Mat computation of book profit us 115jb doubtful debts since, we. Thus, the adjusted book profits would be further eligible to the benefits set out in the other provisions of the act and the plain language of section 115jb thus admits of the grant of relief under section 54ec in an assessment thereunder. Mat calculation of book profit us 115jb ao seems to have acted. Sales tax subsidy being capital receipt, the same is not taxable under the mat provisions and accordingly, the issue was raised before the tribunal. Cbdt issues faqs on computation of book profit for levy of. Clarifications on computation of book profit for the purposes of levy of minimum alternate tax mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies. Profit from sale of agricultural land is not book profit in 115jb. Advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Minimum alternate tax mat us 115jb of income tax act, 1961. It is obligatory on aos part to consider such notes while determining the book profit under section 115jb. Faq computation of book profit for levy of mat us 115jb for indian accounting standards ind as compliant companies. To bring clarity on the tax implications of transition to ind as, budget 2017 proposed certain amendments to section 115jb. Rsm india is a member of the rsm network and trades as. Cbdt circular on section 115jb of the incometax act, 1961.
Calculation of book profits for the purpose of mat section. Nov 05, 2015 similarly for computing book profits u s 115jb of the act, the ao added rs. Nov 20, 2012 yes, as per the amemndments made by finance act,2011, mat is now required to by paid on income exempt u s 1038 and income decuctible u s 10aa. Similarly for computing book profits us 115jb of the act, the ao added rs. Capital receipt waiver of loan not chargeable to tax u. How should adjustments for service concession arrangements be treated for the purpose of computation of book profit under mat.
Adjustments on account of service concession arrangements would be included in the transition amount and also on an ongoing basis. Central board of direct taxes cbdt constituted mat ind as committee to suggest framework for computation of book profit for purposes of levy of minimum alternate tax mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies in the year of adoption and thereafter. Framework for computation of book profit for the purpose of. Profit from sale of agricultural land is not book profit. Faqcomputation of book profit for levy of mat us 115jb. Book profit of the company computed as per the provisions of section 115jb. An exempt income cant be considered for the purpose of computation of book profit us 115jb. Though the above said profit was shown in the profit and loss account, yet the assessee excluded the same while computing the book profit under section 115jb of the act, by placing reliance on the decision rendered by the coordinate bench of cochin tribunal in the case of harrisons malayalam ltd. Regarding the assessees claim of computation of book profit us. Methods of computation used for determination of income on transfer of long term capital assets in the form of shares or units of mutual fund which forms part of book profit us 115jb. It is obligatory on aos part to consider such notes. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. Computation of book profits by ind as compliant companies. Based on the matching principle of accountancy, only expenses debited to the profit and loss account that had direct and proximate nexus with the exempt income credited to the profit and loss account should have been added back while computing book profit under mat provisions.
Apr 28, 2016 government of india ministry of finance department of revenue central board of direct taxes. The revised section 115jb of the incometax act, 1961 the act prescribes that. Capital receipts and book profits mat no longer a self. Government of india ministry of finance department of revenue central board of direct taxes. The mat provisions begin with a nonobstante clause, and thus, are a sacrosanct and selfcontained code. Computation of book profits would be calculated as under a stepi. The tax rate is 15% with effect from ay 202021 fy 201920 2. It requires that every company shall pay tax on its book profits arrived by preparing its accounts as per schedule iii to companies act 20 part ii of schedule vi to companies act 1956 earlier, subject to adjustments as provided under explanation 1 thereunder. While computing the book profits under the provisions of section 115jb of the incometax act, 1961 the act, disallowance under section 14a of the act has been a topic of debate since its inception with reference to increasing the book profit by such disallowance.
Minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961. Meaning of book profit as per explanation 1 to section 115jb 2 book profit for the purposes of section 115jb means net profit as shown in the statement of profit and loss prepared in accordance with schedule iii to the companies act, 20 as increased and decreased by certain items prescribed in this regard. Complexity in computing the book profit under mat provisions. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb for computation of book profit, one may proceed as follows. Gujarat organics ltd, mumbai vs assessee indian kanoon. Changes include modification to part a and introduction of new part b and part c in annexure to form 29b seeking various details regarding the amount required to. Mat computation of book profit u s 115jb doubtful debts since, we. Clarifications on computation of book profit for the purpose of levy of mat under section 115jb of the incometax act for ind as compliant companies. May 21, 2012 book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. Mat is calculated under section 115jb of the incometax act. First of all calculate tax as per normal provisions of income tax. Central board of direct taxes cbdt constituted mat ind as committee to suggest framework for computation of book profit for purposes of levy of minimum alternate tax mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies in the year of adoption and thereafter the following are brief extracts. Framework for computation of book profit for the purposes of levy of mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies a committee had been constituted, with. Book profit under section 115jb the purpose of computing.
