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. The tax computed by applying 15% plus surcharge and cess as applicable on book profit is called mat. For the accounting year 200809in books of accounts of abc ltd there is a business loss of rs. Should the changes in fair value be included in book profit for computation of mat liability. Capital receipt waiver of loan not chargeable to tax us. Income tax payable shall be the higher of the following amounts. 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. Chapter xiib provides an alternate scheme for computing tax liability of certain companies, whose total income under normal provisions is below the threshold book profit as prescribed under chapter xiib. Sep 11, 20 crack cs professional in the 1st attempt. Home publications 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. Mat taxation view 1 vdecisions dharmayug investmentsltd. Calculation of book profits for the purpose of mat.
The ao did not accept said contention of the assessee and held that the scope of minimum alternate tax mat was widened by including the income exempt us. 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. Therefore, to counter this, as system of mat was introduced. The finance act, 2017 also provides certain adjustments to book profits for mat computation. Apr 28, 2016 government of india ministry of finance department of revenue central board of direct taxes. Minimum alternative tax mat and computation of book profits. However, the cita refused to interfere with the recomputation of book profit at higher figure by the ao. Additions to the net profit if debited to the profit and loss account. V acit 69sot 433mum assesseecompany claimed exemptionundersection 1038. Income by way of ltcg referred to in section 1038 is not to be reduced and the same is liable to mat. Computation of book profits by ind as compliant companies for. Cs professionalcomputation of book profit from mat on. When any amount of tax is paid as mat by an assessee being a company, then, credit in respect of tax so paid shall be allowed to him in accordance with the provision of section 115jaa.
Whereas book profit is computed on the basis of schedule vi of the companies act, 1956. Computation of book profits contd computation of book profits contd. 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. Accordingly, mat would be calculated using the profits as per the statement of profit and loss before other comprehensive income oci, as the starting. Tribunals decision a bare reading of explanation 1iii to section 115jb of the act provides that while computing the. The amount of taxation determined in accordance with this calculation is called mat. Cbdt circular of clarifications faqs on computation of s. These requirements should be read together with the existing provisions for computation of mat under section 115jb of the act, in particular, the. Mat provisions require book profit to be adjusted against lower of brought forward unabsorbed loss and unabsorbed depreciation and. Nontaxable income under a tax treaty cannot be reduced. Get indias best faculty video classes for best study at home. Adjustment of unabsorbed losses or depreciation as per books of accounts for mat on.
It has been recommended that these items should be included in the book profits for mat purposes at an appropriate point of time. Capital receipts and book profits mat no longer a self. Computation of book profits would be calculated as under a stepi. Nontaxable income under a tax treaty cannot be reduced from. Framework for computation of book profit for the purpose of. Mat computation of book profit us 115jb doubtful debts.
Step 2 adjustment to net profit to convert it into book profit which are given under explanation 1 to section 115jb 2. Jan 14, 2011 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. In book profit computation, long term capital gains as computed after claiming indexed cost was sought to be included under bracketed portion ofclause iiofexplanation1to section 115jb. Jul 26, 2017 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. While calculating book profits under section 115jb of income tax act for obtaining minimum alternative. Capital receipt waiver of loan not chargeable to tax u. Taxpayers methodology to set off and carry forward. May 24, 2016 the provisions of section 115jb provide for levy of mat on basis of book profits, i. Allowable tax credit difference of mat paid and income tax payable under normal provision of income tax act, 1961. Setoff of business loss or unabsorbed depreciation under. Book profits as per 115 jb xxxx 10 % of the book profits xxxx surcharge xxxx education cess xxxx total tax liability xxxx kindly note that except these adjustments nothing to be considered for mat calculation. May 31, 2008 05 june 2008 sir but for calculating mat we are required book profit.
Clarifications on computation of book profit for the. May 21, 2012 book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb for computation of book profit, one may proceed as follows. Book profit us 115jb to be reduced by exempted capital gain. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb step 1.
The mat provisions begin with a nonobstante clause, and thus, are a sacrosanct and selfcontained code. 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 to be reduced. Pwc reportinginbrief clarifications on mat for ind as. 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. Home publications 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 share print linkedin. Under existing rules, book profit is calculated as.
In the year in which these grants were credited to special reserve, they had not been added to net profit for calculation of book profit subjected to mat. On 1 february 2017, the finance minister presented the finance bill, 2017 the bill which contained a number of. Clarifications on computation of book profit of minimum alternate tax mat for ind as compliant companies. Before proceeding on how mat is calculated, first provisions related to mat calculation is important to learn.
Income tax paid or payable if any calculated as per normal provisions of income tax act. Here, while computing book profits for year 4 for mat purposes, a question arises as to how muchshould be the downward adjustment towards lower of loss brought forward or unabsorbed depreciation. Minimum alternate tax part iii computation of book profits. Minimum alternate tax mat us 115jb of income tax act, 1961. A question arises whether the amounts, which can be added or reduced from the book profit as prescribed in section 115j, 115ja and section 115jb are exhaustive or illustrative. Exempt capital gains are to be excluded while computing book.
