Minimum Alternate Tax Current Affairs
The Central Board of Direct Taxes (CBDT) has announced to relax norms around levy of minimum alternate tax (MAT) for insolvent companies from financial year 2017-18.
The purpose of the move is to make the Insolvency and Bankruptcy Code, 2016 more effective and minimise hardship faced by companies going in for insolvency resolution.
Minimum alternate tax (MAT)
Its aim is to bring Zero Tax Companies” into tax realm who do not pay any tax. It is ruled by provisions enclosed in section 115JB of Income Tax Act, 1961. MAT is valid to all companies comprising foreign companies. As per meaning of MAT, tax obligation of company will be higher if income tax of company calculated as per normal provision of income tax and tax calculated at 18.5% on book profit plus surcharge and cess as applicable.
This exemption facility will be available only for companies against whom application for corporate insolvency resolution process has been admitted by the adjudicating authority. An amendment to this effect will be made in section 115 JB of the Income Tax Act.
According to existing provisions for purposes of levy of MAT company, amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account shall be reduced from book profit. The relation of norms will allow company to reduce amount of total loss brought forward including unabsorbed depreciation from the book profit for the purposes of levy of MAR.
This decision was taken based on suggestions of various stakeholders suggesting hardship faced by companies against whom application for corporate insolvency resolution process was admitted by Adjudicating Authority due to restriction in allowance of brought forward loss for computation of book profit. The Indian Banks Association (IBA) also had sought removal of MAT for new investors apprehending depressed bids.