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AIT-2009-171-HC by wpr1947

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									                             AIT-2009-171-HC
                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

T.C.(A) Nos.887 of 2004, 2246, 2248, 2277, 2305, 2322, 2323, 2341, 2484, 2495, 2606,
2614, 2615, 2635, 2656, 2706, 2707, 2713 & 2722 of 2006, 10, 22, 112, 269, 270, 382,
400, 410, 485, 488, 517, 627, 646, 647, 684, 686, 717, 729, 871, 949, 1006 to 1008 & 1162
of 2007, 81 to 84, 244, 245, 356, 543, 578, 1450, 2126, 2213, 2215 & 2441 of 2008

                                  T.C.(A) No.887 fo 2004

              The Commissioner of Income Tax, Chennai.... Appellant

                                            Vs.

               M/s Chemplast Sanmar Limited, Chennai....Respondent

Tax Case Appeal No.887 of 2004 is filed under section 260A of the Income Tax Act, 1961
against the order of the Income Tax Appellate Tribunal, Madras "C" Bench, Chennai
dated 22.03.2004 made in ITA No. 1468/(Mds.)/2003.

AIT Head Note: the Income Tax Tribunal is right in law in holding that the carry
forward MAT credit available to the assessee was to be adjusted first before
charging interest under Sections 234B and 234C
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.
the Income Tax Tribunal is right in law in not considering the fact that Form 1 had
been substituted by the Income Tax (19th amendment) Rules 2001 with effect from
17.08.2001 and as such interest chargeable under Section 234B or 234C should be
first deducted and thereafter tax credit under Section 115JAA should be given.
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. (Para 18)

For appellant: Mrs.Pushya Sitaraman, in all TCs Senior Standing Counsel for IT assisted by
Mr.J.Narayanasamy

For respondents in: Mr.Venkatnarayanan T.C.Nos.887/04, 2246, 2277, 2323, 2606, 2615
2656 of 2006, 10, 410, 717, 1006 to 1008 of 2007, 81 to 84, 245, 356, 543 & 578 of 2008

For respondent in: Mr.N.Quadin Hoseyn TC.2305/06



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For respondent in: Mr.V.S.Jayakumar T.C.2322/06

For respondent in:Mr.M.P.Senthilkumar T.C.2484 & 2495/06 for M/s Philip George& 244/08

For respondent in :Mr. R.Shankaranarayanan T.C.2614/06

For respondent in: Mr.N.Srinivasan T.C. 2707/06

For respondent in: Mr.R.Srinivasan T.C.2722/06, 270 & 871/07

For respondent in: Ms.Dr.Anita Sumanth T.C.2706/06, 112, 382 & 405/07

For respondent in: Mr.T.N.Seetharaman
T.C.269/07

For respondent in: Mr.S.A.Balasubramaniam
T.C.400/07

For respondent in: Mr.A.S.Chandrasekaran
T.C.517/07

For respondent in: Mr.J.Balachander
T.C.684 & 729/09

For respondent in: Mr.C.Manishankar T.C.1162/07

CORAM: MR. JUSTICE K.RAVIRAJA PANDIAN AND MR.JUSTICE P.P.S.JANARTHANA
RAJA

Date of Judgment : 09.04.2009

J   U   D    G   M    E   N    T

P.P.S.JANARTHANA RAJA,J.

In this batch of cases, the questions raised for consideration are one and the same.
Therefore, they are taken up together and disposed of by a common judgment.

2. The questions of law raised for consideration are as follows:

        "1. Whether on the facts and in the circumstances of the case, the Income Tax
        Tribunal is right in law in holding that the carry forward MAT credit available to the
        assessee was to be adjusted first before charging interest under Sections 234B
        and 234C?




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       2. 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?

       3. Whether on the facts and in the circumstances of the case, the Income Tax
       Tribunal is right in law in not considering the fact that Form 1 had been substituted
       by the Income Tax (19th amendment) Rules 2001 with effect from 17.08.2001 and
       as such interest chargeable under Section 234B or 234C should be first deducted
       and thereafter tax credit under Section 115JAA should be given?"

