115jb book profit calculation

Upholds capital gains exclusion from book profit calculation us 115jb, grants sec 54ec benefit. The h tribunal therefore heard both sides on additional ground and in paragraph ig 18 held that once accounts are prepared in accordance with indian companies act, 1956, they have been h. Conundrum on brought forward loss treatment under mat taxsutra. Minimum alternate tax and alternate minimum tax 115jb and. The itat chennai in the case of the deputy commissioner of income tax, corporate circlei, coimbatore vs.

Minimum alternate tax and alternate minimum tax 115jb and 115jc. Minimum alternate taxsection 115jbhow to compute arthikdisha. Calculation of book profits for the purpose of mat section 115jb. O seems to have acted beyond the provisions laid down in section 115jb and has made the. It is calculated under section 115jb of the income tax act. Calculation of mat credit applicability of minimum. Cbdt amends the report on computation of book profits for ind as compliant companies background 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. Q3 as per explanation to section 115jb 2c of the act, the convergence date is defined as the.

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. So while calculating book profit under explanation 1 to section 115jb1, the agricultural income falling us. Calculation of book profits for the purpose of mat. 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. This explanation provides that book profit is nothing but is calculated after making some adjustments in the net profit as per the profit and. Profit from sale of agricultural land is not book profit. Understanding the concept of liability to pay minimum alternate taxmat and alternate minimum tax amt and various provisions like book profit, dividends paid or proposed, depreciation, deferred tax, income of foreign company, etc. The minimum alternate tax mat on companies challenges and. Jun 04, 2017 minimum alternate tax and alternate minimum tax 115jb and 115jc 1. Whether unabsorbed depreciation includes unabsorbed. Government of india ministry of finance department of revenue central board of direct taxes. Provisions of income tax act, 1961 tax on book profits i.

Profit from sale of agricultural land is not book profit in 115jb. Calculation of mat credit applicability of minimum alternate tax. After section 115jaa of the incometax act, the following section shall be inserted with effect from the 1st day of april, 2001, namely. 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. 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.

Whether the profit arising on transfer of development rights to the fully owned subsidiary company is required to be included in the book profit under section 115jb of the income tax act, 1961the act. This books profit meaning is provided in explanation 1 of subsection 2 of section 115jb. Aug 24, 2015 section 115jb of income tax act, 196, mat, book profit, adjustments to calculate book profits. This story is available exclusively to subscribers of. While calculating book profits under section 115jb of income tax act for obtaining minimum alternative 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. 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. Aug 29, 2016 advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Partnership is not a separate entity distinct from the partners, but for tax purposes a partnership is an entity.

The procedure for the computation of book profit as per. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain 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. There are specific provisions under the income tax act 1961, under which the mat is collected from every company. 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 us 115jb of the act and computed book profit us 115jb of rs.

Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. A number of costsincome are considered along with the profit and loss statement when calculating the book profit of a company. Cbdt circular of clarifications faqs on computation of s. Special provision for payment of tax by certain companies.

It also provides explanation with respect to calculation of book profits. If a company whose tax payable works out to less than 15% amended in finance act, 2009 from 10% of book profit then the company has to pay tax at 15% of book profit. For the companies minimum alternate tax mat would be applicable us. Conundrum on brought forward loss treatment under mat. Under the existing provisions contained in subsection 1 of section 115jb in case of a company, if the tax payable on the total income as computed under the incometax act, is less than eighteen and onehalf percent of its book profit, such book profits shall be deemed to be the total income of the assessee and the tax payable by the. 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. Cbdt amends the report on computation of book profits for ind as compliant companies background 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. Cbdt clarifies on computation of book profit for the purposes.

Section 115jb is for the company,if tax payable calculated as per income tax act is lesser than 18. Cbdt issues faqs on computation of book profit for levy of mat and proposes amendment to section 115jb of the incometax act. A2 starting point for computing book profits for ind as compliant companies shall be profit before other comprehensive income item number xiii in part 2 statement of profit and loss of division ii of schedule iii to the companies act, 20. Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb 2c adjustment in book profits for a company referred to in subsection 2a, the book profit of the year of convergence and each of the following four previous years, shall be further increased or decreased, as the case may be, by onefifth of the transition amount provided that the book profit of. Book profit us 115jb to be reduced by exempted capital gain q. Minimum alternatetax115jb, and alternate minimum tax115jc an overview mr. 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. Additions to the net profit if debited to the profit and loss account.

