Question

Q. Consider the following statements in reference to Minimum Alternate Tax( MAT).

Select the correct answer using the code given below:

• A. 1 and 2 only
• B. 2 and 3 only
• C. 1 and 3 only
• D. 1, 2 and 3

Answer 1

The correct option is D 1, 2 and 3

Explanation:

Statements 1, 2 and 3 are correct:

• The objective of the introduction of MAT is to bring into the tax net "zero tax companies" which in spite of having earned substantial book profits and having paid handsome dividends, do not pay any tax due to various tax concessions and incentives provided under the Income-tax Law.
• Book profits are the net profits as shown in the profit and loss account of that company.
• MAT was introduced in 1988 for the first time. It was subsequently withdrawn in 1990 by the Finance Act(1990) but was reintroduced by the Finance Act(1996).
• The tax computed by applying 15% (plus surcharge and cess as applicable) on book profit is called MAT.
• The explanations of Book profits are in accordance with the Companies Act, 2013.