The government is considering a proposal to modify the method of calculation of book profit under the minimum alternate tax system.
According to sources, this follows the recommendation by the Central Board of Direct taxes that even if a company is allowed to revalue assets under MAT, the depreciation should be claimed on the original book value and not on the revised book value arrived at after the revaluation.
The tax department is of the view that many companies reduce their tax liability even under MAT by revaluing the assets and claiming higher depreciation.
This gets adjusted from the new book profit, resulting in reduced tax liability under Section 115JB.
Several major corporates including Larsen & Toubro, Mahindra & Mahindra and Reliance Industries pay MAT.
This is usually adopted by a company which does not have taxable income but can show book profit either by depreciating the assets under the straight line method or by not debiting capital expenditure on scientific research and development to its profit and loss account.
Meanwhile, the CBDT has urged the ministry to delink annual letting out value from the Rent Control Act for calculation of house property income.
This is because the department has observed that the Rent Control Act governs the state of affairs in major metropolitan cities like Delhi and Mumbai offers a very small base for calculation of the house property income.
Sources added that it also helps the companies to offer loans to their directors or inter group companies in the guise of house rent allowance.
For instance, it has been seen that if the rent of a house in Mumbai is Rs 25,000, the deposit for the house is shown as Rs 2.5 crore (Rs 25 million).
© 2025