Cbdt clarifies on computation of book profit for the. 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. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. For the purposes of this section, book profit means the 77 profit. Income tax payable, if any calculated, as per normal provisions of it act. Provision of mat minimum alternate tax for payment of. Ppe under ind as, as per section 115jb of the act, the book profit of the previous year in which the items of ppe are retired, disposed or realised shall be increased or decreased, as the case may be, by the. Income tax computed as per provision of section 115jb of income tax act. 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. It is increased and decreased by the following items. Computation of book profit under sec 115jb income tax forum.
Mar 11, 2020 following the abovesaid decision, the income tax appellate tribunal allowed the claim of the assessee and held that the provision for gratuity is an ascertained liability eligible to be deducted from net profit for the purpose of computing book profit under section 115jb of the income tax act. The finance act, 2017 with the intent of providing a framework i to bring the adjustments being recorded on the transition. 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. Section 115jaa provided for allowance of credit of tax paid by the companies under section 115ja 115jb in subsequent years. First of all calculate tax as per normal provisions of income tax. 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. This explanation provides that book profit is nothing but is calculated after making some adjustments in the net profit as per the profit and loss account of the company. Section 115jb special provision for payment of tax by certain companies. Then, the tribunal referred to the order passed in the case of essar teleholdings ltd. Pricing tp adjustment to book profits under section 115jb of the incometax act, 1961 the act minimum alternate tax mat and directed the ao to exclude the tp adjustment from the book profits computed under section 115jb of the act.
Mat provisions require book profit off to the lower number. Book profit us 115jb to be reduced by exempted capital gain. Under existing rules, book profit is calculated as per section 115jb of the. 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. Minimum alternate tax on companies section 115jb under. Calculation of mat credit applicability of minimum alternate tax. Assessing officer erred in adding back transfer pricing. 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. Book profit refers to the net profit as shown in the profit and loss account.
For the purposes of this section, book profit means the net profit as shown in the. Cbdt issues faqs on computation of book profit for levy of. On 1 february 2017, the finance minister presented the finance bill, 2017 the bill which contained a number of. Mat is calculated as 15% of the book profit of the tax assesse. Section 115jaa provided for allowance of credit of tax paid by the companies under section 115ja115jb in subsequent years.
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. It is calculated on the basis of companies act, 20. 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. 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. Conundrum on brought forward loss treatment under mat taxsutra. 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. 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.
The taxpayer reduced inr 25 being lower of unabsorbed loss and unabsorbed depreciation in the tax computation under section 115jb of the act. The assessing authority viewed that as per the provisions of the companies act, prior year adjustments could not be reduced for arriving at the net profit of that particular year. Why we chose the topic the corporate assessees, irrespective of their income level are. Calculation of book profits for the purpose of mat section. Cbdt amends the report on computation of book profits for. Cbdt amends the report on computation of book profits for ind. While granting relief to lenovo, the bangalore bench of the income tax appellate tribunal itat held that the warrant expenses should be deducted from the book profit under section 115jb of the income tax act, 1961 the assessee is a renowned company lenovo engaged in the business of manufacturing and distribution of desktop, laptop, servers and smartphones. 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. Complexity in computing the book profit under mat provisions. Faqs for computing book profits under mat for indas. 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.
Faqmat book profit computation for ind as compliant companies. Cbdt clarifies on computation of book profit for the purposes. Indeed the statement certifies that the book profit is per section 115jb. 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. 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. 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. 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. Section 115jb of the act already provides for adjustments for dividend for computation of book profit. Brochure report title goes here section title goes here. Minimum alternate tax mat us 115jb of income tax act, 1961. The only remaining issue is whether provision for gratuity is an ascertained liability eligible to be deducted from the net profit for the purpose of computing book profit us 115jb of the income tax act the tribunal noticed the decision of the mumbai tribunal in the case of dresser valve india p ltd wherein it was held that the incorrect quantification of the provision makes the. Tax liability as per the mat provisions are given in sec 115jb18. The explanation appended to section 115jb of the act provides certain items which if debited to the profit and loss account can be.