3. In order to appreciate the bone of contention, it would be suffice to state the facts
relevant to one of the assessee's viz., M/s Chemplast Sanmar Limited, Chennai case in
T.C.(A) No.887 of 2004, which are as follows:

The assessee is a company engaged in manufacture and sale of PVC Resins, Caustic Soda,
Chioromethane, refringerant Gases, Promotion of new-ventures, undertakings companies and
operation of ships etc. The relevant assessment year is 2002-2003 and the corresponding
accounting year ended on 31.03.2002. The asessee filed its return of income on 31.10.2002
admitting a taxable income of Rs.32,90,54,720/- and the tax payable thereon was
determined at Rs.11,76,77,896/- including the interest under Section 234B and 234C of
the Act. The assessing officer processed the return under Section 143(1) by intimation
dated 21.02.2003 accepting the income returned. While computing the tax, the assessing
officer has not adjusted the carry forward MAT credit available to the assessee before
charging interest under Section 234B of Rs.1,17,64,830/- and under Section 234C of
Rs.56,31,754/- and consequently raised a tax demand of Rs.1,64,86,519/- and further, the
assessing officer had not given credit for TDS of Rs.4,49,527/-. Aggrieved by that order,
the assessee has filed an appeal before the Commissioner of Income Tax (Appeals)
contending that the provision of Section 115JAA had to be applied first as it is a tax
credit or prepaid taxes with the Government available to the assessee for set off, before
applying the provisions of Section 234 B and 234 C of the Act. The Commissioner, while
dismissing the appeal, held as follows:

       "The appellant's submissions have been considered. The order of priority of
       adjustment of TDS, advance tax and tax credit under Section 115JAA have not
       been spelt out in the Act. One has to take recourse to the Income Tax Rules 1962,
       for this purpose. Rule 12(1)(a) of the Income Tax Rules 1962 lays down that in the
       case of a company, the return of income required to be furnished shall be in Form
       No.1. Schedule G to Form No.1 lays down the manner of computing the total tax
       payable by the assessee. It also gives the order in which TDS, Advance Tax and
       tax credit under Section115 JAA, shall be given effect to. Form No.1 has been
       substituted by Income Tax (19th Amendment) Rules 2001 with effect from
       17.8.2001. Therefore, there is no ambiguity with effect from 17.8.2001 that




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       interest under Section 234B or 234C shall be first deducted and thereafter tax
       credit under Section 115JAA shall be given."

Aggrieved by that order, the assessee has filed further appeal before the Income Tax
Appellate Tribunal. The Tribunal allowed the appeal and directed the assessing officer to
give set off of the MAT credit of Rs.8,64,72,445/- first, before the charging of interest
under Sections 234B and 234C of the Income Tax Act, 1961. Aggrieved by that order, the
Department preferred the present appeal.

4. The learned counsel appearing for the Department submitted that the Tribunal is wrong
in holding that the carry forward MAT credit available to the assessee was to be adjusted
first before charging interest under Section 234B and 234C of the Act. Further she
contended that the Income Tax Rules viz., Rule 12(1)(a) lays down that every company has
to furnish a return of income in Form No.1 and schedule G of 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. She also submitted
that the Tribunal failed to note that form-I had been substituted by the Income Tax
(19th Amendment) Rules 2001 with effect from 17.08.2001 and as such, there was no
ambiguity from that date and the interest chargeable under Section 234B and 234C has to
be first deducted and thereafter, tax credit under Section 115JAA has to be given effect
to. The said Rules and Form are mandatory and the same is binding on the assessee. She
further contended that these appeals are arising out of the assessment proceedings. In
these batch of cases, the validity of Rules and Form-I have not been challenged. The
authorities working under the statute are bound by the Rules. She further contended that
Section 234B provides for charge of interest for defaults in payment of advance tax. The
assessee is liable to pay advance tax under Section 208 of the Act. When the assessee
fails to pay such tax or advance tax paid by the assessee under Section 210 is less than
90% of the "assessed tax", the assessee shall be liable to pay interest at the prescribed
rate on the "assessed tax" or on the difference between the "assessed tax" and the
advance tax paid. The "assessed tax" is defined in Explanation 1 after Section 234B(1) that
the tax determined under Section 143(1) or upon a regular assessment as reduced by the
Tax deducted at source (TDS). Prior to the amendment, the explanation did not have any
reference to MAT credit. In order to arrive at the figure of "assessed tax", the only
permissible deduction from the tax computed on total income as determined under Section
143(1) or upon a regular assessment is only the amount of tax deducted at source. As per
Section 234C, the interest payable under the provision is to be computed with reference to
"tax due on returned income". The said expression defined in Explanation after section
234C(1) would mean the tax chargeable on the total income declared in the return of income
furnished by the assessee for the assessment year commencing on the first day of April
immediately following the financial year in which the advance tax is paid or payable, as
reduced by the amount of TDS on any income which is subject to deduction or collection and
which is taken into account in computing such total income. Here too, according to the
revenue, the only reduction permissible is TDS. It is only after amendment of the provision
with effect from 01.04.2007, the tax credit under Section 115JAA has to be given before
charging interest under Section 234A, 234B and 234C. The Revenue has also relied on a
circular No.14/2006 of the Central Board of Direct Taxes, which contains the "Explanatory



