing for set off of tax credit after determination of tax payable on the returned income and after calculation of interest Under Sections 234B and 234C does not make any difference. This may be explained with reference to an example. The returned income may be Rs. 1 crore. Tax payable by a company may be Rs. 35 lakhs. Interest Under Sections 234E and 234C is to be calculated on the basis of short(sic)all of the advance tax and not on the basis of tax payable on the returned income.
The calculation has got to be made separately and the amount, if any, payable Under Sections 234B and 234C to be added to the tax payable as per the return. Say for example, interest under Section 234B works out to Rs. 1 lakh, the total tax and interest works out to Rs. 36 lakhs. As per the return, the tax credit, say for example, Rs. 20 lakhs is to be adjusted, the balance tax and interest payable will be Rs. 16 lakhs.
17. We may now calculate the tax and interest in the order of priority as would be ideal in the circumstances of this case. We first calculate the tax payable by the company on the returned income of Rs. 1 crore which is Rs. 35 lakhs. We set off the MAT credit i.e. Rs. 20 lakhs.
Balance payable works out to Rs. 15 lakhs. Interest Under Sections 234B and 234C, which has been presumed by us at Rs. 1 lakh, is to be added to Rs. 15 lakhs. The total demand including the interest would work out to Rs. 16 lakhs. It is thus seen that there is no difference in the calculation of interest Under Sections 234B and 234C when the set off MAT credit is allowed either before calculation of interest Under Sections 234B and 234C or after allowing the credit. It may be stated at the cost of repetition that interest calculation is not affected by giving priority to it in adjustment. We are, therefore, of the considered opinion that form No. 1 does not have any effect of influencing the interpretation in regard to the priority in adjustment of MAT credit allowable Under Section 115JAA.18. For the sake of clarity and to sum up, we may even at the cost of repetition reiterate the first stage of tax payable comes at the time of payment of advance tax. As per provisions of Sections 207, 208 and 209 the assessee is required to estimate his current income, work out the tax payable on such income and pay the said tax in three instalments. So, in order to work out the tax payable on the estimated current income, the first step to be taken is to determine the tax payable. As per the provisions of Section 115JA(4), assessee is entitled to set off of MAT credit against the tax payable. So, in order to determine the tax payable on the estimate current income for the purpose of advance tax, the assessee by virtue of Sub-section (4) of Section 115JAA, is entitled to set off the MAT credit. The tax payable would thus be the balance tax on estimated current income less the tax credit. The balance tax would be payable in three instalments as per the provisions of the Act. This may further be explained with reference to an example. Assessee may estimate the current income at Rs. 10 lakhs. The tax payable will work out to Rs. 4 lakhs. Let us assume that there is a MAT credit of Rs. 2 lakhs. That leaves a balance tax payable at Rs. 2 lakhs. Assessee would be required to pay Rs. 2 lakhs in three instalments. In the event of any default in the payment of instalments, the assessee would be liable to interest.
19. Taking the totality of the facts and circumstances of this case into consideration, we are of the considered view that the AO was not justified in not giving the set off of MAT credit in working out the tax payable by the assessee for the purpose of determination of payment of advance tax and consequently for the purpose of levy of interest Under Sections 234B and 234C. We accordingly set aside his order as well as the order of the CIT(A) and allow the appeal of the assessee.
The Assessing Officer is directed to recalculate the interest, if any, payable Under Sections 234B and 234C as per this decision. We direct accordingly.