May 21, 2012 book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. The tribunal therefore heard both sides on additional ground and in paragraph 18 held that once the accounts are prepared in accordance with. Mat minimum alternative tax is presently governed by section 115jb of income. It is calculated under section 115jb of the income.

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. Jul 29, 2016 conundrum on brought forward loss treatment under mat. Mat provisions require book profit to be adjusted against lower of brought forward unabsorbed loss and unabsorbed depreciation and not merely restrict the amount set. Income tax computed as per provision of section 115jb of income tax act. Book profit under section 115jb the purpose of computing. As per explanation 1 to section 115jb 2, book profit for the purpose of section 115jb means net profit as shown in the statement of profit and loss in accordance with the schedule iii to the companies act 20, as adjusted by certain items prescribed below. Mat minimum alternate tax 115jb income tax act, 1961.

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. Minimum alternate tax or mat and its application to an mnc. Computation of book profits would be calculated as under a stepi. Section 115jb of income tax amended in budget 2016 mat. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb. Taxable income as per normal provision of income tax act. 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. Computation of book profit under sec 115jb income tax forum. First of all calculate tax as per normal provisions of income tax.

Cbdt amends the report on computation of book profits for. 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. As per section 115jb 2, book profit means net profit in the statement of profit and. In sub section 1 to sec 115jb, a word book profit is used for calculation of tax liability of the company. As per section 115jb 2, book profit means net profit in the statement of profit. Faqmat book profit computation for ind as compliant companies. Then if we include capital recipt in book profit and tax under 115jb, then the benifit of set off under section 74 would be effectively lost for that year, which is very unfair to assessee. Tax liability as per the mat provisions are given in sec 115jb 18. Minimum alternate tax is applicable for all companies except for companies involved in the life. 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. Minimum alternate tax part iii computation of book profits. Section 115jb of income tax act, 1961 sets out provision for calculation of minimum alternate tax. Calculation of book profits for the purpose of mat section.

Minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961. Disallowance under section 14a read with rule 8d will. Aug 20, 2015 book profit us 115jb to be reduced by exempted capital gain q. For calculating the tax outflow of company, first the tax is required to be calculated as per the normal provisions under the income tax act. The tax rate is 15% with effect from ay 202021 fy 201920 2.

Tax liability as per the mat provisions are given in sec 115jb18. 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. Capital receipt waiver of loan not chargeable to tax u. As the profit and loss account is subject to notes and qualifications thereon, the profit shown in the profit and loss account may have to be adjusted with the. The finance act, 2012 has inserted new subsection 5a to provide that section 115jb shall not apply to any income accruing or arising to a company from life insurance business. Minimum alternate tax mat us 115jb of income tax act, 1961. A company has to pay mat or tax as per normal provisions, whichever is higher. The minimum alternate tax mat on companies challenges and way forward 09.

As per section 115jb 2, book profit means net profit in the statement of profit and loss prepared in accordance with schedule iii of the companies act, 20. No marginal relief, since the income does not exceed. Mat book profit computation 115jb for ind as compliant. Jan 20, 2010 what would be the case if there was a brought forward ltcl from earlier years which could wipe off ltcg during the concerned financial year. Complexity in computing the book profit under mat provisions. Apr 28, 2016 government of india ministry of finance department of revenue central board of direct taxes. Jul 06, 2017 ca jyoti gupta has analyzed the recent judgement of the itat special bench in acit vs. So while calculating book profit under explanation 1 to section 115jb 1, the agricultural income falling us. Mat provisions require book profit off to the lower number. Nikhil s gupta kosho moolo dandah revenue is the root of administration kautilyasarthashastra. Book profit us 115jb to be reduced by exempted capital gain. Brought forward depreciation for the purpose of section 115jb of income tax act, 1961 in case of build, operate and transfer bot projects whether includes amortisation of project expenditure.

As 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 cbdt constituted a committee in june, 2015 for suggesting the framework for computation of mat liability under section 115jb for ind as compliant companies in the year of adoption and thereafter. For computation of book profit, one may proceed as follows. Cbdt issues faqs on computation of book profit for. Mat book profit computation 115jb for ind as compliant companies. 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. 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. Cbdt amends the report on computation of book profits for ind. Company has no taxable income but has a positive book profit.