The Comptroller & Auditor General (CAG) in its recent report presented before the Lok Sabha said that the Government cannot achieve the objective of Minimum Alternate Tax (MAT) provisions due to ‘MAT Credit’ carry forward and set off facility which was reintroduced since April 1, 2006.
A report by the CAG on “Payment of tax by certain companies under special provisions of section 115JB” the MAT Credit facility seems to have “nullified” the impact of MAT levy, according to the Comptroller & Auditor General (CAG).
The main objective of levy of MAT in the mid-Nineties was to bring ‘zero tax paying’ companies into tax net.
It wanted the Central Board of Direct Taxes (CBDT) to clarify the treatment of computation of ‘book profit’ as regards profit/loss on sale of long term investment of the amalgamating company; excess/short depreciation due to change in method of depreciation.
It may be recalled that from the Assessment Year 2006-07, the provisions of MAT credit were reintroduced allowing carry forward of MAT credit up to seven years. This was further extended up to 10 years via Finance Act 2009.
Recently, the Finance Bill 2017 had extended the period of set off to 15 years and no justification was given for re-introduction of MAT credit, the CAG report said.
The CBDT may like to clarify the manner of setting off brought forward business loss/unabsorbed depreciation in computation of book profit, the CAG has suggested.
Read the full text of the Report below.
