MAT which had become a bone of contention with the Indian corporates, needs fine-tuning says T G Keswani, secretary (taxation) with the Associated Chambers of Commerce and Industry (Assocham), whereas its complete withdrawal has been demanded by s B Gupta, senior secretary with the Federation of Indian Chambers of Commerce and Industry (Ficci).

"MAT was introduced to curb the practice of some companies achieving zero-tax status by paying out huge dividends, issuing bonus shares and efficient tax planning leading to their escaping the tax net," Keswani said articulating the views of Assocham.

Currently under section 115JA of the income tax Act 1961 (which deals with MAT), a corporate assessee becomes liable to pay tax on 30 per cent of its book profits in case his taxable income computed under theprovisions of the income-tax act is less than 30 per cent of the book profit.

"Section 115 JA grants exemption inter alia to incomes exempt under chapter iii of the I-T Act (which broadly deals with income accrued from investments in basic infrastructure projects) in computing book profits," Keswani said.

"However, capital gains which are exempt under various sub-sections of section 54 (where capital gains arise from transfer of long-term capital assets and the assessee has invested whole or part of the net consideration in any of the government-approved securities within a period of six months of the transfer) does not qualify for such exemption and this has led to discrimination," Keswani said.

"To mitigate this situation, this section needs to be amended suitably to include Sec 54 while computing 30 per cent of the book profit for levy of tax under this section instead of giving illustrative list which covers some items and excludes others," he said.

"In terms of section 115JA, a company has topay a minimum tax on 30 per cent of its book profits computed in the specified manner. In other words, it is obliged to pay every year a minimum tax at 10.5 per cent of the book profits and this has unnecessarily slowed down the pace of growth-oriented companies," S B Gupta, senior secretary with Ficci said.

"Corporates which avail of tax exemptions/incentives and thereby do not pay tax or pay less tax have to make productive investments and it may be mentioned that such companies are the most dynamic enterprises and are potential global players," he added. "These companies undertake plans for development and expansion which results in additional capital formation, higher productive investments and increased employment," Gupta said adding " even though these companies may not pay direct taxes, they contribute substantially to indirect taxes." "The tag that such companies are zero-tax companies is a misnomer. These companies are only zero direct tax companies and not zero tax companies and that too for ashort while," he stated.