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Notes on provisions relating to Direct Taxes" under the Finance Act, 2006 and the relevant
portion of the circular reads as follows:

       "38.2. It has been represented from several quarters that the tax credit allowed
       under Section 115JAA is not 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 2007-2008 and subsequent years."

From a reading of the above, it is clear that there are representations from various
quarters that tax credit should be allowed before charging interest under Section 234A,
234B and 234C of the Act. After considering the representation, law was amended with
effect from 01.04.2007 and the same is applied from the assessment year 2007-2008.
It comes into effect only prospectively and not retrospectively. She further contended
that Section 140A deals with "self assessment" and it speaks of deduction of only TDS
amount. There is no mention of MAT credit. Therefore, she submitted that the order
passed by the Tribunal is not in accordance with law and the same has to be set aside.

5. The learned counsel appearing for the Assessee/Respondent submitted that the liability
to pay interest under Section 234B can only be computed after the liability to pay advance
tax is calculated, which in turn, depends on the tax payable on the current income.       He
further contended that the tax credit is a nature of advance tax with the department and
hence, the same has to be set off against the tax payable only. It is also further contended
that as per sub-Section 4 of 115JAA of the Act, tax credit shall be allowed at the stage
at which the tax has become payable.        It is further contended that the assessee is
entitled to take into account the MAT credit under Section 115JAA, when it computes tax
payable under Section 209 i.e. the tax payable on the current income less the MAT credit
available. It is vehemently contended that under Section 234B and 234C of the Act, the
interest can only be computed after the tax credit under Section 115 JAA is set off against
the tax payable. As per provision of 234B(2) of the Act, any tax paid by the assessee
under Section 140A or otherwise should be taken into consideration. The word "or



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otherwise" includes the tax credit available with the department i.e. whatever manner the
tax is paid, shall be taken note of in calculating the interest. The learned counsel further
contended that the interest leviable under Section 234A and 234B are only compensatory in
nature and not a penal one and it is only by way of compensation in respect of the tax
withheld and since, MAT credit was available at the beginning of the year and had to set off
against the tax payable, no loss has been caused to the revenue, and therefore, there is no
question of charging any interest thereon by way of compensation. To support the above
claim, the learned counsel has relied on the decision of the Apex Court in the case of
COMMISSIONER OF INCOME TAX Vs. PRANOY ROY AND ANOTHER reported in (2009)
309 ITR 231, wherein it has been held as follows:

       "Since the tax due had already been paid which was not less than the tax payable on
       the returned income which was accepted, the question of levy of interest does not
       arise."

The learned counsel further relied on the circular No.14/2006 dated 28.12.2006 and
contended that the amendment in Explanation 1 after Section 234B brought about by the
Finance Act, 2006 with effect from 01.04.2007 is clarificatory in nature and therefore
retrospectively should be given. The learned counsel also placed reliance on the decision of
the Apex Court in the case of ALLIED MOTORS VS. CIT reported in (1997) 224 ITR 677
and SURESH N. GUPTA VS. CIT reported in (2008) 297 ITR 322. The learned counsel
further contended that the expression under sub-sections 4 and 5 of Section 115JAA is
"set off" and not "deduction". Therefore, the tax credit has to be set off against tax
payable. By relying on the decision of the Delhi High Court in the case of COMMISSIONER
OF INCOME TAX VS. JINDAL EXPORTS LTD. AND OTHERS reported in (2009) 221 CTR
8, learned counsel contended that all the points raised now before this Court have already
been raised before the Delhi High Court and the Delhi High Court has also considered the
matter in detail and allowed in favour of the assessee. The said judgment squarely applies
to the present case and therefore the same has to be followed. In such circumstances,
the order passed by the Tribunal is in confirmity with law and the same has to be
confirmed.

6. Heard the learned counsel appearing on either side and perused the materials available
on record.

7. 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.




