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. As per section 115jb 2, book profit means net profit in the statement of profit. This books profit meaning is provided in explanation 1 of subsection 2 of section 115jb. Jul 26, 2017 section 115jb of the act already provides for adjustments for dividend for computation of book profit. 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. 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. Jun 04, 2017 applicability and nonapplicability of mat as per section 115jb, every taxpayer being a company is liable to pay mat, if the income tax 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. The proposed amendments also consider to mitigate tax burden on the companies during the transition phase.
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. Analysis for computing book profit book profit highly relies on accounting by corporates. If deduction available to partnership regarding it,then it is pgbp income of partners however if deduction not available to partnership regarding it,then it is not taxable as pgbp of partners question 1 suppose a partnership firm has business profit of 7 lacs what is maximum salary it can give to 2 partners as per section 40b. Special provision for payment of tax by certain companies. While calculating the computation of book profit under section 115jb, ao. The minimum alternate tax mat on companies challenges. 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. 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.
Book profit of the company computed as per the provisions of section 115jb. Aug 21, 2019 if deduction available to partnership regarding it,then it is pgbp income of partners however if deduction not available to partnership regarding it,then it is not taxable as pgbp of partners question 1 suppose a partnership firm has business profit of 7 lacs what is maximum salary it can give to 2 partners as per section 40b. Applicability and nonapplicability of mat as per section 115jb, every taxpayer being a company is liable to pay mat, if the income tax 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. Calculation of book profits for the purpose of mat. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. Cbdt circular of clarifications faqs on computation of s. 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. Faqcomputation of book profit for levy of mat us 115jb for indian accounting standards ind as compliant companies. However, for computing the eligible amount for the succeeding year, the taxpayer has adjusted inr 25 against.
In the order under section 1433 while calculating the book profit us 115jb of the act, the a. Adjustment in book profits section 115jb2c x x x x extracts x x x x full text of the document. Tax paid as per mat calculation income tax payable under. 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. Additions to the net profit if debited to the profit and loss account. Minimum alternate tax and alternate minimum tax 115jb and 115jc. The minimum alternate tax mat on companies challenges and.
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. For computation of book profit, one may proceed as follows. 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. Calculation of book profits for the purpose of mat section.
Mat provisions require book profit off to the lower number. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain companies. Apr 18, 2020 it is calculated under section 115jb of the income tax act. Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb 2c adjustment in book profits inserted by fa, 2017. As per explanation 1 to section 115jb2, 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. Disallowance under section 14a read with rule 8d will. Profit from sale of agricultural land would not be included for purpose of computing book profit under section 115jb.
In sub section 1 to sec 115jb, a word book profit is used for calculation of tax liability of the company. Section 40b deduction for salary and interest partnership. The procedure for the computation of book profit as per. 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. 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. Baroda branch of icai impact of ind as on corporate taxation. Conundrum on brought forward loss treatment under mat taxsutra. Minimum alternate tax and alternate minimum tax 115jb and. For the purposes of this section, book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under subsection 2. Cbdt clarifies on computation of book profit for the. This explanation provides that book profit is nothing but is calculated after making some adjustments in the net profit as per the profit and. Cbdt amends the report on computation of book profits for. Calculation of book profits for the purpose of mat section 115jb. 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.
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. This article discusses the amendments made to section 115jb to incorporate adjustments as mandated by ind as. 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. No marginal relief, since the income does not exceed. Cbdt issues faqs on computation of book profit for levy of. Insertion of new section 115jb income tax department. Aug 29, 2016 advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb2c adjustment in book profits inserted by fa, 2017.
After section 115jaa of the incometax act, the following section shall be inserted with effect from the 1st day of april, 2001, namely. Indeed the statement certifies that the book profit is per section 115jb. Income tax paid or payable if any calculated as per normal provisions of income tax act. Minimum alternate tax part v computation of book profits. Calculation of mat credit applicability of minimum alternate tax. It is calculated under section 115jb of the income tax act.
For the purposes of this section, book profit means the net profit as shown in the. Disallowance under section 14a read with rule 8d will apply. 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. Tax liability as per the normal provisions of income tax acttax rate 30% plus. 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. Minimum alternate tax mat us 115jb of income tax act, 1961. Claimed as per accounts and under 115jb from year 1 to year 3. 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. 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. Sir, pls elaborate, whether we have to take pat or pbt for arriving the depreciation loss or business loss. 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. Ca jyoti gupta has analyzed the recent judgement of the itat special bench in acit vs. Jul 06, 2017 ca jyoti gupta has analyzed the recent judgement of the itat special bench in acit vs. Tax liability as per the mat provisions are given in sec 115jb18.
Profit arising on sale of agricultural land, which does not fall in the category of capital asset as defined under sec. Complexity in computing the book profit under mat provisions. 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. Profit as per profit and loss account in the current year. 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. Conundrum on brought forward loss treatment under mat. On 1 february 2017, the finance minister presented the finance bill, 2017 the bill which contained a number of. Profit from sale of agricultural land is not book profit in 115jb.
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. Apr 21, 2016 in sub section 1 to sec 115jb, a word book profit is used for calculation of tax liability of the company. The tax rate is 15% with effect from ay 202021 fy 201920 2. The deferred tax as per as 22 makes the lot of difference. The minimum alternate tax mat on companies challenges and way forward 09. Income tax computed as per provision of section 115jb of income tax act. Section 115jb provides for certain adjustments for determining book profit, mainly. May 21, 2012 amount deductible in respect of remuneration of partners under section 40b with effect from the a. Company has no taxable income but has a positive book profit. Section 14a forms part of chapter iv of the act, which determines the. Cbdt amends the report on computation of book profits for ind. Brochure report title goes here section title goes here.
Mat on ind as compliant financial statement i for mat calculation, the starting point is the net profit as per the statement of profit and loss before considering any items forming a part of other comprehensive income oci. 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. All companies that fall under the purview of section 115jb has to file this form 29b report. 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. Amount deductible in respect of remuneration of partners under section 40b with effect from the a. Second proviso to section 115jb states that provided further that where the company has adopted or adopts the financial year under. 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. Capital receipt waiver of loan not chargeable to tax u. Profit from sale of agricultural land is not book profit.
Rationalization of provisions of section 115jb is a welcome step taken by government in bringing long awaited clarity in calculation of book profits under section 115jb considering the accounting adjustments resulting from adoption of ind as. 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. 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. Computation of book profit under sec 115jb income tax forum. First of all calculate tax as per normal provisions of income tax. Tax liability as per the mat provisions are given in sec 115jb 18. 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. The taxpayer reduced inr 25 being lower of unabsorbed loss and unabsorbed depreciation in the tax computation under section 115jb of the act.