The Centre may not be fully achieving the objective for which Minimum Alternate Tax (MAT) provisions were introduced in the income tax law, a CAG report has concluded.
This is because the ‘MAT Credit’ carry forward and set off facility—reintroduced since April 1, 2006--- seems to have “nullified” the impact of MAT levy, according to the Comptroller & Auditor General (CAG).
The main objective of levy of MAT in the mid-Nineties was to bring ‘zero tax paying’ companies into tax net.
It may be recalled that from the Assessment Year 2006-07, the provisions of MAT credit were reintroduced allowing carry forward of MAT credit up to seven years. This was further extended up to 10 years via Finance Act 2009.
Recently, the Finance Bill 2017 had extended the period of set off to 15 years and no justification was given for re-introduction of MAT credit, the CAG report said.
The CAG also wants the Central Board of Direct Taxes (CBDT) to clarify the treatment of computation of ‘book profit’ as regards profit/loss on sale of long term investment of the amalgamating company; excess/short depreciation due to change in method of depreciation.
The CBDT may like to clarify the manner of setting off brought forward business loss/unabsorbed depreciation in computation of book profit, the CAG has suggested..
ENTERTAINMENT SECTOR In another report, tabled in Lok Sabha on Friday, the Government auditor had found “systemic deficiencies” relating to the levy and collection of service tax on entertainment sector.
The deficiencies include taxable commercial activities escaping taxation due to clubbing of theatrical rights that are exempted with taxable non-theatrical rights/other activities by way of an agreement treating the entire consideration only towards theatrical rights.
Also, copyrights transferred with limitations were treated as transferred in perpetuity resulting in the escapement of revenue.
There were instances of artists/producers entering into agreements with foreign entities to establish a service recipient (s) and place of provision in the non-taxable territory and thereby consideration for the portion of service provided outside India was treated as export.
srivats.kr@thehindu.co.in