Computation of book profit under section 115jb of income tax

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. Cbdt clarifies on computation of book profit for the. Cbdt invites suggestions on framework for computation of. While computing the book profits under the provisions of section 115jb of the income tax 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. The revised section 115jb of the incometax act, 1961 the act. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb. 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.

Computation of book profit under sec 115jb income tax forum. Profit from sale of agricultural land would not be included for purpose of computing book profit under section 115jb. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain companies. 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. The minimum alternate tax mat on companies challenges. 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. 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. May 21, 2012 book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. Second proviso to section 115jb states that provided further that where the company has adopted or adopts the financial year under the companies act, 20 18 of 20, which is different from the previous year under this. Mat provisions require book profit to be adjusted against lower of. The minimum alternate tax mat on companies challenges and. Rsm india is a member of the rsm network and trades as rsm. Cbdt issues faqs on computation of book profit for.

Calculation of book profits for the purpose of mat section. While computing the book profits under section 115 jb of the 1961 act, the assessee claimed reduction, under clause iv of explanation to section 115jb, of 100% export profits. Baroda branch of icai impact of ind as on corporate taxation. Nonapplicability of mat in respect of certain foreign companies section 115jb.

Cbdt circular on section 115jb of the incometax act, 1961. Central government notified the indian accounting standards ind. 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. The mat provisions begin with a nonobstante clause, and thus, are a sacrosanct and selfcontained code. Capital receipt waiver of loan not chargeable to tax u. 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.

Guide to minimum alternate tax mat for ind as compliant. On 1 february 2017, the finance minister presented the finance bill, 2017. Cbdt clarifies on computation of book profit for the purposes. Since the introduction of mat, several changes have been introduced in the provisions of mat and today it is levied on companies as per the provisions of section 115jb. Aug 20, 2015 book profit us 115jb to be reduced by exempted capital gain q. 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. Tax liability as per the mat provisions are given in sec 115jb18. Book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. Clarifications on computation of book profit for the. Book profit under section 115jb the purpose of computing. Section 115jb along with the return of income filed under section 9 1 of the act or along with the return of income furnished in response to a notice under section 142 1i of the act.

Mat computation of book profit us 115jb doubtful debts since, we. Cbdt amends the report on computation of book profits for ind. Book profit us 115jb to be reduced by exempted capital gain. Nbfc statutory reserve addition book profits computation 115jb. The tribunal, while examining the above issue, has observed that the taxpayer had no option to.

The purpose of section 115jb for mat is not to tax any income or receipts not otherwise taxable under the act. Applicability of section 14a is confined to computation of tax liability under the five heads of income under normal provisions contained in chapter iv of the act. Calculation of book profits for the purpose of mat section 115jb. The itat chennai in the case of the deputy commissioner of income tax, corporate circlei, coimbatore vs. Central government notified the indian accounting standards ind as which are converged with. 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. Income tax computed as per provision of section 115jb of income tax act. 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. 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.

Ao while computing book profit under section 115jb made addition of. Clarifications on computation of book profit for the purpose of levy of mat under section 115jb of the incometax act for indian accounting standards ind as compliant companies cbdt circular no. Section 14a could not be extended and read into section 115jb, falling under chapter xiib of the act. Jul 26, 2017 consequently, the finance act, 2017, has amended the provisions of section 115jb of the incometax act, 1961 the act w. Capital gains exempt under section 54ec need not be. For computation of book profit, one may proceed as follows. Matbook profit under section 115jacapital gains exempted under section 54ec being reckoned for purpose of computing book profit conclusion.

Cbdt invites suggestions on framework for computation of book profit for the purposes of levy of mat. The committee submitted two interim reports in year 2016 which were placed before stakeholders for. 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. Cbdt amends the report on computation of book profits for ind as.

Section 115jb, section 80hhc1b of income tax act, 1961. Faqmat book profit computation for ind as compliant companies. 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. Minimum alternate taxsection 115jbhow to compute arthikdisha. 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. Cbdt circular of clarifications faqs on computation of s. In a latest judgment, delhi high court has ruled that for the computation of book profit for the purpose of minimum alternate tax mat under section 115jb of the income tax act, 1961, amount transferred to all reserves other than specified under section 33ac shall be added back and even the statutory reserve created by a non banking finance company under section 45ic of reserve bank of india. The procedure for the computation of book profit as per.

Mat provisions require book profit off to the lower number. Minimum alternate tax mat us 115jb of income tax act, 1961. 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. No 3232015tpl issued a faq titled 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 where it answered 14 questions. Apr 21, 2016 this section provides that in case the tax payable by a company is less than 18. The minimum alternate tax mat on companies challenges and way forward 09. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. Cbdt amends the report on computation of book profits for.

Capital receipts and book profits mat no longer a self. Calculation of mat credit applicability of minimum alternate tax. 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. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb for computation of book profit, one may proceed as follows. Profit arising on sale of agricultural land, which does not fall in the category of capital asset as defined under sec. By virtue of clause iic in explanation to section 115jb by the finance act, 2015 share of profit received from aop could not be added while computing book profit under section 115jb. Capital gains, exempt under section 54ec, could not be reckoned for purpose of computing book profit under section 115ja. We support committees recommendation on exclusion of notionalunrealised profits from mat levy and consequential mat pick up at the stage of actual realisation. Book profit us 115jb to be reduced by exempted capital gain q. Issue under consideration was that whether capital gains, which were exempt under. 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 incometax act, 1961 for indian accounting standards ind as compliant companies in the year of adoption and thereafter the following are brief extracts based on the. Computation of book profits would be calculated as under a stepi.

Computation of book profit us 115jb tax management india. 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. Why we chose the topic the corporate assessees, irrespective of their income level are. It is calculated under section 115jb of the income tax. Understanding the concept of liability to pay minimum alternate tax mat and alternate minimum tax amt and various provisions like book profit, dividends paid or proposed, depreciation, deferred tax, income of foreign company, etc.

This section provides that in case the tax payable by a company is less than 18. What will be the tax liability of essem minerals pvt. 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. 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. Cbdt issues faqs on computation of book profit for levy of mat and proposes amendment to section 115jb of the incometax act. Second proviso to section 115jb states that provided further that where the company has adopted or adopts the financial year under the companies act, 20 18 of 20, which is. Section 14a could not be extended and read into section 115jb, falling under chapter xii. Normal tax, in this case, means the tax payable on the basis of normal computation of total income of the company.

Cbdt issues faqs on computation of book profit for levy of. Calculation of book profits for the purpose of mat. The said return was accompanied by statutory audit report claiming deduction under section 80hhc of the incometax act, 1961 for short, the 1961 act. Capital gains exempt under section 54ec need not be reckoned. Sep 23, 2019 minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961. Rsm is the trading name used by the members of the rsm network. Cbdt notifies rules for computation of interest income. 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. Section 115jaa provided for allowance of credit of tax paid by the companies under section 115ja 115jb in subsequent years.

Analysis for computing book profit book profit highly relies on accounting by corporates. Section 115jaa provided for allowance of credit of tax paid by the companies under section 115ja115jb in subsequent years. Under the provisions of section 115jb of the incometax act, 1961 the act, where in the case of a company, the incometax payable on the total income in respect of any assessment year ay, is less than ten percent of its book profit, such. Home publications clarifications on computation of book profit for the purpose of levy of mat under section 115jb of the income tax act for. 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. 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. Under existing rules, book profit is calculated as per section 115jb of the income tax act, 1961.