MAT provisions relaxed for insolvent companies

The government has announced relaxation in the provisions relating to levy of minimum alternate tax (MAT) in case of companies against whom an application for corporate insolvency resolution process has been admitted under the Insolvency and Bankruptcy Code, 2016.

The existing provisions of section 115JB of the Income-tax Act, 1961, inter alia, provide that for the purposes of levy of minimum alternate tax (MAT) in case of a company, the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account, shall be reduced from the book profit.

The decision follows representations received from various stakeholders that the companies against whom an application for corporate insolvency resolution process has been admitted are facing hardship due to restriction in allowance of brought forward loss for computation of book profit.

Accordingly, the ministry of corporate affairs has decided that with effect from assessment year 2018-19 (ie, financial year 2017-18), any company against whom an application for corporate insolvency resolution process has been admitted by the adjudicating authority under section 7 or section 9 or section 10 of the IBC, the amount of total loss brought forward (including unabsorbed depreciation) shall be allowed to be reduced from the book profit for the purposes of levy of MAT under section 115JB of the Act.

The ministry said appropriate legislative amendment in this regard will be made in due course.