On 1 february 2017, the finance minister presented the finance bill, 2017 the bill which contained a number of. Mat is calculated under section 115jb of the income tax act. 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. Expenditure related to incomes which are exempt under section 10 other. Faqmat book profit computation for ind as compliant companies. Aggregate of profitslosses of both stp and nonstp units, and not just nonstp units, is to be taken into consideration while computing book profit us.
The revised section 115jb of the income tax act, 1961 the act prescribes that. 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 income tax act, 1961 for indian accounting standards ind as compliant companies in the year of adoption and thereafter. 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 provisions us 115jb an exhaustive overview of landmark. 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. This is not so in computation of book profit under the companies act. Calculation of book profits for the purpose of mat section.
The minimum alternate tax mat on companies challenges. May 21, 2012 book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. Tax paid as per mat calculation income tax payable under normal provision of. Provision made for diminution in the value of any asset. Up to fy 201718 long term capital gain on sale of shares or units of mutual fund on which security. Cbdt issues faqs on computation of book profit for. Conundrum on brought forward loss treatment under mat. Capital receipts and book profits mat no longer a self.
Cbdt circular on section 115jb of the incometax act, 1961. Find out more and tell us what matters to you by visiting us at. Profit arising on sale of agricultural land, which does not fall in the category of capital asset as defined under sec. Computation of book profit under sec 115jb income tax forum. Section 115ja, read with section 14a, of the income tax act, 1961 minimum alternate tax assessment year 200001 whether provisions of subsection 2 and subsection 3 of section 14a cannot be imported into clause f of explanation to section 115ja while computing adjusted book profit held, yes assesseecompany made investment in. Clarifications on computation of book profit for the purposes of levy of minimum alternate tax mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies. This has led to lower net income and lower revenue for the government. 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. Section 115jb of income tax act, 196, mat, book profit, adjustments to calculate book profits. Book profit us 115jb to be reduced by exempted capital gain. Similarly for computing book profits us 115jb of the act, the ao added rs. Brought forward business losses can be adjusted even after.
Amount of expenditure relatable to certain incomes if such income is not subject to. Computation of book profits would be calculated as under a stepi. Sep 08, 2015 profit from sale of agricultural land would not be included for purpose of computing book profit under section 115jb. Framework for computation of book profit for the purposes of levy of mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies. Taxable income as per normal provision of income tax act. Profit as per profit and loss account in the current year. Mat provisions require book profit to be adjusted against lower of brought forward unabsorbed loss and unabsorbed. We support committees recommendation on exclusion of notionalunrealised profits from mat levy and consequential mat pick up at the stage of actual realisation. Faq on mat computation for ind as compliant companies. 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. 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. 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. Income tax computed as per provision of section 115jb of income tax act. Rsm is the trading name used by the members of the rsm network.
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. Capital gains exempt under section 54ec need not be. Jul 26, 2017 framework for computation of book profit for the purposes of levy of mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies may 03, 2016. On 1 february 2017, the finance minister presented the finance bill, 2017 the bill which contained a number of proposals including computation of book profit for ind as compliant. The procedure for the computation of book profit as per. Mat computation of book profit us 115jb doubtful debts. Nontaxable receipt to be excluded profits arising on land transfer by assessee to its subsidiary, by virtue of being exempt us 47iv for purposes of capital asset definition, also entitled to be excluded from book profits computation us 115jbread more. Government of india ministry of finance department of revenue central board of direct taxes. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb for computation of book profit, one may proceed as follows. Deletions to the net profit if credited to the profit and loss account 1. Minimum alternate tax part iii computation of book profits.
The assessing officer was of the opinion that the same is liable to be reckoned for the purpose of computation of book profit under section 115ja. Capital gains, exempt under section 54ec, could not be reckoned for purpose of computing book profit under section 115ja. Calculation of book profits for the purpose of mat section 115jb. Mat book profit computation 115jb for ind as compliant. Calculation of book profits for the purpose of mat.
Global business tax alert sharp insights deloitte us. Profit from sale of agricultural land is not book profit. The mat provisions begin with a nonobstante clause, and thus, are a sacrosanct and selfcontained code. Cbdt amends the report on computation of book profits for ind as compliant companies. Tribunals ruling the tribunal has explained its position through the following illustration. Claimed as per accounts and under 115jb from year 1 to year 3.
