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Clarification on Availability of MAT Credit for Companies Opting for Lower Corporate Tax Rate

CBDT has provided clarification dated 2nd October, 2019 for the domestic companies regarding the decision to switch to the lower rate of 22% from the existing rate of 30%. Board has addressed the concerns in respect of option exercised under section 115BAA of the Income-tax Act, 1961 which has been inserted through the Taxation Laws (Amendment) Ordinance, 2019.
Board have considered the two issues for which representations received from the stakeholders seeking clarification on issue of allowability of brought forward loss on account of additional depreciation and allowability of brought forward MAT credit.
According to the ordinance promulgated on the 20th September 2019, the newly inserted section 115BAA doesn’t allow any deduction of additional depreciation (under section 32(1)) from the total income and it shall be computed without setting off any loss carried forward from any earlier assessment year if same is attributable to additional depreciation. Thus, it has been clarified that domestic company opting for benefit under section 115BAA is not allowed to claim set off of any brought forward loss on account of additional depreciation.
Further, in regards to allowability of brought forward MAT credit, as provided in the Ordinance, provision of section 115JB relating to MAT is not applicable to domestic company exercising option under section 115BAA. Therefore, it has been clarified by the Board that MAT credit shall not be available consequent to exercising such option by the company.
Considering the possible disadvantage in the hands of companies having such considerable losses and MAT Credit, the Board has pointed out that there no defined time limits for exercising the aforementioned option. Therefore, option under section 115BAA is not bound by any timeline which implies that if any domestic company has losses mentioned above or MAT credit then it can exercise the option after setting off losses so accumulated or after utilising the said credit against the regular tax payable under the taxation regime.