The computation of book profit under section 115jb is a complicated and vexed issue with diverse interpretations possible on various issues. Framework for computation of book profit for the purpose. Calculation of mat credit applicability of minimum alternate tax. The computation method is relevant for companies preparing financial statements under erstwhile as. The net other comprehensive income1 includes certain items that would permanently be recorded in reserves, and hence, can never be reclassified to the statement of profit and loss account included in the computation of book profits.
Jul 06, 2017 ca jyoti gupta has analyzed the recent judgement of the itat special bench in acit vs. As per section 115jb 2, book profit means net profit. Step 2 adjustment to net profit to convert it into book profit which are given under explanation 1 to section 115jb2 book profit is arrived at after making specified adjustments to the profit as shown in the statement. O seems to have acted beyond the provisions laid down in section 115jb and has made the.
Taxable income as per normal provision of income tax act. The minimum alternative tax mat is a provision introduced in direct tax laws to limit the tax deductionsexemptions otherwise available to taxpayers so that they pay a minimum amount of tax to the government. Calculation of book profits for the purpose of mat. Minimum alternate tax part iii computation of book profits. Further the sales tax subsidy received by the assessee is a capital receipt and does not come within the definition of income under section 224 of the i. The provisions of section 115jb provide for levy of mat on basis of book profits, i. In other words, the mat provisions in section 115jb create a deeming fiction, which deems book profit as the total income of a company for determining its tax liability. Cbdt amends the report on computation of book profits for ind. In order to trim down the exempt provision of section 1038 and include the said income in computation of book profit, a proviso is inserted to section 1038 and simultaneously references to section 1038 are excluded from the clause f and ii of explanation 1 to section 115jb for computation of book profit. Step 2 adjustment to net profit to convert it into book profit which are given under explanation 1 to section 115jb 2 book profit is arrived at after making specified adjustments to the profit as shown in the statement. Capital gains exempt under section 54ec need not be reckoned. Mat computation of book profit us 115jb doubtful debts.
Computation of book profit under sec 115jb income tax forum. For computation of book profit, one may proceed as follows. It requires that every company shall pay tax on its book profits arrived by preparing its accounts as per schedule iii to companies act 20 part ii of schedule vi to companies act 1956 earlier, subject to adjustments as provided. Tax liability as per the mat provisions are given in sec 115jb18. Calculation of book profits for the purpose of mat section 115jb. The itat chennai in the case of the deputy commissioner of income tax, corporate circlei, coimbatore vs. On 1 february 2017, the finance minister presented the finance bill, 2017 the bill which contained a number of. Mat provisions us 115jb an exhaustive overview of landmark. Brought forward business losses can be adjusted even after. Further, the assessee by way of a note in the computation gave a caveat that the amount of rs.
Existing clause iii of explanation to section 115jb2 of the act provides. Kolkata itat recently held that the expenditure incurred to earn exempt income computed under section 14a of the income tax act could not be added while computing book profit under section 115jb of the act accountant member p. Additionally, to have parity between the transition adjustment and ongoing adjustments on account of items adjusted to other equity, the committee has recommended amendment to section 115jb2a of the incometax act the act w. Tax liability as per the mat provisions are given in sec 115jb 18. Income tax 932020 mat computation of book profit u s 115jb doubtful debts since, we have held that provision of doubtful debts is not an allowable deduction while computing income under normal provisions, as a corollary to the aforesaid findings the book profits under section 115jb are not required to be reduced. Matbook profit under section 115jacapital gains exempted under section 54ec being reckoned for purpose of computing book profit conclusion. Ltd on the controversial issue whether the disallowance u s 14a and rule 8d is required to be adjusted while computing the book profits u s 115jb and explained its nuances in the light of the judgement of the bombay high court in cit vs. Expenditure incurred to earn exempt income computed us. These issues need to be clarified to reduce litigation before the appellate authorities, which is one of the aims of the government. Framework for computation of book profit for the purposes of levy of mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies may 03, 2016. Dec 27, 2019 the refund of sales tax subsidy was routed through the profit and loss account and hence, the same was considered as part of the book profits under section 115jb of the i.
