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Friday, Apr 02, 2004

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Assocham plea to abolish MAT

Our Bureau

New Delhi , April 1

THE Associated Chambers of Commerce and Industry of India (Assocham) has mooted a proposal to the Ministry of Finance to abolish Minimum Alternative Tax (MAT), which retards the corporate growth, to offload additional burden on progressive companies.

Alternatively tax credit for MAT should be made available to set-off against the taxes payable (as computed under the normal provisions of Income Tax Act) in the subsequent years, this being in the nature of deemed tax.

According to the chamber, MAT is payable by companies even on long-term capital gains, though the same might not be taxable because of indexation or investment in bonds in accordance with the provisions of Sections 54EC of the Act.

Assocham further suggested that Section 115JB should be amended to provide for exclusion of long-term capital gains from the ambit of MAT. Moreover, it may be noted that Section 112 deals with long-term capital gains and as such there is no rationale for imposing MAT on long-term capital gains also.

It also suggested restoration of the earlier provision when the profits of the undertaking engaged in the business of generation and distribution of power and infrastructure business were also allowed to be reduced from the book profits.

Regarding the dividend distribution tax, the Chamber says while the present provisions tend to benefit the individual shareholders, the concept of double taxation of dividend income still persists in as far as inter-corporate dividends and the dividends received by the corporate investors from the mutual funds are concerned.

Assocham has thereby suggested that the provisions of Section 80M should be re-introduced so that the domestic companies receiving the dividends can be granted deduction under section 80M, restricted to their pay-out of dividends.

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