Cbdt issues faqs on computation of book profit for levy of. Calculation of mat credit applicability of minimum. The itat chennai in the case of the deputy commissioner of income tax, corporate circlei, coimbatore vs. However, while computing the taxable income under the provisions of section 115ja, the same was not added to book profits. Notes to accounts decisive for book profit computation. Mat provisions require book profit off to the lower number. Therefore, even clause f of explanation to section 115jb which refers to those amounts which are debited to profit and loss account, alone can be added to b book profit, cannot apply. Cbdt notifies rules for computation of interest income. Home publications clarifications on computation of book profit for the purpose of levy of mat under section 115jb of the income tax act for ind as compliant companies.
Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. Methods of computation used for determination of income on. 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 book profit under section 115jacapital gains exempted under section 54ec being reckoned for purpose of computing book profit conclusion. 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, 1961 the act. Clarifications on computation of book profit for the purpose of levy of mat under section 115jb of the income tax act for indian accounting standards ind as compliant companies cbdt circular no. Minimum alternate tax mat us 115jb of income tax act, 1961. Profit from sale of agricultural land is not book profit in 115jb. The minimum alternate tax mat on companies challenges and way forward 09.
In a recent ruling1 of the ahmedabad bench of the income tax appellate tribunal tribunal, an issue relating to determining the quantum of brought forward unabsorbed loss and unabsorbed depreciation eligible for reduction from the profits in the tax computation under section 115jb of the income tax act, 1961 the act has come up. Jul 06, 2017 if the assessee has not debited any actual expenditure relating to the earning of the exempt income, therefore, the provisions of section 14a cannot be imported into the computation of book profit under section 115jb of the income tax act, 1961. 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 income. Cbdt invites suggestions on framework for computation of book profit for the purposes of levy of mat. The revised section 115jb of the income tax act, 1961 the act. Issue under consideration was that whether capital gains, which were exempt under. Minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961. 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 by that extent. If the assessee has not debited any actual expenditure relating to the earning of the exempt income, therefore, the provisions of section 14a cannot be imported into the computation of book profit under section 115jb of the income tax act, 1961. Net profits before oci to be considered as the broad starting point for computation of book profit. 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 clarifies on computation of book profit for the. 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. Apr 28, 2016 government of india ministry of finance department of revenue central board of direct taxes. 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. 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. Home publications clarifications on computation of book profit for the purpose of levy of mat under section 115jb of the income tax act. According to the learned department representative, the book profit as referred us 115jb shall be computed irrespective of the fact that whether particular receipt is taxable under normal provisions of the income tax act or not, hence there is no question of deduction of sales tax subsidy, being capital receipt from book profit. Section 115jb of the act already provides for adjustments for dividend for computation of book profit. Cbdt amends the report on computation of book profits for. May 07, 2016 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 income tax act, 1961 for indian accounting standards ind as compliant companies in the year of adoption and thereafter. Book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. Nov 05, 2015 similarly for computing book profits us 115jb of the act, the ao added rs. 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.
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 income tax act. Government of india ministry of finance central board of. Kolkata itat recently held that the expenditure incurred to earn exempt income computed under section 14a of the income tax act could not be added while computing book profit under section 115jb of the act. Computation of book profits by ind as compliant companies for. For computation of book profit, one may proceed as follows.
Methods of computation used for determination of income on transfer of long term capital assets in the form of shares or units of mutual fund which forms part of book profit us 115jb. Cbdt amends the report on computation of book profits for ind. Advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Rsm india is a member of the rsm network and trades as rsm. Minimum alternate taxsection 115jbhow to compute arthikdisha. Computation of book profits by ind as compliant companies. Book profit of the company computed as per the provisions of section 115jb. A receipt exempt from tax under income tax law, cannot be considered for purpose of computation of book profit under section 115jb, hence sales tax subsidy received by assessee being capital in nature was to be reduced from book profit computed under section 115jb. 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. The minimum alternative tax mat is a provision introduced in direct tax laws to limit the tax deductionsexemptions otherwise available to taxpayers so that they pay a minimum amount of tax to the government. As per section 115jb 2, book profit means net profit in. 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. Cbdt clarifies on computation of book profit for the purposes.
Framework for computation of book profit for the purposes of levy of mat under section 115jb of the income tax act, 1961 for indian accounting standards ind as compliant companies may 03, 2016. May 24, 2016 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. Minimum alternate tax mat section 115jb income tax. First of all calculate tax as per normal provisions of income tax. Expenditure incurred to earn exempt income computed us. 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. Global business tax alert sharp insights rationalization of mat provisions for ind as compliant companies. Minimum alternative tax mat and computation of book profits. Book profit us 115jb to be reduced by exempted capital gain q. Calculation of mat credit applicability of minimum alternate tax. Capital gains exempt under section 54ec need not be reckoned. Mat computation of book profit us 115jb doubtful debts since, we. 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. Aug 20, 2015 book profit us 115jb to be reduced by exempted capital gain q.
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