Section 115jb1 of the act starts with the word notwithstanding anything contained in any other provision of this act. Faqmat book profit computation for ind as compliant companies. The finance act, 2017 notified on 31 march 2017, has introduced a separate formula for computation of book profit for the entities that prepare financial statements under indian accounting standards ind as. Book profit us 115jb to be reduced by exempted capital gain. Framework for computation of book profit for the purposes of levy of mat under section 115jb of the incometax act, 1961 for indian accounting standards ind as compliant companies. Yes, as per the amemndments made by finance act,2011, mat is now required to by paid on income exempt us 1038 and income decuctible us 10aa. Aug 29, 2016 advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Cbdt clarifies on computation of book profit for the. Therefore, the business losses can be carried forward for more than 8 years while computing the book profit us 115jb of the act. Cbdt amends the report on computation of book profits for. Calculation of mat credit applicability of minimum. Where in the case of a company, the incometax payable on the total income as computed under the incometax act, is less than15% of its book profit, such book profit shall be deemed to be the total income of the.
Committee to suggest a framework for computation of book profit for the purposes of levy of minimum alter tax mat under section 115jb of the incometax act, 1961 the act for indian accounting standards ind as compliant companies in the year of adoption and thereafter. The procedure for the computation of book profit as per. Faq on mat computation for ind as compliant companies. Cbdt clarifies on computation of book profit for the purposes.
Income tax computed as per provision of section 115jb of income tax act. Capital gains, exempt under section 54ec, could not be reckoned for purpose of computing book profit under section 115ja. Meaning of book profit as per explanation 1 to section 115jb2 book profit for the purposes of section 115jb means net profit as shown in the statement of profit and loss prepared in accordance with schedule iii to the companies act, 20 as increased and decreased by certain items prescribed in this regard. As per section 115jb of the income tax act, if for any previous year for a company the tax payable on the total income as calculated on the basis of the income tax act, falls below 18. Ppt minimum alternate tax section 115jb powerpoint. Ltd on the controversial issue whether the disallowance us 14a and rule 8d is required to be adjusted while computing the book profits us 115jb and explained its nuances in the light of the judgement of the bombay high court in cit vs. May 24, 2016 the provisions of section 115jb provide for levy of mat on basis of book profits, i. By virtue of subsection 6 of section 211 of companies act, 1956 any reference to balance sheet or profit and loss account would include any notes thereon giving information required under the said act, therefore, while determining the book profit under.
Minimum alternative tax mat and computation of book profits. Mat book profit computation 115jb for ind as compliant. Act, 1961 and when a receipt is not a in the nature of income, it cannot form. Claimed as per accounts and under 115jb from year 1 to year 3. Computation of book profits by ind as compliant companies for levy of mat free download as powerpoint presentation. Jul 26, 2017 section 115jb of the act already provides for adjustments for dividend for computation of book profit. Income tax 932020 mat computation of book profit us 115jb doubtful debts since, we have held that provision of doubtful debts is not an allowable deduction while computing income under normal provisions, as a corollary to the aforesaid findings the book profits under section 115jb are not required.
R submitted that, since the assessee before the special bench did not comment about such inclusion in the notes of accounts, but claimed deduction only at the time of computing book profit us 115jb of the act, the special bench took the view that the assessee, having included the capital gain in the profit and loss account which. Capital gains exempt under section 54ec need not be. Computation of book profits by ind as compliant companies for. Proposed computation of mat for ind as compliant companies. Oct 10, 2009 should be followed while preparing pl ac for the purpose of computing book profit us 115 jb thus it is clear that under mat provisions ao normally takes the net profit as computed by the assessee and then makes the adjustments us 115jb. Aug 20, 2015 a it has clearly stated in the notes forming part of accounts that the said profit is not includible for computing book profit u s 115jb of the act, even though it is credited to profit and loss account. Ca jyoti gupta has analyzed the recent judgement of the itat special bench in acit vs. Ppt computation of book profits by ind as compliant. As per ind as, the amount of proposed dividend including dividend distribution taxes is required to be recognized in the year in which it has been declared rather than the year for which it pertains to. Sep 08, 2015 profit from sale of agricultural land would not be included for purpose of computing book profit under section 115jb profit arising on sale of agricultural land, which does not fall in the category of capital asset as defined under sec. Acit itat delhi in the present case, the ao has also made addition of rs. A free powerpoint ppt presentation displayed as a flash slide show on id. Up to fy 201718 long term capital gain on sale of shares or units of mutual fund on which security transaction tax was paid was exempted us 1038. Provisions of mat for payment of tax by certain companies section 115jb tax payable for any assessment year cannot he less than 15% of book profit.
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