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TMI BlogDefinitions, Scope, and Impact on the MAT/AMT Regime : Clause 206(19) of the Income Tax Bill, 2025 Vs. Section 115JF of the Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... r on special provisions relating to certain persons other than a company, particularly concerning the alternate minimum tax. It provides the key definitions for the operation of AMT for non-corporate taxpayers, including limited liability partnerships (LLPs), co-operative societies, and units in International Financial Services Centres (IFSCs). This commentary analyzes Clause 206(19) in detail, interprets its sub-clauses, and provides a comparative analysis with Section 115JF, highlighting similarities, differences, legal implications, and areas for potential reform or clarification. Objective and Purpose The legislative intent behind Clause 206(19) is to clearly define crucial terms that underpin the operation of MAT and AMT under the new tax regime. The provision serves a dual purpose: * To ensure precise application of MAT/AMT by clarifying the meaning of technical terms, thereby reducing litigation and ambiguity. * To harmonize the Indian tax system with global best practices in accounting and insolvency, particularly in light of the adoption of Indian Accounting Standards (Ind AS) and the Insolvency and Bankruptcy Code (IBC). Section 115JF of the 1961 Act served a simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative Note: Section 115JF does not define "net worth," as it is not directly relevant to the AMT regime for non-corporate entities. d) "Private company" and "unlisted public company" Both terms are assigned the meanings provided in the Limited Liability Partnership Act, 2008. This cross-reference is somewhat unusual, as one would expect these terms to be defined by the Companies Act, 2013. However, the LLP Act provides definitions for these terms in the context of conversions to LLPs, which is relevant for MAT provisions dealing with the conversion of companies into LLPs and the consequent cessation of MAT applicability. Comparative Note: Section 115JF previously included a definition for "limited liability partnership," but it has since been omitted, reflecting a shift in focus as the legal landscape for LLPs has evolved. e) "Securities" Defined by reference to section 2(h) of the Securities Contracts (Regulation) Act, 1956. This ensures consistency in the treatment of transactions in securities, particularly for foreign companies and companies with significant capital market transactions, in the context of MAT adjustments. Comparative Note: Section 115JF does not define "se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Subsidiary" A company is a subsidiary of another if the latter holds more than half the nominal value of its equity share capital. This is a standard definition, but its inclusion is essential for MAT adjustments involving groups of companies, such as those under common control or in restructuring scenarios. Comparative Note: Section 115JF does not define "subsidiary," as group company adjustments are not central to the AMT regime for non-corporate entities. Comparison with Section 115JF of the Income Tax Act, 1961 Section 115JF provides definitions for the purpose of AMT as applicable to non-corporate entities. The key definitions in Section 115JF are: * "Accountant": As defined in the Explanation to section 288(2). * "Alternate minimum tax": Defined as tax on adjusted total income at specified rates (9% for IFSC units, 15% for co-operative societies, 18.5% for others). * "Convertible foreign exchange": As per RBI's definition under FEMA. * "International Financial Services Centre": As per Special Economic Zones Act. * "Regular income-tax": Tax payable as per the Act, excluding AMT provisions. * "Unit": As per IFSC definition. A comparative analysis reveals t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opting Ind AS, undergoing insolvency, or part of complex group structures. The phase-in of transition amounts prevents MAT spikes due to accounting changes. * For Non-Corporate Entities: The definitions clarify the scope of AMT, especially for IFSC units and co-operative societies, ensuring that concessional rates are available only to qualifying entities. * For Tax Administrators: The explicit cross-references to other statutes and detailed exclusions reduce interpretive disputes and litigation, facilitating smoother tax administration. * For Policy Makers: The alignment with global best practices in accounting and insolvency law positions India as a competitive jurisdiction for international business, especially in the financial services sector. Comparative Analysis with Other Jurisdictions Many jurisdictions impose some form of minimum tax to counteract aggressive tax planning and ensure a base level of tax contribution. India's MAT/AMT regime is unique in its reliance on book profits and its detailed integration with accounting standards and insolvency law. The explicit phase-in of Ind AS transition amounts is a notable feature, reflecting sensitivity to the impact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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