Cbdt clarifies on computation of book profit for the. Minimum alternate tax mat whereby a companys tax liability as per regular provisions is to be tested against a specified percentage of its book profits. Provision of mat minimum alternate tax for payment of tax by certain companies section 115jb calculation of book profits for the purpose of mat section 115jb tax credit in respect of tax paid on deemed income under mat provisions section 115jaa amounts expressively allowed as deduction section 30 to 37 section 40a of income tax act. The taxpayer reduced inr 25 being lower of unabsorbed loss and unabsorbed depreciation in the tax computation under section 115jb of the act. Profit from sale of agricultural land would not be included for purpose of computing book profit under section 115jb. Provision for gratuity can be deducted while computing book.
Minimum alternate tax mat us 115jb of income tax act, 1961. The assessee during the relevant assessment year deducted prior period expenses of rs 96,94,693 from book profits while computing mat under section 115ja. Tax on bookprofit our company while computing bookprofit under section 115jb compared the aggregate of loss and brought forward depreciation as per books of account and claimed the lesser of the two as deduction. Faqmat book profit computation for ind as compliant companies. The assessing authority viewed that as per the provisions of the companies act, prior year adjustments could not be reduced for arriving at the net profit of that particular year. Mat provisions require book profit off to the lower number. Nov 20, 2012 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. The two being unrelated, the question of applicability of restriction under section 72 to the carry forward and adjustment of brought forward book losses, while. Cbdt circular of clarifications faqs on computation of s. While granting relief to lenovo, the bangalore bench of the income tax appellate tribunal itat held that the warrant expenses should be deducted from the book profit under section 115jb of the income tax act, 1961 the assessee is a renowned company lenovo engaged in the business of manufacturing and distribution of desktop, laptop, servers and smartphones.
Faqs for computing book profits under mat for indas. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain companies. What will be the tax liability of essem minerals pvt. 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 us 115jb of the act, even though it is credited to profit and loss account. It is calculated on the basis of companies act, 20. For the purposes of this section, book profit means the net profit as shown in the. Calculation of book profits for the purpose of mat. On 1 february 2017, the finance minister presented the finance bill, 2017 the bill which contained a number of. Step 1 find out net profit before other comprehensive income oci as per statement of profit and.
Book profit refers to the net profit as shown in the profit and loss account. Jul 06, 2017 therefore, even clause f of explanation to section 115jb which refers to those amounts which are debited to the profit and loss account, alone can be added to the book profit, cannot apply. Cbdt issues faqs on computation of book profit for levy of. Income tax payable, if any calculated, as per normal provisions of it act. Minimum alternate taxsection 115jbhow to compute arthikdisha.
Book profit us 115jb to be reduced by exempted capital gain q. This explanation provides that book profit is nothing but is calculated after making some adjustments in the net profit as per the profit and loss account of the company. Book profit us 115jb to be reduced by exempted capital gain. Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb 2c adjustment in book profits inserted by fa, 2017. This books profit meaning is provided in explanation 1 of subsection 2 of 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 cbdt clarifies law on s. Under existing rules, book profit is calculated as per section 115jb of the. 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. 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. Mar 11, 2020 following the abovesaid decision, the income tax appellate tribunal allowed the claim of the assessee and held that the provision for gratuity is an ascertained liability eligible to be deducted from net profit for the purpose of computing book profit under section 115jb of the income tax act.
Then, the tribunal referred to the order passed in the case of essar teleholdings ltd. Ppe under ind as, as per section 115jb of the act, the book profit of the previous year in which the items of ppe are retired, disposed or realised shall be increased or decreased, as the case may be, by the. 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. The procedure for the computation of book profit as per. Brought forward business losses can be adjusted even after. 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. No marginal relief, since the income does not exceed. All companies that fall under the purview of section 115jb has to file this form 29b report. It is increased and decreased by the following items. 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. Starting point for computing book profits for ind as compliant companies shall be profit before other comprehensive income. The finance act, 2017 with the intent of providing a framework i to bring the adjustments being recorded on the transition. Conundrum on brought forward loss treatment under mat.
Further, section 115jb 4 of the act requires that every company which is liable to pay mat should furnish a report from an accountant2 certifying that the book profit has been computed in accordance with the provisions of section 115jb along with the return of income filed under section 91 of the act or along with the return of. Capital receipts and book profits mat no longer a self. Amount deductible in respect of remuneration of partners under section 40b with effect from the a. Cbdt clarifies on computation of book profit for the purposes.
Complexity in computing the book profit under mat provisions. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. Jul 29, 2016 the income tax act contains a special mechanism i. The bill received the presidents assent on 31 march 2017 and became effective on 1 april 2017. Computation of book profit under sec 115jb income tax forum. Section 115jaa provided for allowance of credit of tax paid by the companies under section 115ja115jb in subsequent years. Cbdt amends the report on computation of book profits for. The mat provisions begin with a nonobstante clause, and thus, are a sacrosanct and selfcontained code. Pricing tp adjustment to book profits under section 115jb of the incometax act, 1961 the act minimum alternate tax mat and directed the ao to exclude the tp adjustment from the book profits computed under section 115jb of the act.
