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MAT relief for companies facing insolvency proceedings

Published: 29 Jan 2018

In view of the problems being faced by the companies undergoing insolvency cases under the Insolvency and Bankruptcy Code (IBC), the Central government has relaxed certain norms linked to minimum alternate tax (MAT). This has been effected in order to ease certain procedures for companies fronting such proceedings and expedite quick disposal of insolvency cases.

The underlying intent in relaxing MAT norms is to supplement the IBC is to supplement effective implementation of IBC provisions to sustain its core objective i.e quick disposal of insolvency cases and to condense the hardships faced by the companies. 

The said norms are effective from the financial year 2018-19. The norms are being relaxed exclusively for the advantage of the companies facing insolvency proceedings provided such proceedings are admitted by the insolvency board.

The Income Tax Department decision to relax the MAT norms is reflection to the receipt of representations from various stakeholders facing the insolvency proceedings and hardships as allowance of brought forward loss for computation of book profit is circumscribed by the Act.

Section 115JB of Income Tax Act (Act), has been amended to facilitate companies facing insolvency proceedings to bring forward the amount of total loss (including unabsorbed depreciation) and such amount shall be allowed to be reduced from the book profit for the purposes of levy of MAT.

It is expected that the simplification of MAT norms will certainly help companies facing financial difficulties by conferring on them the advantage of no tax payout, unlike the earlier situation of the need to carry certain tax payout despite distressed financial position.

It is hoped that with the serious implementation of the relaxed norms will certainly diminish financial liability of the distressed companies and facilitate quick disposal of insolvency cases.

Research inputs by Paruchuri Baswanth Mohan


About the author :

Bhumesh Verma is a lawyer with over 2 decades of experience in advising domestic and international clients on corporate transactions (M&A, Venture Capital, Private Equity, Startups, corporate advisory, etc.) and features in "The A-List - India's Top 100 Lawyers" by India Business Law Journal. He keeps writing frequently on FDI, M&A and other corporate matters and is a guest faculty as well. He can be reached at bhumesh.verma@corpcommlegal.com.

Firm: Addleshaw Goddard

Practice Area: Trade & Customs

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