MAT’s effectiveness under CAG scanner

The Comptroller and Auditor General (CAG) has put a question mark on the effectiveness of the Minimum Alternate Tax (MAT) in compelling &#14...

The Comptroller and Auditor General (CAG) has put a question mark on the effectiveness of the Minimum Alternate Tax (MAT) in compelling ‘zero tax’ to pay taxes. The MAT, it may be recalled, was introduced by P. Chidambaram as Finance minister in the United Front government in 1997.

The CAG report, which was tabled in Parliament on Tuesday, observed, ‘‘a number of companies had paid no tax or marginal tax despite earning substantial book profits and paying handsome dividends.’’

According to CAG’s report, 6,185 companies in Maharashtra, Tamil Nadu and West Bengal did not pay any tax even though they had declared dividends amounting to Rs 2,498 crore. Out of 6,185 companies, 125 companies did not pay the required tax amounting to Rs 241.12 crore under special provisions.

The MAT (Section 115 JA of the Income Tax Act), it may be mentioned, was introduced with effect from April 1, 1997 with a view to arresting laxity in the tax regime and bringing ‘zero tax’ companies in the tax net.

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