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30. Mr Vohra's first submission is that MAT credit is equivalent to payment of tax in advance. According to him, MAT credit available under section 115JAA is essentially credit for the tax paid by the assessee in earlier years. Such credit is withheld by the government to be set-off against tax payable in future years subject to fulfilment of specified conditions. Consequently, it was submitted, the amount of MAT credit is akin to tax paid in advance, lying with the government for and on behalf of the assessee and available to the assessee, as a matter of right, to be set off against the tax payable in future years. It was contended that in the context of payment of advance tax, the courts have held that tax paid within the previous year, though beyond the stipulated date for payment of advance tax, has to be treated as payment of advance tax for the purpose of calculation of interest and penalty under the various sections of the said act. It was, therefore, submitted that the case of MAT credit is on a much better footing inasmuch as the sum representing MAT credit is available with the government even prior to the commencement of the relevant previous year. Consequently, MAT credit cannot be treated as anything but tax paid in advance and is, therefore, to be set off against the tax payable before computing interest under sections 234A, 234B and 234C of the said act.

36. The above table clearly illustrates the difference in the stands adopted by the parties. While the MAT credit is the same, the point at which it is set off makes all the difference. As per the department the MAT credit is to be set off after interest under sections 234B and 234C are computed. On the other hand, as per the assessee, the MAT credit has to be set off against the tax payable, prior to the computation of interest.

Rejoinder on behalf of the Revenue

37. In rejoinder, the learned counsel for the revenue/appellant submitted that the case of Dr Prannoy Roy (supra) was not applicable as the tax had been paid in the year in question. It was also contended that availability of MAT credit could not be equated to advance tax actually paid. The case of refunds was referred to. The learned counsel submitted that each year is treated as an independent year and it cannot be assumed that if there is refund for an earlier year, advance tax to that extent for a later year stands paid. The respondents' answer to this, with which we agree, is that while refunds cannot be set off in a subsequent year as there is no provision for it, MAT credit has to be set off as a matter of right in view of the provisions of section 115JAA itself.

41. It is clear that prior to the filing of the return, the assessee is to make a self-assessment of the tax payable on the basis of the return which is to be furnished and has to pay the amount of such tax ―after taking into account the amount of tax, if any, already paid under any provision of this Act‖. Such tax is to be paid together with interest payable for any delay in furnishing the return (section 234A) or any default or delay in payment of advance tax (Sections 234B and 234C). The expression ―such tax‖ referred to in section 140A(1) means the tax payable on the basis of the return minus the amount of tax, if any, already paid under any provision of the Act. The MAT credit under section 115JAA is nothing but credit for tax paid under section 115JA of the said Act. Both the sections are part of the said act. MAT credit is granted for tax already paid under section 115JA. Thus, the sum represented by the available MAT credit would fall within the expression ―tax....already paid under any provision of this Act‖. This means that the expression ―such tax‖ referred to in section 140A(1) would mean the tax payable on the basis of the return minus, inter alia, the available MAT credit which represents the tax already paid under a provision (section 115JA) of the said Act. The adjustment or the set off in respect of the available MAT credit is implicit in the meaning of ―such tax‖. However, after the amendment introduced by the Finance Act, 2006, this has been made explicit. This would be immediately clear by reading the section 140A(1) as it stands today, that is, after the said amendment:-

42. So, the amendment merely clarifies and makes explicit what was already implicit. Even if the amendment had not been introduced, the expression ―such tax‖ as appearing in section 140A would have reference to the tax payable on the basis of the return minus, inter alia, the MAT credit claimed to be set off in accordance with the provisions of section 115JAA of the said Act.

43. The ―such tax‖ mentioned in section 140A(1), if paid prior to the filing of the return, is what is referred to in section 234B(2) as the tax paid by the assessee under section 140A. Going back to section 234B(2), we find that there is reference to tax paid under section 140A as well as tax paid ―otherwise‖. It is obvious that tax paid otherwise would take in within its sweep any tax paid under the provisions of the said Act. It cannot be denied that an assessee who makes a payment of tax under section 115JA makes such payment as per the provisions of the said Act. However, not all of it is to be accounted in the year it is paid. Part of it is accounted in the same year and the remainder is to be carried forward as MAT credit under section 115JAA. To make it clear, MAT credit under section 115JAA is not given in respect of the entire tax (viz., Minimum Alternate Tax) paid under section 115JA in a year. MAT credit is given only in respect of the amount of MAT which is in excess of the tax payable for that year by the assessee under the normal provisions (i.e., other than the special provisions of section 115JA). It represents the amount of tax paid by the assessee in excess of what it would be required to make under the normal provisions only because of the special provisions requiring company assessees to pay a minimum tax each year. It is for this reason that credit is given to the assessee for such payment and the assessee can, as a matter of right, subject to certain conditions, carry forward and set off the tax credit against the tax payable in a subsequent year. There can be no doubt that the entire amount of MAT paid under section 115JA would be towards tax. Part of it may be towards tax for that year and part of it, for which credit is given, is towards tax for a subsequent year. Thus the tax credit which has been carried forward and is available for set off under the provisions of section 115JAA in a subsequent year would qualify as tax paid ―otherwise‖. Since, it is available at the beginning of the subsequent year, it is obvious that such tax credit would be tax paid by the assessee before the date of determination of total income under section 143(1) or completion of regular assessment.