CALCUTTA, July 31: After a year-long confusion on accounting minimum alternate tax (MAT), the Institute of Chartered Accountants of India has decided that companies should charge MAT as a tax expense in the profit & loss account.

The apex body for chartered accountants, which met last month on the issue, has decided against carrying forward the tax credit on MAT as an asset, an accounting practice adopted up by many leading corporates.

The ICAI has also ruled in favour of charging the liability of corporate dividend tax (CDT) in the year of accrual as a separate disclosure in the profit & loss account `below the line'. A final draft on both key accounting issues will shortly be issued to put at rest all speculation in the mattter.Although it is not incumbent upon companies to follow the ICAI's accounting norm, auditors will be required to "qualify" the accounts if any client chooses to deviate from ICAI stipulation.

The apex body has taken a view that treating tax credit as an asset for set off against future profits suffers from certain contigencies. According to exposure draft, besides the uncertainty regarding legislative changes the utilisation of tax credit in respect of MAT is contigent upon two important factors:

i)"The normal income tax payable should be more than MAT in the year(s) in which the set off can be claimed, i.e, five succeeding assesment years from the year in which tax credit becomes allowable. and (ii) The amount of tax credit may vary on account of the effect of assesments, appeals, etc, as specified in Section 115JAA(6) of the Income Tax Act, 1961."

Due to these uncertainties, the ICAI is of the opinion that tax credit available in respect of MAT is a "contigency", which has been defined in Accouting Standard (AS) 4 as "a condition or situation, the ultimate outcome of which, gain or loss, will be known."

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