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Supreme Court Holds that Interest is Applicable for Shortfall in Payment of MAT
In a significant ruling, the larger Bench of the Supreme Court has ruled that interest under section 234B of the Income-tax Act 1961, would be applicable for shortfall in payment of advance tax even in cases where the final tax liability is under the provisions of Minimum Alternate Tax ("MAT"). Taxand India highlights the impact of the recent ruling for those companies who file corporate tax returns with no income.
This is an important ruling which clarifies the applicability of interest payable for shortfall in payment of advance tax. As the MAT rate has been increasing over years, the corresponding exposure for interest for shortfall in payment of MAT has also been increasing. While MAT is creditable against the future taxes, subject to satisfaction of certain conditions, interest is not. Hence, it is important to properly estimate MAT liability. It may be noted that the Supreme Court had, in another important ruling last month, held that credit for MAT paid should be allowed before computing interest under section 234B and 234C of the Act.
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