HIGH COURT OF MADRAS
Rule 12(1)(a) of the Income-tax Rules, 1962 and Form-I cannot go beyond the provisions of the Act; Form-I cannot lay down the order of priority of adjustment of TDS, advance tax, MAT Credit under section 115JAA which is contrary to the provisions of the Act.
CIT v. Chemplast Sanmar Ltd., T. C. (A) No. : 887 of 2004
April 9, 2009
1.Whether on the facts and in the circumstances of the case, the Income Tax Tribunal is right in law in holding that Rule 12(1)(a) which lays down that every company has to furnish a return of income in Form No.1 and schedule G to the said form clearly lays down the manner of computation of the total income and also the order in which TDS, Advance Tax and Tax credit under Section 115JAA should be given effect to, is against the intention of the legislation and hence not applicable?
2.In respect of the first question of law, the arguments advanced by the counsel on either side are the same as the one advanced before the Delhi High Court cited supra. The Delhi High Court has considered the relevant provisions and dealt with the matter in detail and held that the credit under Section 115JAA should be given effect to before charging of interest under Section 234A, 234B and 234C of the Act. We are in agreement with the reasoning given by the Delhi High Court. The learned counsel appearing for the revenue has not produced any materials or given compelling reasons to take a contrary view with that of the Delhi High Court. In such circumstances, we answer the first question in favour of the assessee and against the revenue.
3. Section 295 of the Income Tax Act deals with power to make rules, which reads as follows:
"295(1) The Board may, subject to the control of the Central Government, by notification in the Gazette of India, make rules for the whole or any part of India for carrying our the purposes of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters:
(p) any other matter which by this Act is to be, or may be, prescribed. "
From reading of the above provision, it is clear that the Section authorised the Central Board of Direct Taxes to make rules for whole of India or part of India for carrying out the purposes of this Act and also it is subject to the control of the Central Government. Sub Section 2 enumerates some of the important matters, which have been provided by Rules. It is well accepted principle that the rule cannot affect control, enlarge or detract or derogate from the full operative effect of the provision of section. If any rule purports to do so, it would be void and ultra vires and further the rule must be consistent or in conformity with the Act. If there is conflict between Rule and the substantial provision of the Act, the Rule must pave way to the provision of the Act. Further the delegating authority must exercise power strictly within the limit of the authority. Even though the rule making power is conferred on the said authority, and the rules made are in excess of such delegated power, the rules would be void even if the Act provides that they shall have effect as though enacted in the Act.
obligations or disabilities not contemplated by the provisions of the Act itself."
4.In the case of CORPORATION BANK VS. SARASWATHI ABHARANSALA reported in (2009) 19 VST 84 = 2009(1) SCC 540, the Apex Court held that if the substantive provision of a statute provides for refund, the State by subordinate legislature cannot lay down that the tax paid my mistake would not be refunded. The Court further held that when a statute cannot be considered in such a manner as would defeat the object, the legislature is presumed to be aware of the consequences following therefrom. The statute should be read in such manner as to do justice to the parties.
5.In the present case, the intention of the legislature is to give tax credit to tax and not to the tax and interest. Once the intention is clear, the revenue cannot rely on the Form-I to say that the MAT credit under Section 115JAA should be given only after tax and interest. Further we have answered the first question of law in favour of the assessee i.e. the MAT credit under Section 115JAA should be given effect to before charging the interest under Section 234B and 234C. Rule 12(1)(a) and Form-I cannot go beyond the provisions of the Act. Form-I cannot lay down the order of priority of adjustment of TDS, advance Tax, MAT credit under Section 115JAA which is contrary to the provisions of the Act. The order passed by the Tribunal is in accordance with law and we do not find any error or illegality in the order of the Tribunal so as to warrant interference. Accordingly, we answer the questions 2 and 3 also in favour of the assessee and as against the Revenue.