CA MANOJ GUPTA
( Expert )
22 June 2011
The FINANCE ACT 2006 HAS AMENDED SECTION 140A, 234B AND 234C SO AS TO ALLOW MAT CREDIT WHILE DETERMINING TAX LIAB
CBDT IN CICULAR NO 14/2006 HAS THUS EXPLAINED THE AMENDMENTS
"38. Credit for payment of Minimum Alternate Tax (MAT) and tax paid in a country or specified territory outside India for the purposes of charge of interest under sections 234A, 234B and 234C
38.1 Under the existing provisions of sections 234A and 234B an assessee is held liable to pay simple interest at the rate of one per cent for every month or part of a month for default in furnishing the return of income and for default in payment of advance tax respectively. Similarly under the existing provisions of section 234C in respect of deferment of advance tax, the assessee is held liable to pay simple interest at the rate of one per cent per month and if there is shortfall of tax paid before the 15th March, one per cent on the amount of the shortfall. While computing interest, credit for advance tax paid and tax deducted or collected at source is allowed. MAT credit under section 115JAA, relief of tax under section 90 and deduction from income-tax payable under section 91 are not taken into account while charging interest under the aforesaid sections. Under section 140A also, interest is required to be paid for any delay in furnishing the return or for any default or delay in payment of advance tax.
38.2 It has been represented from several quarters that the tax credit allowed under section 115JAA is no different from the tax paid in advance and credit for having paid the minimum alternate tax should be allowed against the tax liability determined on assessment. On a similar analogy, credit for taxes paid in a country outside India has also been recommended to be allowed so that interest is not charged on an amount that equals to the taxes paid outside India. Accordingly, for calculating interest under sections 234A, 234B and 234C, the Finance Act, 2006 has provided for—
(a) reduction of tax credit allowed to be set off under section 115JAA from the tax on the total income; and
(b) reduction of the amount of relief of tax allowed under section 90 and 90A and deduction from the Indian Income-tax before furnishing the return of income.
38.3 The credit for the above shall also be allowed under section 140A for calculating tax and interest before furnishing the return of income.
38.4 The above amendments will take effect from 1-4-2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent years."
tHIS MAKES CLEAR THAT MAT CREDIT CAN BE ADJUSTED WHILE COMPUTING ADVANCE TAX LIABILITY
CA MANOJ GUPTA