Amount deductible in respect of remuneration of partners under section 40b with effect from the a. 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. Section 115jaa provided for allowance of credit of tax paid by the companies under section 115ja 115jb in subsequent years. Tax planning under mat free income tax efiling in india.
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. Capital gains, exempt under section 54ec, could not be reckoned for purpose of computing book profit under section 115ja. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. 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. Book profit us 115jb to be reduced by exempted capital gain. The matter was considered by the board and the following clarifications are issued. The purpose of section 115jb for mat is not the tax talk. This explanation provides that book profit is nothing but is calculated after making some adjustments in the net profit as per the profit and. In sub section 1 to sec 115jb, a word book profit is used for calculation of tax liability of the company. The amendment also mandates online filing of the mat audit report under section 115jc of the act, but this mechanism has yet to be launched by the cbdt. In a recent ruling1 of the ahmedabad bench of the incometax 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 incometax act, 1961 the act has come up. Cbdt issues faqs on computation of book profit for.
The minimum alternate tax mat on companies challenges and way forward 09. Issue under consideration was that whether capital gains, which were exempt under. First of all calculate tax as per normal provisions of income tax. 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 income. No marginal relief, since the income does not exceed. Faqs on minimum alternate tax mat relating to ind as. This books profit meaning is provided in explanation 1 of sub section 2 of section 115jb.
Tax laws allowed various incentives and deductions from profits like deduction us 80ia, 80ib. Under existing rules, book profit is calculated as per section 115jb of the income tax act, 1961. Cbdt issues faqs on computation of book profit for levy of mat and proposes amendment to section 115jb of the incometax act. 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 income. 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.
Capital gains exempt under section 54ec need not be. The procedure for the computation of book profit as per. Cbdt notifies revised form 29b of income tax act mat. Calculation of book profits for the purpose of mat section 115jb.
Mat is applicable to all companies, including foreign companies. Taxable income as per normal provision of income tax act. Faqmat book profit computation for ind as compliant companies. Rationalisation of provisions of section 115jb in line. Aug 20, 2015 book profit us 115jb to be reduced by exempted capital gain q. Finance act, 2017 amended the provisions of section 115jb of the incometax act,1961the act so as to provide the framework for computation of book profit for the purposes of levying minimum alternate tax mat in case of indian accounting standards ind as compliant companies in the year of adoption and thereafter. Calculation of book profits for the purpose of mat section. 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. Analysis for computing book profit book profit highly relies on accounting by corporates. Aug 05, 2016 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, 1961 for indian accounting standards ind as compliant companies in the year of adoption and thereafter. Cbdt issues faqs on computation of book profit for levy of. Minimum alternative tax mat and its computation of book profit and mat credit under section 115jb of income tax act, 1961.
Additionally, to have parity between the transition adjustment and ongoing adjustments on account of items adjusted to other equity, the committee has recommended amendment to section 115jb2a of the incometax act the act w. Mat book profit computation 115jb for ind as compliant. Cbdt clarifies on computation of book profit for the purposes. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain companies. Book profits plus 4 % education cess plus a surcharge if applicable. Matbook profit under section 115jacapital gains exempted under section 54ec being reckoned for purpose of computing book profit conclusion. The updated form 29b for mat audit reporting was notified, with immediate effect, under section 115jb on computation of book profits of a company of the incometax act. Aug 24, 2017 the updated form 29b for mat audit reporting was notified, with immediate effect, under section 115jb on computation of book profits of a company of the incometax act. We support committees recommendation on exclusion of notionalunrealised profits from mat levy and consequential mat pick up at the stage of actual realisation. 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. On the basis of the recommendations of the committee on matind as, the central government has notified 10 icds vide notification no. Section 115ja, read with section 14a, of the incometax 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.
The issue is relating to computation of book profit under section 115jb of the act viz a viz profit and loss account prepared by the appellant as per the provisions of companies act and the applicability of clause iic to explanation 1 to section 115jb of the act, which has been inserted by the finance act, 2015 with effect from 142016. Claimed as per accounts and under 115jb from year 1 to year 3. Section 115jb along with the return of income filed under section 91 of the act or along with the return of income furnished in response to a notice under section 1421i of the act. Government of india ministry of finance department of revenue central board of direct taxes.
