MUMBAI: The bad-loans recovery exercise now has a puzzle to solve: Who pays the 20% Minimum Alternate Tax (MAT) on book profits when assets are written down?
The problem, say industry trackers, is that the purchase of a distressed asset triggers writedowns in the profit and loss (P&L) accounts of companies, resulting in likely book profits. Existing laws require that MAT be paid on book profits.
Where loans are written off or restructured, there would be book profits. Some of that may get negated with the write-off of assets, but the net impact may create a book profit, attracting MAT, said Abizer Diwanji, national leader for restructuring services, EY India. Resolution professionals are now debating whether the new buyer, or the len…
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