Computation of book profit under mat

The tribunal rejected the taxpayers methodology and observed that though the taxpayer restricted the quantification of. Step 2 adjustment to net profit to convert it into book profit which are given under explanation 1 to section 115jb 2. The finance act, 2017 introduced tax provisions under minimum alternate tax mat provisions for indian accounting standards ind as. Minimum alternative tax mat and computation of book. Provision made for diminution in the value of any asset. 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. Computation of book profit under sec 115jb income tax forum.

Since mtm gains recognised through profit or loss on fvtpl classified financial instruments are included in book profits for mat computation, it is clarified that mtm losses on such instruments recognised through profit or loss shall not require any adjustments as provided under clause i of explanation 1 to section 115jb2 of the act. 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. Minimum alternate tax mat us 115jb of income tax act, 1961. Normal tax, in this case, means the tax payable on the basis of normal computation of total income of the company. Here, while computing book profits for year 4 for mat purposes, a question arises as to how muchshould be the downward adjustment towards lower of loss brought forward or unabsorbed depreciation.

Computation of book profits by ind as compliant companies. 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. Cs professionalcomputation of book profit from mat on. Mat provisions require book profit off to the lower number. When any amount of tax is paid as mat by an assessee being a company, then, credit in respect of tax so paid shall be allowed to him in accordance with the provision of section 115jaa. Nontaxable income under a tax treaty cannot be reduced. Mat is calculated as 15% of the book profit of the tax assesse. Taxpayers methodology to set off and carry forward. Committee to suggest a framework for computation of book profit for the purposes of levy of minimum alter tax mat under section 115jb of the incometax act, 1961 the act for indian accounting standards ind as compliant companies in the year of adoption and thereafter. The minimum alternate tax mat on companies challenges. Cbdt circular of clarifications faqs on computation of s. Under existing rules, book profit is calculated as per. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb step 1. Framework for computation of book profit for the purpose.

Government of india ministry of finance department of revenue central board of direct taxes. Baroda branch of icai impact of ind as on corporate taxation. Minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961. However, in case of provision for diminution impairment in value of assets other than fvtpl financial instruments, the existing adjustment of.

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. Calculation of mat credit applicability of minimum. Allowable tax credit difference of mat paid and income tax payable under normal provision of income tax act, 1961. 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. When a company pays tax under mat, the tax credit earned by it shall be an amount which is the difference between the amount payable under mat and the normal tax. Book profit of the company computed as per the provisions of section 115jb is rs. Accordingly, mat would be calculated using the profits as per the statement of profit and loss before other comprehensive income oci, as the starting point. We support committees recommendation on exclusion of notionalunrealised profits from mat levy and consequential mat pick up at the stage of actual realisation. Clarifications on computation of book profit for the purpose of levy of. Facts of the case during the assessment year, the taxpayer excluded income earned from its project in bangladesh, malaysia and united kingdom from the computation of mat, on the ground that the income earned in foreign countries. After extensive research, the author makes out a strong case to contend that exempt income was never intended to fall within the concept of book profits in s. 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 computing mat, book profits as computed under section115jb are the base.

Step 1 find out net profit before other comprehensive income oci as per statement of profit. Central government notified the indian accounting standards ind. Proposed computation of mat for ind as compliant companies. Faq on mat computation for ind as compliant companies. 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.

Minimum alternate taxsection 115jbhow to compute arthikdisha. 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. The central government today notified the revised from no. 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. The tax computed by applying 15% plus surcharge and cess as applicable on book profit is called mat. Accordingly, mat would be calculated using the profits as per the statement of profit and loss before other comprehensive income oci, as the starting. 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. Book profit simply means profit as computed in accordance with the provisions but before remuneration paid to partner. Tribunal rejected the contention ofthe assesseecompany.

Where in the case of a company, the incometax payable on the total income as computed under the incometax act, in respect of previous year relevant to the assessment year 2012 or thereafter is less than 18. 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. Mat is levied at the rate of 9% plus surcharge and cess as applicable in case of a company. Many of these companies, particularly, those in real estate, power and utility sector, construction and infrastructure are taxed under mat, and were therefore surrounded by uncertainties regarding computation of book profit for mat under ind as. Get indias best faculty video classes for best study at home.

The finance act, 2017 provided a separate formulae for computation of book profit for the companies that prepare financial statements under ind as. Further, the assessee by way of a note in the computation gave a caveat that the amount of rs. It held that itis amount credited to the profit and loss account that should be included. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb for computation of book profit, one may proceed as follows. 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. Itd did not accept the observation stating that the book profit are different from taxable income under normal provisions and merely because. Cbdt issues faqs on computation of book profit for levy of. Mat provisions require book profit to be adjusted against lower of brought forward unabsorbed loss and unabsorbed depreciation and. Book profit can be referred to as the total amount of.

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. Mat computation of book profit u s 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. Section 115jb speaks about the minimum tax that a company is required to pay. Computation of book profit as per mat provisions 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.

Cbdt clarifies on computation of book profit for the. Govt notifies new form 29b for computing book profits of. Our comments the issue of whether exempt capital gains credited to the profit and loss account can be excluded while computing book profits under the provisions of mat has been a. Aligning the computation of book profits under the act with the logic of the revised provisions of the companies act would help rationalise the book profit. 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. Calculation of book profits for the purpose of mat section 115jb. In book profit computation, long term capital gains as computed after claiming indexed cost was sought to be included under bracketed portion ofclause iiofexplanation1to section 115jb. Easing the mat credit mechanism and simplifying the mat computation provisions on the lines suggested in this paper would help rationalise. Capital receipt waiver of loan not chargeable to tax u. Faqmat book profit computation for ind as compliant companies. Book profit definition, examples how to calculate book. The computation method is relevant for companies preparing financial statements under erstwhile as. Cbdt issues faqs on computation of book profit for levy of mat and.

Mat book profit computation 115jb for ind as compliant. For computation of book profit, one may proceed as follows. Calculation of book profits for the purpose of mat. Analysis for computing book profit book profit highly relies on accounting by corporates.