MAT

This query is : Resolved

CA Ysil Karunai (Querist)
Follow

27 October 2009 Dear Sir,
company assessee calculating tax according to provsions of income tax act and arrive a tax liability.
But why they are falling under MAT?
What is the logic behing the Introduction of MAT?
When assessee liable to pay tax under MAT, why MAT credit concept introduced?

UMA SHANKER SHARDA

UMA SHANKER SHARDA (Expert)
Follow

14 November 2009 MAT is applicable when the tax liabiity is lower than MAT as calculated after providing dep as per IT Act.
There were certain companies in past, who were continously investing in fixed assets and their dep as per income tax act was always higher than dep. as per Comp. Act. Thus in spite of showing good net profit, these companies were escaped from paying income tax. Therefore to bring them into tax net, MAT has been introduced.
MAT credit concept as been introduced later to avoid the hardship, which first occurred at the time of paying MAT and then again as per income tax provisions. As the assessee has already paid MAT and in later years when Dep. as per IT act will be lesser than Dep as per Comp. Act, the company has to pay more tax, which is in fact doubling the liability.