7.1 The scheme of levying Minimum Alternative Tax (MAT) on zero-tax companies was introduced by the Finance Act 1996 w. e f. 01.04.1997. A new section 115JAA was also inserted to provide for a tax-credit scheme by which the MAT paid can be carried forward for set-off against regular tax payable during the subsequent years, subject to certain conditions The sub-sections (1), (2) and (3) of section 115JAA read as under.
“115JAA (1) Where any amount of tax is paid under sub-section (1) of section 115JA by an assessee being a company for any assessment year. then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section.
(2) The tax credit to be allowed under sub-section (1) shall be the difference of the tax paid for any assessment year under sub-section (1) of section 115JA and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act
(3) The amount of tax credit determined under sub-section (2) shall be carried forward and set off in accordance with the provisions of sub-sections (4) and (5) but such carry forward shall not be allowed beyond the fifth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under sub-section (1).
8. In the present case the tax credit was allowed for the first time for AY 1998-99. The AO, in his rectification order passed u/s 154 on 30.04.2007, held that such a tax credit could be allowed only up to AY 2002-03, and that it was not allowable for AY 2003-04. The CIT(A) allowed the assessee’s claim for the reasons given in paragraph 5 of his order as under.
“5. I have gone through the facts of the case and the submissions made by the appellant on this issue. The details of tax credit allowed as per the letter filed by the appellant on 14-08-06 with the Assessing Officer is as under:
Accordingly in our case tax credit shall be allowable for set off from asst. year 1998-99, which succeeds asst. year 1997-98 in which tax credit was allowed, for the succeeding 5 years i.e . from asst. year 1999-00 upto asst. year 2003-04 as given below.
|Asst. year||Tax credit allowed u/s 115JA||Tax credit availed u/s 115JAA||No of years allowed for c/f|
5.2 I have gone through the submissions made by the appellant. Section 115JAA clearly specifies that tax credit determined under sub section (2) shall be carried forward and set off in accordance with the provisions of sub-section (4) and sub section (5) but such carry forward shall not be allowed beyond the 5th assessment year immediately succeeding the assessment year in which tax credit become allowable under sub section (1). In the instant case the first year therefore commences from the asst.year 1999-2000 and ends in the asst.year 2003-04 and therefore the officer is hereby directed to allow the tax credit available for the asst year 2003-04″
9. In our opinion the CIT(A) has rightly interpreted the sub-section (3) of section 115JAA of the Act. The sub-section (3) says, “such carry forward shall not be allowed beyond the fifth assessment immediately succeeding the assessment year in which tax credit became allowable under sub-section (1)”.
9.1 There is no ambiguity in the language of sub-section (3) of 115JAA. The carry forward is available for a total of six (1+5) years. It appears that the above confusion has arisen because of the language used in the CBDT Circular No.763 dated 18.2.1998. The paragraph 45.4 of this Circular, dealing with ‘Minimum Alternative Tax on companies’, reads as under.
“45.4 The Act also inserts a new section 115JAB to provide for a tax credit scheme by which the MAT paid can be carried forward for set-off against regular tax payable during the subsequent five-year period subject to certain conditions. as under:
(1) When a company pays tax under MAT, the tax credit earned by it shall be an amount which is the difference between the amount payable under MAT and the regular tax. Regular tax in this case means the tax payable on the basis of normal computation of total income of the company
(2) MAT credit will be allowed carry forward facility for a period of five assessment years immediately succeeding the assessment year in which MAT is paid. Unabsorbed MAT credit will be allowed to be accumulated subject to the five year carry forward limit
10. The period of ‘five assessment years’, mentioned in sub-paragraph (2) reproduced above, contradicts with what is stated in sub-section (3) of section 115JAA. It is trite law that statutory provisions prevail over a Circular in case of a contradiction between the two. This position was reiterated by the Supreme Court in the case of Commissioner of Central Excise vs Ratan Melting & Wire Industries (2008) 220 CTR (SC) 98. Therefore, we agree with the conclusions reached by the CIT(A). His order is, accordingly, upheld.