Fiserv India Pvt. Ltd. vs ACIT: MAT Credit Dispute for AY 2013-14 – ITA 6583/DEL/2019

Case Overview: Fiserv India Pvt. Ltd. vs ACIT (ITA 6583/DEL/2019)

The case revolves around an appeal filed by Fiserv India Pvt. Ltd., a prominent company in the IT services sector, against the Assistant Commissioner of Income Tax (ACIT), Circle-9(1), New Delhi, regarding the assessment year 2013-14. The dispute centers on the rectification of Minimum Alternate Tax (MAT) credit entitlement due to transfer pricing adjustments made for the assessment year 2011-12.

Background of the Case

The assessment for the financial year 2013-14 was completed under Section 143(3) of the Income Tax Act, 1961, with an assessed income of Rs. 59,90,57,890 as against the returned income of Rs. 52,65,19,530. The difference arose due to certain disallowances and adjustments. Subsequently, the Assessing Officer (AO) issued a rectification order under Section 154, which further adjusted the MAT credit entitlement of Fiserv India Pvt. Ltd. by Rs. 5,68,28,807. The rectification was based on the fact that certain transfer pricing adjustments made for the assessment year 2011-12 were upheld by the Dispute Resolution Panel (DRP).

The primary contention in the rectification order was that the MAT credit allowed in AY 2013-14, which included Rs. 5,68,28,807 for AY 2011-12, should be reduced due to the transfer pricing adjustments. Fiserv India Pvt. Ltd. contested this rectification, leading to the filing of an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the AO’s decision.

Issues Raised in the Appeal

Fiserv India Pvt. Ltd. raised several key issues in their appeal:

• Rectification under Section 154: The company argued that the issue of MAT credit adjustment was debatable and could not be addressed through a rectification order under Section 154. They contended that the rectification involved a complex issue that required a deeper examination, which is beyond the scope of Section 154.
• Sub-Judice Transfer Pricing Adjustments: The appellant pointed out that the transfer pricing adjustments for AY 2011-12 were still under dispute before the Income Tax Appellate Tribunal (ITAT). They argued that since the matter was sub-judice, the AO should not have adjusted the MAT credit until the final outcome of the appeal.
• Interest under Section 234B: Fiserv India Pvt. Ltd. also contested the charging of interest under Section 234B of the Income Tax Act, which was imposed due to the reduction in MAT credit. They argued that the interest should not be charged as the adjustment of MAT credit was still under dispute.

ITAT’s Ruling

The ITAT, consisting of Shri Sudhanshu Srivastava, Judicial Member, and Shri Prashant Maharishi, Accountant Member, carefully considered the arguments presented by both parties.

Rectification under Section 154

The Tribunal examined whether the rectification of MAT credit under Section 154 was justified. It was noted that the provisions of Section 154 allow rectification only when there is a clear mistake apparent from the record. In this case, the Tribunal found that the adjustment of MAT credit due to the transfer pricing addition was indeed a mistake apparent from the record. The Tribunal upheld the AO’s decision to rectify the MAT credit, rejecting the appellant’s argument that the issue was debatable.

Sub-Judice Transfer Pricing Adjustments

Regarding the contention that the transfer pricing adjustments were sub-judice, the Tribunal ruled that the pendency of an appeal before a higher authority does not bar the AO from rectifying the assessment if there is a clear mistake on record. The Tribunal emphasized that the AO was within his rights to rectify the MAT credit, even though the transfer pricing issue was still under litigation. The appellant’s argument was dismissed.

Interest under Section 234B

On the issue of charging interest under Section 234B, the Tribunal pointed out that interest is mandatorily charged on any shortfall in the payment of advance tax. Since the MAT credit had been reduced, the shortfall in advance tax payment was inevitable, making the charging of interest under Section 234B unavoidable. The Tribunal dismissed the appellant’s plea to waive the interest, stating that the interest was correctly levied as per the provisions of the law.

Conclusion

The ITAT concluded that the AO’s actions in rectifying the MAT credit and charging interest under Section 234B were justified and in accordance with the law. The appeal filed by Fiserv India Pvt. Ltd. was dismissed, with the Tribunal upholding the orders of the lower authorities.

This case highlights the complexities involved in MAT credit adjustments, particularly when linked to transfer pricing disputes. It also underscores the importance of understanding the scope and limitations of rectification orders under Section 154 of the Income Tax Act.

In conclusion, the ITAT’s decision reaffirms the principle that clear mistakes on record, such as incorrect MAT credit allowances, can be rectified by the AO, even when related issues are under appeal. The charging of interest under Section 234B remains a mandatory consequence of any shortfall in advance tax payments.

Fiserv India Pvt. Ltd. vs ACIT: MAT Credit Dispute for AY 2013-14 – ITA 6583/DEL/2019