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8. In respect of question Nos.2 and 3, the learned counsel appearing for the revenue
vehemently contended that the Act does not prescribe the order of priority              of
adjustments of tax deducted at source, advance tax and tax credit under Section 115JAA
of the Income Tax Act. Therefore, one has to take recourse to the Income Tax Rules
1962 for the said purpose. Rule 12(1)(a) of the Income Tax Rules, 1962 prescribed that in
the case of a company, the return of income required to be furnished shall be in Form No.I.
Schedule G of Form No.1 lays down the manner of computing the total tax payable by the
assessee. It also specified the order in which tax deducted at source, Advance tax and
tax credit under Section 115JAA shall be given effect to. Later the Form was amended
with effect from 17.08.2001. Therefore, there is no dispute that the tax credit under
Section 115JAA shall be given effect only after determining tax and interest. The
Commissioner of Income Tax rightly rejected the contention of the assessee and
dismissed the appeal. On appeal, the Income Tax Appellate Tribunal allowed the appeal
which is not only inconsistent with the statutory rule but made the rule crippled and
redundant in the absence of any challenge to the rule. The Tribunal held as follows:

       " 6.8. The well established rule of interpretation is that the same expression
       contained in the Act as well as in the Rules framed thereunder have to receive an
       identical construction (CWT Vs. Vasantha, 87 ITR 17, 21 (Mad).). Section 20 of
       the General Clauses Act, 1897 specifically provides that where, by any Central Act
       or Regulation, a power to issue any notification, order, scheme, rule, form or bye-law
       is conferred, then, expressions used in the notification, etc., shall, unless there is
       anything repugnant in the subject or context have the same respective meanings as
       in the Act or Regulation conferring the power. A rule made by the rule-making
       authority cannot enlarge or expand the meaning of a word used in a section (123
       ITR 619, 624 (Mad.) or the meaning of the section. If a rule goes beyond what the
       section contemplates, the rule must yield to the statute (see Central Bank of India
       Vs. Their workmen, AIR 1960 SC 12; Chandra Kumar Sah Vs. District Judge, AIR
       1976 All. 328(FB).

       6.9. The rule-making authority is given to the end that the provision of the statute
       may be better carried out into effect and not with a view to neutralising or
       contradicting those provisions (East Asiatic Co. (India) Ltd. Vs. State of Madras,
       (1956) 7 STC 299, 314 (Mad.), The rule-making authority cannot, in exercise of its
       rule making power, destroy a substantive right created by a provision of the statute
       (A.H.M. Allaudin Vs. Addl. ITO, (1964) 52 ITR 900, 904(Mad.) or alter, affect or
       abrogate a legislative provision in any other statute (Revula Subba Rao Vs. CIT)
       (1951) 20 ITR 337, 346(Mad.) nor can give any greater power to an authority than
       what is granted in the Act itself (Basudeb Hota Vs. State of Orissa, (1958) 9 STC
       663 (Orissa).

       6.10. In this case on hand we have to first go through the provisions of section
       115JAA regarding adjustment of tax credit. Sub-section (5) of section 115JAA
       reads as under:-




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               "set off in respect of brought forward tax credit shall be allowed for any
               assessment year to the extent of the difference between the tax on his
               total income and the tax which would have been payable under the provisions
               of sub-section (1) of section 115JA (or section 115JB, as the case may be)
               for that assessment year."

It can be seen from the above section that the statute intends to allow set off in respect
of brought forward tax credit (MAT credit) and it has to be allowed to the extent of the
difference between the tax on its total income and the tax which would have been payable
under the provisions of sub-section (1) of section 115JA. It may be seen that in this section
the legislature has used the word 'tax' and not 'tax and interest under sections 234B and
234C of the Act'. In such circumstances it is to be inferred that the intention of the
legislature is to allow set off of the MAT credit from the 'tax' and not from the total
amount including 'tax and interest'. Had it been the intention of the legislature it would
have been specifically stated in the section itself. By exercising the delegated authority
the Central Board of Direct Taxes has framed the forms for filing the returns of income
for the companies and while framing form No.1 the delegated authority, namely, the CBDT,
has included Schedule G (statement of tax) to Form No.1. While drafting this schedule the
Board has given the order of preference of adjustment of TDS, advance tax and tax credit
under Section 115JAA. While doing so, the Board has first prescribed charging of interest
under Sections 234A and 234B and then has prescribed to give credit for MAT credit
available under Section 115JAA of the Act. In our considered view this method of
prescribing the order of priority of adjustment of TDS, advance tax and MAT credit is
totally against the intention of the legislature because the legislature by insertion of sub-
section (5) to section 115JAA has intended to give set off of MAT credit against the
difference between the tax on total income of the assessee and the tax which would have
been payable under the provisions of sub-section(1) of section 115JA and not on the total
amount of tax and interest under Sections 234 B and 234C as understood by the rule-
making authority. Hence in our considered opinion schedule G to Form No.1 is totally against
the intention of the legislature which has been clearly prescribed in section 115JAA. As
has been already pointed out in the earlier paragraphs, rules cannot be contrary to the
provisions of sections or the intention of the legislature. Hence as we have already held
that schedule G to Form No.1 is contrary to the provisions of section 115JAA, we are
inclined to allow the claim of the assessee by directing the Assessing Officer to give set
off of the MAT credit of Rs.8,64,72,445/- first before the charging of interest under
Sections 234B and 234C of the Income-tax Act, 1961."

