The Finance Ministry on Wednesday said that imposing a minimum alternate tax (MAT) on gross assets was a better option than basing it on profits, even as it has accepted India Inc.’s demand that the tax should be levied on net gains.

“MAT is an effective way to ensure optimum utilisation of assets, to make it asset-based. I still think it is the best thing to do but if you are not ready for it, we are not pushing it now, may be it will come later,” Revenue Secretary Sunil Mitra said at a CII seminar here.

MAT is a levy imposed on profit-earning companies that do not fall under the tax net because of various exemptions.

The first draft of Direct Taxes Code (DTC) proposed to levy MAT on gross assets of companies, but altered the proposal in the second draft after industry representatives raised objections to the move.

DTC is slated to replace archaic Income Tax Act from April 1, 2012 and a bill on it has already been tabled in the monsoon session of Parliament. Mitra said the standing committee of Parliament will invite suggestions on the bill and there are still chances of reconsideration in the legislation.

On DTC’s new proposals on Controlled Foreign Company (CFC), Mitra said, “India Inc is going out acquiring assets overseas and that’s a very good thing. It is just that we need to bring in a concept of responsibility whereby these assets that are acquired overseas, and income earned overseas, are also brought back and reported in the tax code.”

The DTC Bill has spelt out conditions for treating a company as a subsidiary of a foreign company, or as a CFC, for tax purposes. According to the proposal, an entity would be treated as a CFC on the basis of many factors, including whether the firm is registered in a jurisdiction having a lower tax rate.

The ownership of the particular entity, such as whether the management is controlled by one or more Indian residents, would also be taken into consideration before deciding on CFC status.

When asked whether the Government has reduced its borrowings by Rs 10,000 crore this fiscal from its earlier plans because of buoyant tax receipts, the Revenue Secretary said the Centre also has certain non-tax receipts. The Government collected over Rs 1 lakh crore from spectrum (radio waves) sale for high speed mobile and broadband services against just Rs 35,000 crore estimated in the Budget.

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