CBDT issues clarifications under sec 115BAA of the Income tax act, 1961 inserted through Taxation (Amendment) Ordinance 2019

Oct 07, 2019 | by Avantis RegTech Legal Research Team


The Central Board of Direct Taxes on October 03, 2019, has issued clarifications in respect of option exercised under Section 115BAA of the Income-tax Act, 1961 which states that domestic companies have the option to pay tax at a rate of 22% from the FY 2019-20 onwards if such domestic companies adhere to certain conditions specified, inserted through the Taxation Laws (Amendment) Ordinance, 2019. 

However, CBDT made several amendments are made to the Income Tax Act,1961 through this ordinance, they are:

Insertion of section 115BAA in Income-tax Act, 1961 and

Amendment to Section 11 5JB relating to Minimum Alternate Tax (MAT), namely:

Provisions of Section 115JB shall not apply to a person who has exercised the option in the newly inserted Section that is 115BAA.

CBDT received representations from the stakeholders which state clarifications on following issues:

•Allowability of brought forward loss on account of additional depreciation, and 

•Allowability of brought forward MAT credit

As per section 115BAA, clause (2) of the IT Act, the total income of the domestic company shall be computed without claiming any deduction for additional depreciation, and loss (attributable to additional depreciation) carried forward from earlier fiscal year shall not be allowed to be set-off.

Firstly, it is clarified that where a domestic company, which exercises option of availing benefit of reduced corporate tax rate, shall not be allowed to claim set-off of any brought forward loss on account of additional depreciation for any fiscal year for which the options has been exercised and for any subsequent fiscal year.

And secondly, clarification on MAT credits where the domestic company avails benefit of reduced corporate tax rate, the provisions of section 115JB of the IT Act are not applicable. The CBDT has clarified that as the MAT provisions are itself not applicable to domestic companies opting for reduced tax rate, the MAT credit brought forward from earlier fiscal years shall not be available consequent to exercising the benefit of reduced tax rate. 

No timeline for the domestic companies to choose a lower tax rate under section 115BAA, thus such companies can avail the benefit of section 115BAA after claiming the brought forward loss on account of additional depreciation and utilising the MAT credit against the regular tax payable if any.

[Circular no. 29/2019]


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