Section 115JB of Income Tax Act 1961, read as  “Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year, is less than Eighteen and one-half per cent of its book profit, [such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of Eighteen and one-half per cent].”


From Assessment year 2012-13, even LLP’s are brought under the provision of tax on deemed total Income. In case of companies this tax is termed as Minimum Alternative Tax (MAT) and in case of LLP’s its called Alternative Minimum Tax (AMT).


MAT (Minimum Alternative Tax) or AMT (Alternative Minimum Tax) looks like an unfair demand from companies and LLP’s (Limited Liability Partnerships). What is the use of allowing exemptions when government is finally going to demand Tax on that exemption too?


In case of LLP, Exemptions provided under section 10AA and deductions provided under chapter VI-C of Income Tax Act 1961 are required to be added back to profits, and tax is payable on this arrived profit(Adjusted Total Income). It is really an unjust Demand from LLP’s, these exemptions and deductions are provided to make them competitive, and withstand the market stress created by highly advance companies (MNC’s).


And by withdrawing back these incentives indirectly, Government is defeating the sole purpose of these incentives. Why already suffering domestic industry should suffer the burden of fiscal Deficit. Fiscal Deficit is a problem and disgrace to the shining face of Developing India, but this alternate solution to fiscal deficit is killing the local industries.


And today when Interest Rates are around 14% to 24% these Alternative taxes really hits the Bottom line. MAT and AMT both increases the requirement of working capital. And many business dies eventually due to high tax rate, working capital crunch, non availability of excess profit to set off with MAT and AMT.


I may be wrong in my view, but many times same views are expressed by some of my known business friends. Your alternative views are always welcomed.

Posted 3 years, 10 months ago by CA Pulkit Sharma

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