As the profit and loss account is subject to notes and qualifications thereon, the profit shown in the profit and loss account may have to be adjusted with the. Step 1 find out net profit before other comprehensive income oci as per statement of profit and. Dear friends, under section 115jb of it act 1961, in order to compute book profit, the following is to be reduced from profitloss as per companies act 20. For computation of book profit, one may proceed as follows. No marginal relief, since the income does not exceed. As per section 115jb1, in case of company domestic or foreign, if the incometax payable on the total income computed under the incometax act, 1961 is less than 18. While calculating the computation of book profit under section 115jb, ao. 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.
However, for computing the eligible amount for the succeeding year, the taxpayer has adjusted inr 25 against. Prior period expenses allowable as a deduction from book. A tax officer does not have the power to recompute the. Mar 01, 2018 4 every company to which this section applies, shall furnish a report in the prescribed form80 from an accountant as defined in the explanation below sub section 2 of section 288, certifying that the book profit has been computed in accordance with the provisions of this section along with the return of income filed under sub section 1 of. Brought forward business losses can be adjusted even after. 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. Provision for gratuity can be deducted while computing.
Profit from sale of agricultural land is not book profit in 115jb. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain companies. Profit from sale of agricultural land is not book profit. Calculation of book profits for the purpose of mat section 115jb. Minimum alternate taxsection 115jbhow to compute arthikdisha. Aug 23, 2018 as per section 115jb of the income tax act, 1961, where in the case of a domestic or foreign company, the income tax payable as computed under the income tax act of any assessment year is less than 18.
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. The assessee during the relevant assessment year deducted prior period expenses of rs 96,94,693 from book profits while computing mat under section 115ja. Meena, accountant member these three appeals emanate. Claimed as per accounts and under 115jb from year 1 to year 3.
Jul 26, 2017 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 clarifies law on s. 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. Book profit of the company computed as per the provisions of section 115jb is rs. Capital receipts and book profits mat no longer a self. Provision for gratuity can be deducted while computing book. Profit from sale of agricultural land would not be included for purpose of computing book profit under section 115jb. Jul 29, 2016 the income tax act contains a special mechanism i.
Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb2c adjustment in book profits inserted by fa, 2017. 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 profit, cannot apply. Amount deductible in respect of remuneration of partners under section 40b with effect from the a. Jul 06, 2017 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 profit, cannot apply. Conundrum on brought forward loss treatment under mat. Cbdt circular of clarifications faqs on computation of s. Book profit under section 115jb the purpose of computing. The bill received the presidents assent on 31 march 2017 and became effective on 1 april 2017.
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 115jb provides for certain adjustments for determining book profit, mainly. 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. 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. As per section 115jb of the income tax act, 1961, where in the case of a domestic or foreign company, the income tax payable as computed under the income tax act of any assessment year is less than 18. 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. The assessing officer ao compared each years bookloss and unabsorbed depreciation and adopted lesser of the two as eligible.
Profit as per profit and loss account in the current year. This books profit meaning is provided in explanation 1 of subsection 2 of section 115jb. The mat provisions begin with a nonobstante clause, and thus, are a sacrosanct and selfcontained code. Starting point for computing book profits for ind as compliant companies shall be profit before other comprehensive income. 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. 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 procedure for the computation of book profit as per. Apr 21, 2016 this books profit meaning is provided in explanation 1 of subsection 2 of section 115jb. Provision of mat minimum alternate tax for payment of tax by certain companies section 115jb calculation of book profits for the purpose of mat section 115jb tax credit in respect of tax paid on deemed income under mat provisions section 115jaa amounts expressively allowed as deduction section 30 to 37 section 40a of income tax act. 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. Clause iii and explanation there under to section 115jb2 says that the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account shall be reduced for the purpose of computing bookprofit.
Jul 26, 2017 section 115jb of the act already provides for adjustments for dividend for computation of book profit. Profit arising on sale of agricultural land, which does not fall in the category of capital asset as defined under sec. All companies that fall under the purview of section 115jb has to file this form 29b report. Calculation of book profits for the purpose of mat. The description should be obtained before filing the income tax. Mar 11, 2020 the addition made to the book profits us. Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb 2c adjustment in book profits inserted by fa, 2017. Book profit us 115jb to be reduced by exempted capital gain q.
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