The case law relied upon by revenue is not applicable in the present case as the special bench, following the decision the apex court in apollo tyres and hcl comnet supra, held that the ao cannot travel beyond the net profits declared by the taxpayer unless a it is discovered that profit and. 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 minimum alternate tax mat on companies challenges and way forward 09. Book profit will be increaseddecreased by all amounts crediteddebited to oci that will. In the supreme court of india civil appellate jurisdiction civil appeal no 7518 of 2010 arising out of slp c no 22397 of 2009 ajanta pharma ltd versus commissio. The description should be obtained before filing the income tax. You will thus appreciate that the brought forward loss and depreciations on 31. 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. 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. The complete report on the topic payment of tax by certain companies under special provisions of section 115jb, in english and hindi, is contained in the cd enclosed with the booklet. Nov 05, 2015 similarly for computing book profits us 115jb of the act, the ao added rs.
Addition towards not deducting the waived interest amount of under one time settlement for computing book profit us 115jb of the act rs. We enclose herewith a working of book profit us 115jb as given in form no. Company has no taxable income but has a positive book profit. 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 form of tax is applicable to all companies, including foreign companies that have established their presence in india. The term book profit has been defined in the respective sections. Nov 27, 2015 the assessing officer, while computing the book profit of a company under section 115j of the incometax act, 1961 has only the power of examining whether the books of account are certified by the authorities under the companies act as having been properly maintained in accordance with the companies act. The impugned order of the tribunal followed its decision in ms. Report under section 115jb of the incometax act, 1961 for. Cbdt amends the report on computation of book profits for ind. 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. The revised section 115jb of the incometax act, 1961 the act prescribes that. Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb 2c adjustment in book profits inserted by fa, 2017.
The concept of indexation while computing the long term capital gain cannot be imported to the computation of book profit us. Faqmat book profit computation for ind as compliant companies. 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. Which have been adopted for preparation of pl ac laid before agm. Minimum alternate tax mat us 115jb of income tax act. 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. First of all calculate tax as per normal provisions of income tax. Based on the matching principle of accountancy, only expenses debited to the profit and loss account that had direct and proximate nexus with the exempt income credited to the profit and loss account should have been added back while computing book profit under mat provisions. The finance act, 2012 has inserted new subsection 5a to provide that section 115jb shall not apply to any income accruing or arising to a company from life insurance business. 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. 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. The profit before oci will first be adjusted for items which are specified in the existing provisions of section 115jb of the act and thereafter, adjustments shall be made for transition amount, if any. Minimum alternate tax mat us 115jb of income tax act, 1961. Capital receipt waiver of loan not chargeable to tax u.
Addition towards waiver of working capital term loan rs. Section 115jb of income tax act, 196, mat, book profit, adjustments to calculate book profits. 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. The assessing officer, while computing the book profit of a company under section 115j of the incometax act, 1961 has only the power of examining whether the books of account are certified by the authorities under the companies act as having been properly maintained in. Aug 24, 2015 section 115jb of income tax act, 196, mat, book profit, adjustments to calculate book profits. The cbdt has clarified that for the purposes of section 115jb of the act, starting point for computing book profits for ind as compliant companies would be profit before other comprehensive income oci item number xiii in part 2 statement of profit and loss of division ii of schedule iii to the companies act, 20. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain companies.
Amount deductible in respect of remuneration of partners under section 40b with effect from the a. 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. Minimum alternate tax part iii computation of book profits. The report has been laid on the floor of the parliament. Calculation of book profits for the purpose of matmaximum alternate tax section 115jb step 1. Similarly for computing book profits us 115jb of the act, the ao added rs. On 1 february 2017, the finance minister presented the finance bill, 2017 the bill which contained a number of.
Calculation of book profits for the purpose of mat section. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. Capital receipt waiver of loan not chargeable to tax us. Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb2c adjustment in book profits inserted by fa, 2017. Advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. Capital receipts and book profits mat no longer a self. When the assessee preferred an appeal before the cita, the cita allowed the appeal of the assessee. Pwc reportinginbrief clarifications on mat for ind as.
The minimum alternate tax mat on companies challenges. 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. 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. The to cannot go beyond audited financial statements of the taxpayer while computing book profits under section 115jb. Calculation of book profits for the purpose of mat. 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. Section 115jb, section 80hhc1b of income tax act, 1961. The entire provision contained under the law clarified whether the remission of loan can be assessed as income under section 411 of the it act and if it cannot be assessed as income under the act whether the same can be considered as addition to the book profit for purposes of minimum alternative tax under section 115jb of the it act. No marginal relief, since the income does not exceed. Under these circumstances, we, therefore, deem it fit and proper to setaside order of commissioner of incometax appeals and to remit matter back to file of assessing officer, who shall revisit working of book profit for purposes of section 115jb in so far as it relates to. 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. Assessing officer erred in adding back transfer pricing.
Nov 28, 2007 29 november 2007 for the purposes of section 115jb, book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under subsection 2, as increased by a the amount of incometax paid or payable, and the provision therefor. Step 2 adjustment to net profit to convert it into book profit which are given under explanation 1 to section 115jb 2. The mat provisions begin with a nonobstante clause, and thus, are a sacrosanct and selfcontained code. Pwc reportinginbrief clarifications on mat for ind as reporters. We also enclose herewith the working of brought forward loss and depreciation which has been reflected in form no. Based on the matching principle of accountancy, only.
Cbdt issues faqs on computation of book profit for levy of. The objective behind mat or minimum alternate tax is to facilitate taxation of zero tax companies, by making such companies liable to pay a minimum tax based on their book profit. Aug 29, 2016 advanced understanding minimum alternate tax concepts computation of book profits in most easiest manner by mr. The minimum alternate tax mat on companies challenges and. 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. Remission of loan is a capital surplus and not distributable. Cbdt amends the report on computation of book profits for. 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. Indeed the statement certifies that the book profit is per section 115jb. A question arises whether the amounts, which can be added or reduced from the book profit as prescribed in section 115j, 115ja and section 115jb are exhaustive or illustrative.
Book profit under section 115jb the purpose of computing. What would be the case if there was a brought forward ltcl from earlier years which could wipe off ltcg during the concerned financial year. All companies that fall under the purview of section 115jb has to file this form 29b report. Under these circumstances, we, therefore, deem it fit and proper to setaside order of commissioner of incometax appeals and to remit matter back to file of assessing officer, who shall revisit working of book profit for purposes of section 115jb in so far as it relates to clause iii of explanation 1 to section 115jb2 of act.
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