TMI Blog2004 (3) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... s tax paid ahead of advance tax. Sec. 115JAA(3) stipulates that no interest shall be paid by the IT Department on credit available under s. 115JAA implying thereby the tax represented by it be considered similar to advance tax. 4. The learned CIT(A) ought to have appreciated that the interpretation of the Department upheld by him would lead to absurd consequences. The stand taken by the Department would require that a company wanting to avoid penal effects of interest under ss. 234B and 234C would first be called upon to pay advance tax without reckoning the credit available under s. 115JAA and claim refund of advance tax while filing the return. Further, it results in a situation where MAT credit get elapsed without being adjusted, which would lead to absurd consequences. 5. The learned CIT(A) ought to have appreciated that the Finance Minister in his Budget Speech (extract enclosed) had contemplated the relief by way of credit under s. 115JAA as part of change of method of charging and collecting tax. Thus, the tax chargeable and collectible is itself to be determined net of credit under s. 115JAA. 6. The learned CIT has failed to appreciate that the word shall be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose, that r. 12(1)(a) of the IT Rules, 1962, lays down that in the case of a company the return of income required to be furnished shall be in Form No. 1, that Sch. G to Form No. 1 lays down the manner of computing the total tax payable by the assessee, that it also gives the order in which TDS, advance tax and tax credit under s. 115JAA, shall be given effect to, that Form no. 1 has been substituted by Income-tax (19th Amendment) Rules, 2001, w.e.f. 17th Aug., 2001, and that, therefore, there was no ambiguity w.e.f. 17th Aug., 2001, that interest under ss. 234B or 234C shall be first deducted and thereafter tax credit under s. 115JAA shall be given. Regarding the claim that no credit was given for TDS of a sum of Rs. 4,49,527, the first appellate authority directed the AO to examine the claim of the assessee and to allow the same in accordance with law after verifying the certificates. 3. Still aggrieved, the assessee is in second appeal before us on the issue of adjustment of MAT credit against the tax payable before charging interest under ss. 234B and 234C, with the grounds of appeal extracted elsewhere in this order. At the time of hearing the learned counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncreased or decreased on account of appeal, revision, rectification and reopening, then the amount of credit set off is also increased or decreased. The amount of unutilised credit is not to be repaid. When the credit is adjusted, no interest is payable from the date of payment to the date of adjustment on such adjusted credit. Therefore, under the scheme of things, tax paid under s. 115JA, as computed under s. 115JAA is advance tax retained by the Department itself for setting off against the tax liability of future years. Carry forward and set off of the tax credit is statutorily provided and is mandatory. 4.4 The set off of credit under sub-s. (5) is against the difference between the tax payable under normal computation and the tax payable on book profits. Again, under sub-s. (6) credit is to be increased or decreased on the basis of increase or decrease of the tax liability. Thus, the set off of credit is against the tax computed, or as the case may be increase or decrease thereof and not against the balance of tax payable after deducting the advance tax and TDS. Thus, the tax credit is the first amount to be set off against the tax payable and not after advance tax and TDS. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a High Court in the case of West Bengal State Electricity Board vs. Dy. CIT (2001) 165 CTR (Cal) 502 : (2001) 248 ITR 152 (Cal) supports this view. 4.11 When two views are possible the construction which favours the assessee is to be preferred. In support of this proposition the following case law are relied on: 1. Union of India vs. Onkar S. Kanwar (2002) 177 CTR (SC) 281 : (2002) 258 ITR 761 (SC) 2. Asstt. CIT vs. Thanthi Trust, Etc. Etc. (2001) 165 CTR (SC) 681 : (2001) 247 ITR 785 (SC) 3. Vijay Omprakash Bansal vs. CIT (2003) 179 CTR (Bom) 348 : (2002) 257 ITR 649 (Bom) 4. CIT vs. L.G. Balakrishnan (2002) 176 CTR (Mad) 118 : (2002) 255 ITR 339 (Mad) 5. CIT vs. Quantas Airlines Ltd. (2002) 175 CTR (Del) 98 : (2002) 256 ITR 84 (Del) 6. Southern Roadways Ltd. vs. CWT (2001) 170 CTR (Mad) 544 : (2001) 251 ITR 213 (Mad). 