E. FACILITATING INSOLVENCY RESOLUTION

Relief from liability of Minimum Alternate Tax (MAT)

Section 115JB of the Act, provides for levy of a minimum alternate tax (MAT) on the “book profits” of a company. In computing the book profit , it provides, inter alia, for a deduction in respect of the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Consequently, where the loss brought forward or unabsorbed depreciation is Nil, no deduction is allowed. This non-deduction is a barrier to rehabilitating companies seeking insolvency resolution.

In view of the above, it is proposed to amend section 115JB to provide that the aggregate amount of unabsorbed depreciation and loss brought forward (excluding unabsorbed depreciation) shall be allowed to be reduced from the book profit, if a company’s application for corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 has been admitted by the Adjudicating Authority.

Consequently, a company whose application has been admitted would henceforth be entitled to reduce the loss brought forward (excluding unabsorbed depreciation) and unabsorbed depreciation for the purposes of computing book profit under section 115JB.

This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years.

A clarificatory amendment is also proposed in section 115JB of the Act to provide that the provisions of section 115JB of the Act shall not be applicable and shall be deemed never to have been applicable to an assessee, being a foreign company, if- its total income comprises solely of profits and gains from business referred to in section 44B or section 44BB or section 44BBA or section 44BBB and such income has been offered to tax at the rates specified in the said sections.

This amendment will take effect, retrospectively from 1st April, 2001 and will, accordingly, apply in relation to the assessment year 2001-02 and subsequent assessment years.

[Clause 35]

 

Minimum alternate tax relief: admitted corporate insolvency applicants may deduct accumulated losses and depreciation when computing book profits. Amendment permits a company whose corporate insolvency resolution application has been admitted to reduce book profit under section 115JB by the aggregate of unabsorbed depreciation and loss brought forward (loss excluding unabsorbed depreciation) for MAT computation, effective 1 April 2018. A clarificatory amendment deems section 115JB inapplicable to a foreign company whose total income comprises solely profits from businesses taxed under specified presumptive provisions and offered at the prescribed rates, effective retrospectively from 1 April 2001.