LexCOMMISSIONER OF INCOME TAX, CHENNAI versus TULSYAN NEC LTD.
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A B [2010} 14 (ADDL.) S.C.R. 1114 COMMISSIONER OF INCOME TAX, CHENNAI V. TULSYAN NEC LTD. (Civil Appeal Nos.10677-79 of 2010) DECEMBER 16, 2010 [S.H. KAPADIA, CJI, K.S. PANICKER RADHAKRISHNAN AND SWATANTER KUMAR, JJ.] Income Tax Act, 1961: ss.115JAA, 234A, 2348, 234C - C Minimum Alternate Tax (MAT) credit admissible in terms of s. 115JAA is to be set off against the tax payable before calculating interest u/ss. 234A, B and C of the Act. The question which arose for consideration in the D instant appeals was whether MAT credit admissible in terms of Section 115JAA of the Income Tax Act, 1961 has to be set off against the tax payable (assessed tax) before calculating interest under Sections 234A, B and C of the Act. E Dismissing the appeals, the Court HELD: 1. As per the provisions of Section 115JA of Income Tax Act, 1961, a company is liable to pay tax on 30% of book profits, if the income computed under F normal provisions of the Act is less than 30% of the book profits. Thus, the assessee is required to compute income chargeable to tax on two alternative basis - (i) income computed under normal provisions of the Act and (ii) 30% of book profits as disclosed in the P & L Account G prepared in accordance with Parts II and Ill of Schedule VI to the Companies Act, 1956, subject to the adjustments specified in the Explanation to Section 115JA. The higher of the two computations is deemed to be the "total income" chargeable to tax and tax is payable accordingly. H 1114 COMMISSIONER OF INCOME TAX, CHENNAI v. 1115 TULSYAN NEC LTD. Thus, Section 11 SJA enacts a deeming fiction by deeming A 30% of book profits to be the "total income" chargeable to tax. The amount of tax paid under Section 11 SJA is held to be a "tax" payable under the Act, as defined in Section 2(43). [Para 5] [1126-0-F] 2. The relevant provisions under Section 11 SJAA of 8 the Act, introduced by Finance Act, 1997 w.e.f. 1.4.1997, i.e., applicable for assessment years 1997-98 and onwards, governing the carry forward and set off of credit available in respect of tax paid under Section 11 SJA, show that when tax is paid by the assessee under C. Section 11 SJA, then the assessee becomes entitled to claim credit of such tax in the manner prescribed. Such a right gets crystallized no sooner the tax is paid by the assessee under Section 11 SJA, as per the return of income filed by that assessee for a previous year. D [Section 115JAA(1 )]. The said credit gets limited to the tax difference between tax payable on book profits and tax payable on income computed under the normal provisions of the Act [Section 115JAA(2)] in year one. Such credit is, however, allowable for a period of five E succeeding assessment years, immediately succeeding the assessment year in which the credit becomes available [Section 115JAA(3)]. However, MAT credit is available for set off against the tax payable in succeeding years where the tax payable on income computed under F the normal provisions of the Act exceeds the tax payable on book profits computed for that year [Section 115JAA(4),(5)]. The statute envisages under Section 11 SJAA "credit in respect of tax so paid" because the entire tax is not an automatic credit but has to be G calculated in accordance with sub-section (2) of Section 11 SJAA. Sub-section (4) to Section 11 SJAA allows "tax credit" in the year tax becomes payable. Thus, the amount of set off is limited to the tax payable on the H 1116 SUPREME COURT REPORTS [201 O] 14 (ADDL.) S.C.R. A income computed under the normal provisions of the Act less the tax payable on book profits for that year. [Section 115JAA(4) and Section 115JAA(5)). The tax credit to be allowed is the function of tho tax payable on book profits and the tax payable on income computed under the B normal provisions of the Act, in year one. The difference of the two is the amount of tax credit to be allowed. The A.O. may vary the amount of tax credit to be allowed pursuant to completion of summary assessment under Section 143(1) or regular assessment under Section c 143(3) for year one, in terms of Section 115JAA(6). As a consequence of such variation the tax credit to be allowed for year. one is liable to change. With every change in the amount of tax payable on book profits and/ or tax payable on income computed under the normal 0 provisions of the Act, the tax credit to be allowed would have to be changed
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