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Thursday, Nov 13, 2003

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Case made out for MAT withdrawal

K.R. Srivats
Richa Mishra

The argument that has been put forth is that MAT has "affected" the internal resource generation of the companies resulting in a "severe blow" to their plans for expansion and diversification.

New Delhi , Nov. 12

INDIA Inc continues to be on the mat when it comes to the minimum alternative tax (MAT).

With barely four months to go before the next edition of the Union Budget, a section of Corporate India has started pitching for withdrawing MAT or at least a restructuring of the tax.

This issue may be raised at the three-day international conference, starting tomorrow, on `Investment-friendly tax and corporate law regime'. The conference is being organised by the Federation of Indian Chambers of Commerce and Industry . A note prepared for the conference has made a case for the withdrawal of MAT.

The argument that has been put forth is that MAT has "affected" the internal resource generation of the companies resulting in a "severe blow" to their plans for expansion and diversification.

A case has also been made for restoration of tax credit facility on MAT. It has been held that "it is not fair to deny credit" for such deemed tax, against the legitimate taxes payable in subsequent years.

"The fact that many of the big corporates who earned substantial profits do not pay any tax may sound incongruous, but the larger picture needs to be seen to understand it correctly. Although it may be true that these companies may not be paying any direct tax, what about the huge amount of indirect taxes that they contribute to the national and State exchequers," asks the note.

Further, a section of India Inc says as a matter of principle there should be no tax on dividend income.

At least, the dividend distribution tax on corporate assesses should be removed for "group company" dividend distribution. The dividend distribution tax should be imposed only on the holding company, feel industry officials.

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