Income tax dept relaxes norms for MAT on firms facing insolvency1 min read . Updated: 09 Jan 2018, 04:55 PM IST
The income tax department relaxes rules around levy of MAT for insolvent companies as the govt looks to make the Insolvency and Bankruptcy Code, 2016 more effective
New Delhi: The income tax department on Saturday said rules around levy of minimum alternate tax (MAT) will be eased for insolvent companies as the government looks to make the Insolvency and Bankruptcy Code, 2016 more effective.
The tax department said that companies against whom Insolvency proceedings have been initiated will be allowed to reduce the entire amount of loss brought forward including absorbed depreciation from the book profit for calculation of MAT.
This will be effective from assessment year 2018-19.
The decision follows representation made by various stakeholders about problems being faced due to restriction in allowance of brought forward loss for computation of book profit.
“Appropriate legislative amendment in this regard will be made in due course," the tax department said in a statement, in an indication that the government may make the changes in the upcoming budget to be presented on 1 February.
As per the existing provisions of 115JB of the Income Tax Act dealing with levy of MAT, the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account can be reduced from the book profit.
Sanjay Kumar, partner, Deloitte India, said the move will help those firms facing acute financial difficulties.
“These loss making companies in any case may not be paying taxes, but with MAT being applicable to them, there was some payout as tax, thereby impacting their financial position. With the likely amendment they will have no pay out," he said.