9. Section 139(1) contemplates that the assessee being a company has to file return in the
prescribed form and verified in the prescribed manner and setting forth such other
particulars as may be prescribed. Rule 12(1(a) of the Income Tax rules 1962 prescribes
that the assessee being a company should file a return of income in Form-I. The said Form
No.I prescribes the manner in which the computation has to be made. Schedule G deals
with statement of tax and the same is prescribed in the order in which the tax deduction at
source, advance tax and credit under Section 115JAA should be given effect to and same
reads as follows:




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SCHEDULE G. STATEMENT OF TAXES

Code Amount Code Amount

1. Tax on total income

(a) At normal rates                                   801        --

(b) At Special rates                                  802        --

2. Tax on total income (1(a)X1(b))
3.7.5% of adjusted book profit as
computed in Schedule-I-6                              810        --

4. Tax payable (higher of 2 and 3 above)
                                                      825   --

5. Surcharge(on 4 above)                              828   --

6. Tax plus surcharge                                 829   --

7. Relief u/s 90 -- 91 --                             826   --

8. Balance tax payable (6-7)                          840   --

9. Prepaid taxes

(A) Tax deducted/collected at source:(Attach certificate(s)):

     --------------------------------------------------------------------------------------------------
-------------------------
      S.No.      Under section             No. of certificates       Amount
     --------------------------------------------------------------------------------------------------
-------------------------
      (a)                                                                 --

      (b)                                                                  --

      )                                                               --

     Total of (a) to ...........)     870        --

(B) Advance tax (Attach challans)
   ----------------------------------------------------------------------------------------------------
----------




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                  Upto 15/6 Upto 15/9 16/9 to 15/12 16/12 to 15/02 16/03 to 31/03
Total
                   856           857            859                 860                860
862
    ---------------------------------------------------------------------------------------------------
------------------------
    Amount(Rs.) 1
    ---------------------------------------------------------------------------------------------------
------------------------
    Date            2
    ---------------------------------------------------------------------------------------------------
------------------------
    Name of Bank
    ---------------------------------------------------------------------------------------------------
------------------------

(C) Other prepaid taxes, if any

(Please specify and attach proof)                                            876      ---

10. Balance tax payable (8-9)                                                         877     --

11. Add:Interest for:

(a) Late filing of return u/s 234A                 824 --
(b) Default in payment of advance
tax u/s234B                                        843 --

(c) Deferment of advance tax u/s 234C            844 --

12. Total of 11                                               847      --

13. Total tax and interest payable (10+12)           879      --

14. Tax on self assessment (attach challan):

    ---------------------------------------------------------------------------------------------------
---------------------
    Date of payment Income Tax (Rs.)                Interest as per 10 above(Rs.)        Total(Rs.)
    ---------------------------------------------------------------------------------------------------
---------------------
         1                        2                                                      3
    ---------------------------------------------------------------------------------------------------
---------------------
         875




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    ---------------------------------------------------------------------------------------------------
---------------------

15.Tax and interest payable (13-14)                         880      ---

16.Tax credit to be allowed u/s 115JAA                               881     ---

17. Balance tax and interest payable (15-16)                883      ---

18. Refund due, if any                                               896     ---

19. Tax and interest payable on distributed profits
    u/S 115-O/115P as computed in Sch.J.12                  897      ---

20. Total payable(17+19) or, as the case may be (19-18)                               898     ---

10. 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.