Brochure report title goes here section title goes here. Calculation of book profits for the purpose of mat section 115jb. 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. The assessing officer ao compared each years bookloss and unabsorbed depreciation and adopted lesser of the two as eligible. 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. Minimum alternate tax on companies section 115jb under.
Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb2c adjustment in book profits inserted by fa, 2017. For computation of book profit, one may proceed as follows. Section 115jb of the act already provides for adjustments for dividend for computation of book profit. Book profit under section 115jb the purpose of computing. Mar 11, 2020 the addition made to the book profits us. First of all calculate tax as per normal provisions of income tax. Conundrum on brought forward loss treatment under mat taxsutra. As per section 115jb1, in case of company domestic or foreign, if the incometax payable on the total income computed under the incometax act, 1961 is less than 18. Section 115jb provides for certain adjustments for determining book profit, mainly. Therefore, even clause f of explanation to section 115jb which refers to those amounts which are debited to the profit and loss account, alone can be added to the book profit, cannot apply. Further, the section 115jb deals with book profit whereas section 72 deals with carry forward of unabsorbed business losses computed as per the provisions of income tax act, 1961. Further, section 115jb4 of the act requires that every company which is liable to pay mat should furnish a report from an accountant2 certifying that the book profit has been computed in accordance with the provisions of section 115jb along with the return of income filed under section 91 of the act or along with the return of. As per section 115jb of the income tax act, 1961, where in the case of a domestic or foreign company, the income tax payable as computed under the income tax act of any assessment year is less than 18.
The description should be obtained before filing the income tax. 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. 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. Cbdt amends the report on computation of book profits for ind. 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. Aug 23, 2018 as per section 115jb of the income tax act, 1961, where in the case of a domestic or foreign company, the income tax payable as computed under the income tax act of any assessment year is less than 18.
As per section 115jb, every taxpayer being a company is liable to pay mat, if the incometax including surcharge and cess payable on the total income, computed as per the provisions of the incometax act in respect of any year is less than 18. 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. Provision of mat minimum alternate tax for payment of. Meena, accountant member these three appeals emanate. The only remaining issue is whether provision for gratuity is an ascertained liability eligible to be deducted from the net profit for the purpose of computing book profit us 115jb of the income tax act the tribunal noticed the decision of the mumbai tribunal in the case of dresser valve india p ltd wherein it was held that the incorrect quantification of the provision makes the. 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. Prior period expenses allowable as a deduction from book. Calculation of mat credit applicability of minimum alternate tax.
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. Mat is calculated as 15% of the book profit of the tax assesse. While calculating the computation of book profit under section 115jb, ao. Provision for gratuity can be deducted while computing. Tax liability under section 115jb of the act was to be worked out only on the basis of adjusted book profit and not on the basis of income computed under normal provisions of the act. For the purpose of book profit, an assessee being a company for which the proviso to sub section 2 of section 211 of the companies act, 1956 applies, shall prepare a profit and loss account for the concerned previous year as per the provisions of act for the purpose of section 115jb. Apr 21, 2016 this books profit meaning is provided in explanation 1 of subsection 2 of section 115jb.
Profit as per profit and loss account in the current year. For the purposes of this section, book profit means the 77 profit. A tax officer does not have the power to recompute the. 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. However, for computing the eligible amount for the succeeding year, the taxpayer has adjusted inr 25 against. Profit from sale of agricultural land is not book profit. Book profit of the company computed as per the provisions of section 115jb is rs. Income tax computed as per provision of section 115jb of income tax act. Profit arising on sale of agricultural land, which does not fall in the category of capital asset as defined under sec. Tax liability as per the mat provisions are given in sec 115jb18.
Jul 26, 2017 section 115jb of the act already provides for adjustments for dividend for computation of book profit. 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. Why we chose the topic the corporate assessees, irrespective of their income level are. Indeed the statement certifies that the book profit is per section 115jb. Profit from sale of agricultural land is not book profit in 115jb. Dear friends, under section 115jb of it act 1961, in order to compute book profit, the following is to be reduced from profitloss as per companies act 20. Section 115jb special provision for payment of tax by certain companies. 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. 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. 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. Section 115jaa provided for allowance of credit of tax paid by the companies under section 115ja 115jb in subsequent years.
Clause iii and explanation there under to section 115jb2 says that the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account shall be reduced for the purpose of computing bookprofit. 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 year for. Claimed as per accounts and under 115jb from year 1 to year 3. Assessing officer erred in adding back transfer pricing. 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. Mar 01, 2018 4 every company to which this section applies, shall furnish a report in the prescribed form80 from an accountant as defined in the explanation below sub section 2 of section 288, certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under sub section 1 of. 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. Calculation of book profits for the purpose of mat section.