Jul 26, 2017 consequently, the finance act, 2017, has amended the provisions of section 115jb of the incometax act, 1961 the act w. 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. The minimum alternate tax mat on companies challenges. Cbdt circular on section 115jb of the incometax act, 1961. Baroda branch of icai impact of ind as on corporate taxation. 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. Provision of mat minimum alternate tax for payment of tax by certain companies section 115jb tax payable for any assessment year cannot be less than 18. In the case of companies, if tax payable on its total income as computed under the.
Computation of book profit under sec 115jb income tax forum. 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 notifies revised form 29b of income tax act india briefing. 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. Why we chose the topic the corporate assessees, irrespective of their income level are. Book profit us 115jb to be reduced by exempted capital gain q. Mat is calculated under section 115jb of the incometax 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. Mat is calculated under section 115jb of the income tax act. Section 115jaa provided for allowance of credit of tax paid by the companies under section 115ja115jb in subsequent years. Every company should pay higherof the tax calculated under the following two provisions. Special provision for payment of tax by certain companies. This is not so in computation of book profit under the companies act.
The provisions for computation of book profits under section 115jb of the incometax act provide that in case of revaluation of assets, any impact on account of such revaluation shall be ignored for the purposes of computation of book profits. Framework for computation of book profit for the purposes of. Mat provisions proposed to be modified considering the impact of ind as section 115jb section 115jb the act is proposed to be amended by introducing subsections 2a to 2c in the section 115jb in order to rationalize the computation of book profits. Cbdt notifies rules for computation of interest income. Cbdt amends the report on computation of book profits for ind. Cbdt clarifies on computation of book profit for the. The income tax appellate tribunal itat, bangalore has last week held that the provision for gratuity can be deducted from the book profit under section 115jb of the income tax act, 1961. The income tax appellate tribunal itat, bangalore has last week held that the provision for gratuity can be deducted from the book profit under section 115jb. Mat provisions require book profit off to the lower number. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb for computation of book profit, one may proceed as follows. 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.
Consequently, the finance act, 2017, has amended the provisions of section 115jb of the incometax act, 1961 the act w. Book profit under section 115jb the purpose of computing. Section 115jb of income tax act, 1961after budget 2016. For computation of book profit, one may proceed as follows. Capital gains exempt under section 54ec need not be reckoned. Jul 26, 2017 finance act, 2017 amended the provisions of section 115jb of the incometax act,1961the act so as to provide the framework for computation of book profit for the purposes of levying minimum alternate tax mat in case of indian accounting standards ind as compliant companies in the year of adoption and thereafter. 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. Minimum alternate tax mat us 115jb of income tax act, 1961. 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. 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. 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 minimum alternate tax mat on companies challenges and. Capital receipts and book profits mat no longer a self. 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. Framework for computation of book profit for the purposes. 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. Cbdt circular of clarifications faqs on computation of s. 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. 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. May 21, 2012 amount deductible in respect of remuneration of partners under section 40b with effect from the a. 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. Calculation of book profits for the purpose of mat. 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.
In india, when applied to companies, amt is termed the minimum alternate tax mat, operating. Nov 27, 2019 but with the introduction of mat, the companies have to pay a fixed percentage of their profits as minimum alternate tax. 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. Section 115jb provides for certain adjustments for determining book profit, mainly. 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. Matbook profit under section 115jacapital gains exempted under section 54ec being reckoned for purpose of computing book profit.
The itat chennai in the case of the deputy commissioner of income tax, corporate circlei, coimbatore vs. But with the introduction of mat, the companies have to pay a fixed percentage of their profits as minimum alternate tax. Government of india ministry of finance central board of. Book profit of the company computed as per the provisions of section 115jb. Calculation of mat credit applicability of minimum alternate tax. 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 cbdt clarifies law on s. Cbdt amends the report on computation of book profits for.
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