Mat book profit computation 115jb for ind as compliant companies. Minimum alternate tax mat us 115jb of income tax act, 1961. 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. Adjust book profits equally over a period of five years starting from the firsttime adoption of ind as. Kpmg in indias analysis, 2017 these adjustments have been introduced as sections 115jb2a, 115jb2b and 115jb2c of the act. Understanding minimum alternate tax in the most easiest way by mr. 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. The provisions of section 115jb provide for levy of mat on basis of book profits, i. Amendments have been made in the provisions of section 115jb to bring down the minimum alternate tax mat on book profit. Upholds capital gains exclusion from book profit calculation us 115jb, grants sec 54ec benefit.
Jul 20, 2019 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. Taxable income as per normal provision of income tax act. Abc ltd has the taxable income as per normal provisions of income tax act rs 40 lakhs and book profits of rs 75 lakhs for the fy. Section 115jb recent amendments that lower down mat on book profit for companies not opting beneficial option u s 115baa 115bab. Sep 08, 2015 accordingly, we are of the view that the profit from sale of agricultural land, which is not a capital asset, cannot be included for the purpose of computing book profit us 115jb of the act. Under existing rules, book profit is calculated as per section 115jb of the income. Book profit of the company computed as per the provisions of section 115jb is rs. Book profit under section 115jb the purpose of computing. Minimum alternate tax part iii computation of book profits. Computation of mat step procedure 1 compute total income under income tax act, 1961. Computation of book profits by ind as compliant companies. Penalty u s 2711c wherein additionsdisallowances made under normal provisions of the income tax act, 1961 but tax levied under mat provisions u s 115jb 115jc, for cases prior to a. Mat provisions us 115jb an exhaustive overview of landmark. Does icds apply to computation of minimum alternate tax mat u s 115jb of the act or alternate minimum tax amt u s 115jc of the act.
These adjustment can be made as per the following steps. The minimum alternate tax mat on companies challenges and way forward 09. The decision in bombay diamond co 33 dtr 59 was referred to with approval. 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. Mat calculation of book profit us 115jb ao seems to have acted. Calculation of mat credit applicability of minimum alternate tax. 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. Special provision for payment of tax by certain companies. This is not so in computation of book profit under the companies act. Cbdt circular of clarifications faqs on computation of s. Complexity in computing the book profit under mat provisions. Minimum alternate tax mat u s 115jb of income tax act, 1961. Every company that has a book profit needs to pay minimum alternate tax.
Minimum alternate taxsection 115jbhow to compute arthikdisha. Section 115jb of income tax act, 196, mat, book profit, adjustments to calculate book profits. O seems to have acted beyond the provisions laid down in section 115jb and has made the adjustment to the book profits computed as per companies act of the items not appearing in the explanation 1 of section 115jb. Madras hc upholds itat order, rules that capital gains should be excluded while computing book profits for the purposes of mat u s. Conundrum on brought forward loss treatment under mat taxsutra. Minimum alternate tax mat and alternate minimum tax amt. Jun 04, 2017 computation of mat step procedure 1 compute total income under income tax act, 1961. Computation of book profit under sec 115jb income tax forum. The minimum alternate tax mat on companies challenges. The profit and loss account prepared in accordance with the provisions of part ii to schedule vi of the companies act should be read along with the. The tax rate is 15% with effect from ay 202021 fy 201920 2.
The procedure for the computation of book profit as per. As per 115jb, explanation 1 c ascertained liabilities cannot be added back. Minimum alternate tax mat minimum alternate tax was introduced by finance act, 2000 provides for the levy of a minimum tax on book profits at 18. In this article, let us explore how tax planning under mat works. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb. Oct 07, 2018 minimum alternate tax mat minimum alternate tax was introduced by finance act, 2000 provides for the levy of a minimum tax on book profits at 18. 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. Minimum alternate tax and alternate minimum tax 115jb and 115jc. Therefore, the basis of this mat is calculated and paid. 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. Minimum alternate tax mat section 115jb provision of mat minimum alternate tax for payment of tax by certain companies section 115jb book profit how to determine section 115jb analysing computation of total income and book profit. The book profit amount is disclosed in the audited report of the company under form 29b.
Profit from sale of agricultural land is not book profit in 115jb. Book profit us 115jb to be reduced by exempted capital gain. Tax liability as per the mat provisions are given in sec 115jb 18. Understanding minimum alternate tax most easy way youtube. The assessee has revised the return of income by including the additional revenue in its total income. The finance act, 2017, with the intent of providing a framework i to bring the. Mat stands for minimum alternative tax charged u s 115jb to the companies under income tax act. Claimed as per accounts and under 115jb from year 1 to year 3. Amount deductible in respect of remuneration of partners under section 40b with effect from the a. Where in case of a company, the income tax payable on the total income as computed under the income tax act in respect of any previous year is less than 18. Since the appellant had made these provisions on the basis of actuarial valuation they are ascertained liabilities and the appellant had correctly not included the same for computing the book profit u s 115jb of the i.
