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7. As per the provisions of Section 244A of the Act, where refund of any amount becomes due to the assessee, inter alia, on account of advance tax, the assessee is entitled to interest at the rate prescribed in the said provision from the first of April of the assessment year to the date on which the refund is granted. Thus, the interest is payable if refund is due out of advance tax paid by the assessee. The plea of the assessee was that while paying advance tax, the assessee was entitled to adjust the MAT credit, as the MAT credit was not set off and the amount was paid as the advance tax. After the MAT credit was allowed to the assessee, it is the excess advance tax which became payable and therefore, the provisions of Section 244A were applicable and the assessee was entitled to interest thereupon. The assessee had relied upon the judgment of the jurisdictional High Court, i.e., this Court in the case of Commissioner of Income Tax Vs. Jindal Exports [314 ITR 137]. The plea of the assessee was accepted by the CIT (A) holding that the amount which became refundable to the assessee was on account of advance tax paid in excess by the assessee and therefore, Section 244A of the Act was attracted and the assessee was entitled to interest under the said provision on the amount of refund of `9,61,45,549/-. As a consequence, while hearing the appeal of the assessee, the CIT (A) directed the AO to recalculate the interest chargeable under Section 234C of the Act as well as after adjustment of set off of MAT credit available to the appellant.

12. Since it is categorically held that the MAT credit is available for adjustment and set off on the first date of the previous year even before the installment of advance tax is due on the current income and accordingly, the advance tax liability has to be worked out on the current income only after the adjustment and set off the MAT credit brought forward from earlier years. It would mean that the AO had to first set off the MAT credit out of the income tax worked out on the total assessable income and then the credit of advance tax paid by the assessee as well as the TDS and tax collection has to be allowed. When the matter is looked into from this angle, what becomes payable to the assessee is the refund of advance tax given in excess and interest thereupon under Section 244A of the Act. Relevant portion of Section 244A of the Act reads as under:

17. The Court also specifically dealt with the question of calculating advance tax when the company has MAT credit. Following answer is provided:

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

To answer, we need to look at Section 234B. Under that section, "assessed tax" means the tax on the total income determined 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."