Companies get MAT relief on export profits
MUMBAI: There is good news for corporate exporters. A special bench of the Income Tax Appellate Tribunal (ITAT) has given substantial relief to companies on MAT (Minimum Alternative Tax) provisions in respect of export profits.
A three-member bench which heard the matter in Mumbai has ruled that the tax deductions under section 80 HHC (dealing with export profits) for MAT assessments has to be "worked out on the basis of adjusted book profits" and not on profits computed under the regular IT provisions of law.
"The judgment will give big tax relief to exporters even if they had carried forward losses," said K Shivaram, an advocate dealing with tax matters.
In India, MAT (section 115J) was introduced from 1996-97 to bring zero-tax paying companies under the tax net because this form of tax was calculated on the book profits.
Generally, a company pays tax on the income calculated as per the Income Tax Act although the profit and loss account of the company is prepared as per the Companies Act.
Until MAT was introduced, there were several companies who booked profits as per the profit and loss account but were not paying income tax as these companies were claiming lot of tax deductions.
But due to 115 J, such zero tax companies become eligible to pay 30% MAT on their book profits (if they showed their taxable income in a year less than 30 % of their book profits in the previous year).
As regards 80 HHC benefits, these tax benefits were not given to exporters who were having carried forward losses or unabsorbed depreciation.
In the present case pertaining to Syncom Formulations (I) Ltd., tax deduction under section 80HHC was not allowed due to carried forward losses and unabsorbed depreciation.
But due to MAT, Syncom a had huge tax liability. Syncom claimed tax deduction under MAT provisions but it was disallowed by the assessing officer on the ground that no 80 HHC tax deduction was allowed under regular MAT provisions.
Source:Times of India |
