MAT credit of the transferee company can be carried forwarded and set-off against tax liability of amalgamated company

Facts of the case:

  • The assessee being a domestic company was engaged in the business of providing international telecommunication services, national long-distance services and such other internet related services within India.
  • During AY 2007-08, VSNL Broadband Limited (VBL) amalgamated with the assessee and the assessee carry forwarded the MAT credit as per the provisions of section 115JAA of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) of VBL in the resultant company.
  • The assessee filed its Return of Income claiming MAT credit u/s 115JAA of the Act. The assessing officer in its order disallowed the claim of MAT credit claimed by the assessee. Afterwards, the assessee preferred an appeal against the order of assessing officer before CIT(A) and however, no relief was provided to the assessee, therefore, the assessee being aggrieved, filed an appeal before Income Tax Appellate Tribunal.

Provisions for carry forward of MAT Credit (Section 115JAA):

  • As per the provisions of section 115JAA of the Act, the assessee can carry forward its MAT credit for 15 subsequent assessment years and the amount of MAT credit is available to him as a set off in the year when tax payable on total income is computed according to normal provisions of the Act. Therefore, the provision allows the Assessee to carry forward such MAT credit and the same is available as a set off to such person who has paid such MAT. 

Applicability of Provisions in the present case

  • On the basis of the reading of the provisions of Section 115JAA of the Act, the Hon’ble Mumbai ITAT held that MAT credit of the amalgamating company is available as a set-off to the resultant company. The provisions governing such credit do not prohibit availability of the credit in the hands of resulting company. 

Key Take-Aways:

The provision of law stipulates that credit shall be available to such person who has paid tax (MAT) under such section i.e. Section 115JAA of the Act.  Since, in the instant MAT was paid by VBL and subsequently, it got amalgamated into the assessee company, therefore, in the absence of any specific restriction under the section, the same shall be available as credit to the assessee company.  While deciding this case, the Hon’ble Mumbai ITAT also relied on its earlier judgment of Ambuja Cements.

Source: ITA No. Tata Communication Ltd. Vs DCIT Ward-1(3)(2), Mumbai [2577/Mumbai/2019]