In major respite to companies facing corporate insolvency proceedings, the Central Board of Direct Taxes (CBDT) has relaxed norms for levy of Minimum Alternate Tax (MAT) from the current financial year 2017-18. At present, under section 115JB of the Income-Tax Act, 1961, MAT is levied on book profit after deducting the amount of loss brought forward or unabsorbed depreciation, whichever is less.
The Income Tax Department has noted that with effect from assessment year 2018-19 (FY2017-18), in case of a company, against whom an application for corporate insolvency resolution process (CIRP) has been admitted by the Adjudicating Authority under the Insolvency and Bankruptcy Code (IBC), 2016, 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. It pointed out that this decision has been taken to minimise the genuine hardships faced by such companies.
The CBDT further said that lenders of those companies, which have defaulted on loans, have been approaching the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code. It also said that appropriate legislative amendment in this regard will be made in due course and noted that the changes are likely to be brought in as part of the Finance Bill in the upcoming Budget to be presented on February 01. Besides, the number of cases being filed for CIRP under the IBC, has been rising. The RBI data indicated that as on November 2017, over 4,300 applications under CIRP were filed in the various benches of the NCLT.