11. In the case of ASSAM COMPANY LIMITED AND ANOTHER VS. STATE OF ASSAM
AND OTHERS reported in (2001) 248 ITR 567, the Supreme Court has considered the
scope of the rules and held as follows:`




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       " It is an established principle that the power to make rules under an Act is derived
       from the enabling provision found in such Act. Therefore, it is fundamental that a
       delegate on whom such power is conferred has to act within the limits of the
       authority conferred by the Act and it cannot enlarge the scope of the Act. A
       delegate cannot override the Act either by exceeding the authority or by making
       provision which is inconsistent with the Act. Any rule made in exercise of such
       delegated power has to be in consonance with the provisions of the Act, and if the
       rule goes beyond what the Act contemplates, the rule becomes in excess of the
       power delegated under the Act, and if it does any of the above, the rule becomes
       ultra vires the Act. We have already noticed that none of the provisions of the Act
       has contemplated any power to be vested in the State Officers to recompute the
       agricultural income from tea while proviso to Rule 5 of the Rules in specific terms
       empowers the State Officers to recompute the agricultural income from tea
       different from that which is computed by the Central Officers under the Central
       Act. Thus, it is seen that this Rule is not only made beyond the rule-making power of
       the State under Section 50 of the Act but also runs counter to the object of the
       Act itself, and enlarges the scope of the Act. The same also suffers from the other
       vices pointed out by us hereinabove, hence such a Rule, in our opinion, is ultra vires
       the Act. Therefore, proviso to Rule 5 of the State Rules to the extent it empowers
       the State Officers to recompute the agricultural income already computed by the
       Central Officers is ultra vires the State Act."

12. In the case of COMMISSIONER OF INCOME TAX, ANDHRA PRADESH VS. TAJ
MAHAL HOTEL reported in (1971) 82 ITR 44 also, the Supreme Court has considered the
scope of rules and held as follows:

       "It has been rightly observed that the Rules were meant only for the purpose of
       carrying out the provisions of the Act and they could not take away what was
       conferred by the Act or whittle down its effect."

13. In the case of VEENA KUMARI TANDON VS. NEELAM BHALLA AND OTHERS
reported in (2007) 13 Scale 26, the Supreme has held as follows:
"It is now a well settled principle of law that a Legislative Act shall prevail over the
subordinate legislation. Bye-Laws must, therefore, conform to the provisions of the Act
and cannot act in derogation thereof. "

14. In the case of ADDITIONAL DISTRICT MAGISTRATE (REV.) DELHI
ADMINISTRATION VS. SIRI RAM reported in 2000 AIR SCW 2205, the Supreme Court
has held as follows:

       "It is well recognised principle of interpretation of a statute that conferment of
       rule making power by an Act does not enable the rule making authority to make
       rule which travels beyond the scope of the enabling Act or which is inconsistent
       therewith or repugnant thereto. From the above discussion, we have no hesitation
       to hold that by amending the Rules and Form P.5, the rule making authority have
       exceeded the power conferred on it by the Land Reforms Act."



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15. In the case of AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS.
SHARADKUMAR JAYANTIKUMAR PASAWALLA AND OTHERS reported in AIR 1992
Supreme Court 2038, the Supreme Court has held as follows:

       After giving our anxious consideration to the contentions raised by Mr.Goswami, it
       appears to us that in a fiscal matter it will not be proper to hold that even in the
       absence of express provision, a delegated authority can impose tax or fee. In our
       view, such power of imposition of tax and/or fee by delegated authority must be
       very specific and there is no scope of implied authority for imposition of such tax or
       fee. It appears to us that the delegated authority must act strictly within the
       parameters of the authority delegated to it under the Act and it will not be proper
       to bring the theory of implied intent or the concept of incidental and ancillary power
       in the matter of exercise of fiscal power."

16. In the case of KUNJ BEHARI LAL BUTAIL AND OTHERS VS. STATE OF H,P. AND
OTHERS reported in AIR 2000 Supreme Court 1069, the Supreme Court has held as
follows:

       "We are also of the opinion that a delegated power to legislate by making rules 'for
       carrying out the purposes of the Act' is a general delegation without laying down any
       guidelines; it cannot be so exercised as to bring into existence substantive rights or
       obligations or disabilities not contemplated by the provisions of the Act itself."

17. 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.

18. 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.

19. In view of the above, these Tax Case Appeals           are liable to be    dismissed and
accordingly the same are dismissed.



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