Though the Circular does not allow for MAT credit/ additional depreciation loss set-off if companies opt for the lower tax regime, it does come with a breather. The companies can opt for the lower tax regime after exhausting such credits/ losses.
Having said this, it would be worthwhile to note that many companies, especially IT companies have huge MAT credits available with them (approximately INR 1.50 billion, as per a recent news article in economic times). These companies would be required to weigh both the options i.e. exhaust credits/ losses and then opt for the lower tax regime or opt for the lower tax regime immediately and write-off the credits/ losses.
Interestingly, given that the clarification has come through a circular, there is a possibility that the taxpayers could adopt a position that circulars cannot bind the taxpayer. This proposition has been upheld earlier by various courts and hence it may be worthwhile for companies to evaluate the quantum of credit available vis-à-vis litigation costs before deciding the way forward.