In recent case ( 2007 -TMI - 1918 - HIGH COURT, MADRAS ) decided by the honorable High Court of Madras, two issues were raised with respect to MAT (Minimum Alternate Tax):

"I. Whether, on the facts and circumstances of the case, the Tribunal is right in holding that, while computing the book profit under section 115J, the net profit shown in the profit and loss account is not to be increased by all the items in the clause (a) to (ha) of the Explanation to section 115J(1A) ?

2. Whether, on the facts and circumstances of the case, the Tribunal is right in holding that the unabsorbed depreciation to be carried forward should be, enhanced by an amount equal to the income assessed to tax under section 115J ?"

Following the ruling of Apex Court, Madras HC has held that:

"Amount of unabsorbed depreciation shall not be enhanced by an amount equal to the income assessed to tax under section 115J."

Unabsorbed depreciation not increased by MAT adjustment, limiting carryforward enhancement and preserving depreciation relief against assessed book profit. Whether net profit must be increased by the Explanation items for computing book profit, and whether unabsorbed depreciation carried forward should be enhanced by an amount equal to income assessed to tax under section 115J. The tribunal held net profit need not be increased by those Explanation items, and the amount of unabsorbed depreciation shall not be enhanced by the income assessed to tax under section 115J.