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CBDT relaxes MAT provisions for companies under corporate insolvency
January, 11th 2018

In significant relief to firms undergoing insolvency resolution, the Finance Ministry has now eased provisions of minimum alternate tax (MAT) for them.

Accordingly, companies against whom corporate insolvency resolution process has been initiated can now reduce the total loss brought forward (including unabsorbed depreciation) from the book profit for the purpose of MAT.

“Representations have been received from various stakeholders that the companies against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority, are facing hardship due to restriction in allowance of brought forward loss for computation of book profit,” said the Central Board of Direct Taxes (CBDT) on Saturday.

The relaxation will be available from the assessment year 2018–19 onwards, it added. “Appropriate legislative amendment in this regard will be made in due course,” said the CBDT. These are now likely to be included in the Union Budget 2018–19, which will be presented in Parliament on February 1.

At present, under section 115JB of the Income-Tax Act, 1961, MAT is calculated after the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account is reduced from the book profit.

Earlier, the issue had been raised by sectoral experts, bankers and industry chambers that had pointed out that the existing MAT provisions could be a challenge for new promoters or investors under insolvency resolution.

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