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18.12.2010 - Recent Updates as on 18.12.2010
Saturday, December 18, 2010

1.   COMMISSIONER OF INCOME TAX, CHENNAI VERSUS TULSYAN NEC LTD. CIVIL APPEAL NOS.10677-79 OF 2010, DATE OF ORDER : DECEMBER 16, 2010, HON’BLE SUPEREME COURT OF INDIA

Whether MAT credit admissible in terms of Section 115JAA hasto be set off against the tax payable (assessed tax) before calculating interest under Sections 234A, B and C of the Income Tax Act, 1961 (the Act). 

The issue which crops up for decision is - how should the advance tax be calculated when the Company has MAT credit? 

Under that section, "assessed tax" means the tax on the total incomedetermined 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. The definition, thus, at the relevant time excluded MAT credit for arriving at assessed tax.

This led to immense hardship. The 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 the 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 the 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.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. We reiterate that we cannot accept the case of the Department because it would mean that even if the assessee does not have to pay advance tax in the 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.  

The consequence 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. Thus, despite MAT credit standing to the account of the assessee, the liability of the assessee gets increased instead of it getting reduced. 

(Please click here for judgment)

  

2.   A Latest Amendment in Sch-1 of Dvat-04

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What's New 

  • NOTIFICATION NO 124/2010 - Duty free import under DEPB scheme extended till 30th June 2011-Customs  (Click for detail) 

  • CIR/CFD/DIL/10/2010 – SEBI - Amendments to the Equity Listing Agreement  (Click for detail) 

  • CIR/MRD/DP/37/2010 – SEBI - Acceptance of third party address as correspondence address  (Click for detail)

  • DOPT (Department of Personnel Training) Office Memorandum - Amendment to RTI Rules  (Click for detail)

  • Delay not Ground for Dismissing Petition- SC  (Click for detail) 

                

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Thanks for your valuable time 

"Voice of CA"

CA. Sanjay Kumar Agarwal, Founder - Voice of CA
Member  Central Council - ICAI
Former Chairman - NIRC
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