4.12 Without prejudice, the following submissions are made. After 15th June, 1999, s. 143(1) has been amended. Even the adjustments permitted under erstwhile s. 143(1)(a) was withdrawn. The only action permitted is to demand tax due as per the return or grant refund based on the return. No adjustment is contemplated or permitted. Thereafter, the AO c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and had arrived at a refund of Rs. 11,54,231. In effect, due to the change in the method of adjustment of MAT credit available for the assessee for the relevant assessment year in a sum of Rs. 8,64,72,445, the assessee is made liable to pay a further sum of Rs. 1,64,86,519, being interest under ss. 234B and 234C of the Act. In other words, if the method adopted by the assessee is accepted, the assessee is getting a refund of Rs. 11,54,231, whereas if the method adopted by the AO is adopted the assessee is liable to pay a further sum of Rs. 1,64,86,519, though the assessee is eligible for adjustment of MAT credit of Rs. 8,64,72,445. 6.4 We have been called upon in this case to decide as to the point at which the MAT credit is to be adjusted from the tax due from the assessee for the relevant assessment year. Let us approach this point at issue from two angles, namely, (i) logical and (ii) legal. Let us first approach the point at issue from the logical angle. The fact remains that the assessee is eligible for adjustment of MAT credit to the extent of Rs. 8,64,72,445, which the assessee had already paid during the earlier years and which had been brought forward to this assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MAT credit first before charging of interest under ss. 234B and 234C. Even otherwise, keeping the assessee s money under the promise to adjust the same against the tax due in a particular assessment year and charging interest before making such adjustment seems to be very illogical in our view because, on the one hand, the Government is keeping the assessee s money with it in the form of MAT credit for the three previous assessment years without assigning the interest-bearing character and, on the other hand, the Government is charging interest on the whole of the tax for the present assessment year without adjusting such MAT credit. It is like putting the cart before the horse. 6.5 There is force in the contention of the assessee s counsel that the set off of credit under sub-s. (5) is against the difference between the tax payable under the normal computation and the tax payable on book profit, and that again under sub-s. (6) credit is to be increased or decreased on the basis of increase or decrease of the tax liability, and that thus the set off of credit is against the tax computed, or, as the case may be, increase or decrease thereof and not against the balance of tax payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the main policy of the legislature on the relevant subject, the minute details and procedural matter are delegated to some authority for making subordinate legislation. This is for the simple reason that procedural matters are best handled by the implementing authority and the Parliament can give its precious time for more important matters. Thus, the rule making power of the Board (Central Board of Direct Taxes) is the delegated or subordinate legislation only. In delegating powers to an administrative authority such authority cannot be given an arbitrary and uncontrolled discretion to make Rules. The Rules made under the rule making power should strictly conform to the intention of the main provisions of the statute and be consistent therewith. A delegate is not entitled to exercise powers in excess of or in contravention of the delegated powers. If the aforesaid principles are not followed such rules are illegal, void or ultra vires. The above views are supported by the following decisions: 1. V. Verghese Anr. vs. Dy. CIT (1994) 121 CTR (Kar) 164 : (1994) 210 ITR 526 (Kar) 2. Asstt. CCE vs. Ramakrishnan Kulwant Rai (1990) 184 ITR 387 (SC) 3. Supreme Court Employees We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the provisions of sub-s. (1) of s. 115JA (or s. 115JB, as the case may be) for that assessment year." It can be seen from the above section that the statute intends to allow set off in respect of brought forward tax credit (MAT credit) and it has to be allowed to the extent of the difference between the tax on its total income and the tax which would have been payable under the provisions of sub-s. (1) of s. 115JA. It may be seen that in this section the legislature has used the word tax and not tax and interest under ss. 234B and 234C of the Act . In such circumstances it is to be inferred that the intention of the legislature is to allow set off of the MAT credit from the tax and not from the total amount including tax and interest . Had it been the intention of the legislature it would have been specifically stated in the section itself. By exercising the delegated authority, the CBDT has framed the forms for filing the returns of income for the companies and while framing Form No. 1, the delegated authority, namely, the CBDT, has included Sch. G (statement of tax) to Form No. 1. While drafting this Schedule the Board has given the order of preference of adjustment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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