Mat is levied at the rate of 9% plus surcharge and cess as applicable in case of a company. Computation of book profits by ind as compliant companies. Computation of book profits by ind as compliant companies for levy of mat the provisions of section 115jb provide for levy of mat on basis of book profits, i. Nov 20, 2012 while computation of book profit for mat calculation under sec 115jb do we have to include the income exempted under sec 10aa among the deductions from net profit as per schedule vi income tax tax queries. We support committees recommendation on exclusion of notionalunrealised profits from mat levy and consequential mat pick up at the stage of. Mat is calculated as 15% of the book profit of the tax assesse. Jul 29, 2016 conundrum on brought forward loss treatment under mat. Mat computation of book profit us 115jb doubtful debts since, we. Mat book profit computation 115jb for ind as compliant companies. The procedure for the computation of book profit as per. In 2001, the mat provisions were again modified so that the comparison would now be between 7.
Under mat, such companies are made liable to pay to the government, by deeming a certain percentage of their book. Book profit can be defined as the leftover money after the entity has paid all of its expenses and as shown in the statement of profit and loss of the entity. 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. Cbdt invites suggestions on framework for computation of. For computation of book profit, one may proceed as follows.
However, icds did not cover the issues relating to computation of minimum alternate tax mat, which is based on book profits and for. Calculation of book profits for the purpose of mat section. A committee had been constituted, with the approval of the finance minister, to suggest the 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 in the year of adoption and thereafter. Setoff of business loss or unabsorbed depreciation under mat.
Easing the mat credit mechanism and simplifying the mat computation provisions on the lines suggested in this paper would help rationalise. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb. Minimum alternate taxsection 115jbhow to compute arthikdisha. Mat provisions require book profit off to the lower number. O seems to have acted beyond the provisions laid down in section 115jb and has made the.
Government of india ministry of finance department of revenue central board of direct taxes. Minimum alternative tax mat and computation of book. The minimum alternate tax mat on companies challenges and. How should adjustments for service concession arrangements be treated for the purpose of computation of book profit under mat. Calculation of book profits for the purpose of mat section 115jb. Income covered us 10aa is not to be reduced and the same is liable to mat. Faq on mat computation for ind as compliant companies. Considering that the book profit based on ind as compliant financial statement is likely to be different from the book profit based on existing indian gaap, the central board of direct taxes cbdt constituted a committee in june, 2015 for suggesting the framework for computation of. A company has to pay mat or tax as per normal provisions, whichever is higher. Cbdt clarifies on computation of book profit for the. Profit on sale to be considered for mat 819 819 question 11. Cbdt issues faqs on computation of book profit for levy of mat and. Apr 20, 2019 when a company pays tax under mat, the tax credit earned by it shall be an amount which is the difference between the amount payable under mat and the normal tax. Faqmat book profit computation for ind as compliant companies.
Regular profit is the profit computed by applying the provisions of tax laws. Calculation of mat credit applicability of minimum alternate tax. Our comments the issue of whether exempt capital gains credited to the profit and loss account can be excluded while computing book profits under the provisions of mat has. Broadly speaking book profit in context of mat means profit as shown in the profit and loss account adjusted by additions and deductions as provided in respective sections that is section115j, section115ja and section 115jb. In other words, it refers to all the money earned by an entity during a financial year by selling products and services deducted by all the expenses incurred during the same financial year. Minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961. An entity has elected to subsequently measure its investment in associates using the fair value through profit or loss fvpl as per ind as 109 in its separate financial statements. Perusal of section 115ja of the act indicates that none of the clauses i to ix of the explanation thereto provide for reduction in respect of the income which may be. Cbdt issues faqs on computation of book profit for levy of. Minimum alternate taxunder section 115jb minimum alternate tax as per section 115jb of income tax act as the name itself suggests that if for a company in the previous year the tax payable to the government falls. Computation of book profit under sec 115jb income tax forum. Adjustment of unabsorbed losses or depreciation as per. Book profit us 115jb to be reduced by exempted capital gain q. Book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner.
Cbdt report regarding framework for computation of book profit for the purposes of levy of minimum alternate tax mat under section 115jb of the lncometax act 1961 for indian accounting standards lnd as compliant companies in the year of adoption and thereafter. Perusal of section 115ja of the act indicates that none of the clauses i to ix of the explanation thereto provide for reduction in respect of the income which may be exempt by virtue of the application of the tax treaty. Minimum alternate tax mat is a tax effectively introduced in india by the finance act of 1987, vide section 115j of the income tax act, 1961 it act, to facilitate the taxation of zero tax companies i. Normal tax, in this case, means the tax payable on the basis of normal computation of total income of the company.
According to section 115jb of the income tax act, mat has to be remitted by a company if the tax has to be paid on the total income, which is calculated as stated in the. The term book profit has been defined in the respective sections. The finance act, 2017 provided a separate formulae for computation of book profit for the companies that prepare financial statements under ind as. Conundrum on brought forward loss treatment under mat taxsutra. Cbdt clarifies on computation of book profit for the purposes.
Advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Book profit of the financial year, in which the asset is retired, disposed, realised or otherwise transferred, is required to be adjusted by the revaluation amount after adjustment of the. Cbdt relaxes norms for mat on firms facing insolvency. 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. The assessee reduced the income us 10a from mat computation. The curious case of mat computation for ind as companies. Calculation of mat credit applicability of minimum.
Aug 29, 2016 advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Below is an illustrative list of such items along with the recommended treatment of mat sr no. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. The minimum alternate tax mat on companies challenges.
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