Tax paid as per mat calculation income tax payable under normal provision of incometax act, 1961. Book profit means the net profit as shown in the profit and loss account, as increased by the amount of incometax paid or payable, and the provision therefor. Calculation of book profits for the purpose of mat. Faqcomputation of book profit for levy of mat us 115jb for.
Whether when computation of book profits is done us 115jb. Mat can be payable in the case where there is no taxable business income. Calculation of mat credit applicability of minimum. 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 of profit and loss so prepared. The profit and loss account prepared in accordance with regulatory act governing such companies, would be taken as basis for computing book profit under section 115jb. Mat is calculated as 15% of the book profit of the tax assesse.
Cbdt amends the report on computation of book profits for. Nov 27, 2019 tax liability as per the mat provisions are given in sec 115jb 18. Calculation of book profit for matmat calculation examplemat calculation format mat creditmat us 115jbminimum alternate taxminimum alternative tax. Aug 29, 2016 advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Cbdt amends the report on computation of book profits for ind. Transitional liabilities disclosed in notes to accounts to be adjusted while computing book profit u s. Since the book profit as per the audited balance sheet, profit and loss account of the assessee company was more, therefore, the tax liability was determined by assessee u s 115jb of the act and computed book profit u s 115jb of rs. 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 of profit and loss so prepared. The bill received the presidents assent on 31 march 2017 and became effective on 1 april 2017. For calculation of books prof its ref er anne xure i rate of tax u s 115jb tax ra te applicable u s 115jb for various assessment year s are as follows. The facts of the case are that in this case assessment order u s 1433 of the it act was passed on 29122006 determining the total income at nil.
Mat provisions require book profit to be adjusted against lower of brought forward unabsorbed loss and unabsorbed depreciation and. The bill received the president s assent on 31 march 2017 and became effective on 1 april 2017. 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 u s 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. Mat provisions require book profit off to the lower number. First of all calculate tax as per normal provisions of income tax.
Assessing officer tinkered the book profit by adding the additional revenue on account of subsequent realization of export, while computing the book profit u s 115jb of the act. Calculation of book profits for the purpose of mat section 115jb. 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. Calculation of book profits for the purpose of mat section. Additions to the net profit if debited to the profit and loss account. Dcit the itat hyderabad special bench has held that capital gains exempt us 47iv cannot be excluded from the book profit because no such exclusion was permitted under the explanation to s. 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 based on the. Cbdt issues faqs on computation of book profit for levy of. As per sub section 1 of section 115jb of the act, if total income of a company in any year commencing from a. 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. Minimum alternate tax and alternate minimum tax 115jb and. Mat provisions require book profit to be adjusted against lower of brought forward unabsorbed loss and unabsorbed depreciation and not merely restrict the amount setoff to the lower number august 21, 2018 in brief in a recent ruling1 of the ahmedabad bench of the incometax appellate tribunal tribunal, an issue. Minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961. Kpmg in india s analysis, 2017 these adjustments have been introduced as sections 115jb 2a, 115jb 2b and 115jb 2c of the act.
Aug 24, 2015 section 115jb of income tax act, 196, mat, book profit, adjustments to calculate book profits. May 08, 2014 the issues before the bench are whether if the computation of book profits has been done u s 115jb, the concealment of income has no role to play and it is totally irrelevant and whether in such a case penalty for concealment cannot be levied even in respect of the false claim of depreciation made by the assessee. 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. 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. The finance act, 2017, with the intent of providing a. 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. Apr 28, 2016 government of india ministry of finance department of revenue central board of direct taxes. Law makers observed that there is many companies which are disclosing massive profit in the accounts as laid in the annual general meeting agm before the shareholder but at the same time these companies also showing profit nil or bit above nil for the income tax purpose. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain companies. The issues before the bench are whether if the computation of book profits has been done u s 115jb, the concealment of income has no role to play and it is totally irrelevant and whether in such a case penalty for concealment cannot be levied even in respect of the false claim of depreciation made by the assessee. The ao observed that there was a mistake in computing the income u s 115jb of the it act.
However, it assumes to be the income of the company for tax calculation purposes. Upholds capital gains exclusion from book profit calculation us 115jb, grants sec 54ec benefit itat. Book profit as computed according to explanation given in subsection 2. Minimum alternate tax is applicable for all companies except for companies involved in the life. Mat is calculated under section 115jb of the incometax act. Mat is calculated on book profit of company not on taxable business incomewith certain change as given in aforesaid section itself. However, no interest shall be paid on this tax credit by the department. For computation of book profit, one may proceed as follows. Section 115jb special provision for payment of tax by.
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