Book profit as per section 115jb

Faqmat book profit computation for ind as compliant companies. 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. Minimum alternate taxsection 115jbhow to compute arthikdisha. Calculation of book profits for the purpose of mat section. 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. Book profit refers to the net profit as shown in the profit and loss account. 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. Capital receipts and book profits mat no longer a self. Section 115jaa provided for allowance of credit of tax paid by the companies under section 115ja 115jb 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. Indeed the statement certifies that the book profit is per section 115jb. Faqs for computing book profits under mat for indas. 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.

Profit arising on sale of agricultural land, which does not fall in the category of capital asset as defined under sec. 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. This books profit meaning is provided in explanation 1 of subsection 2 of section 115jb. 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, 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.

Provision for gratuity can be deducted while computing book. 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. Brought forward business losses can be adjusted even after. For the purposes of this section, book profit means the 77 profit.

The taxpayer reduced inr 25 being lower of unabsorbed loss and unabsorbed depreciation in the tax computation under section 115jb of the act. A tax officer does not have the power to recompute the. Apr 21, 2016 this books profit meaning is provided in explanation 1 of subsection 2 of section 115jb. Mat is calculated as 15% of the book profit of the tax assesse. The description should be obtained before filing the income tax. Then, the tribunal referred to the order passed in the case of essar teleholdings ltd. Tax on bookprofit our company while computing bookprofit under section 115jb compared the aggregate of loss and brought forward depreciation as per books of account and claimed the lesser of the two as deduction. 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. For computation of book profit, one may proceed as follows. Cbdt circular of clarifications faqs on computation of s.

Mat provisions require book profit off to the lower number. Section 115jb special provision for payment of tax by certain companies. It is increased and decreased by the following items. 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. Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb2c adjustment in book profits inserted by fa, 2017. 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. 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. 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. Calculation of book profits for the purpose of mat section 115jb. Step 1 find out net profit before other comprehensive income oci as per statement of profit and. Book profit of the company computed as per the provisions of section 115jb is rs.

Mar 11, 2020 the addition made to the book profits us. 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. No marginal relief, since the income does not exceed. 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. Brochure report title goes here section title goes here. 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. What will be the tax liability of essem minerals pvt. Assessing officer erred in adding back transfer pricing. On 1 february 2017, the finance minister presented the finance bill, 2017 the bill which contained a number of. The bill received the presidents assent on 31 march 2017 and became effective on 1 april 2017. Calculation of book profits for the purpose of mat. Step 1 find out net profit before other comprehensive income oci as per statement of profit and loss of the company. 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.

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. Provision of mat minimum alternate tax for payment of. Cbdt amends the report on computation of book profits for. 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. Complexity in computing the book profit under mat provisions. However, for computing the eligible amount for the succeeding year, the taxpayer has adjusted inr 25 against. Jul 26, 2017 section 115jb of the act already provides for adjustments for dividend for computation of book profit. 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. 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. Profit from sale of agricultural land would not be included for purpose of computing book profit under section 115jb.

Cbdt clarifies on computation of book profit for the. 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. Conundrum on brought forward loss treatment under mat taxsutra. 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. Conundrum on brought forward loss treatment under mat. Profit as per profit and loss account in the current year. While calculating the computation of book profit under section 115jb, ao. 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. Cbdt clarifies on computation of book profit for the purposes. Jul 29, 2016 the income tax act contains a special mechanism i.

Section 115jb provides for certain adjustments for determining book profit, mainly. Calculation of mat credit applicability of minimum alternate tax. 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. The explanation appended to section 115jb of the act provides certain items which if debited to the profit and loss account can be. 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. 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. 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. Starting point for computing book profits for ind as compliant companies shall be profit before other comprehensive income. Why we chose the topic the corporate assessees, irrespective of their income level are. The mat provisions begin with a nonobstante clause, and thus, are a sacrosanct and selfcontained code. 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. 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. Section 115jb, incometax act, 1961 2015 7special provision for payment of tax by certain companies.

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. Meena, accountant member these three appeals emanate. Minimum alternate tax on companies section 115jb under. Under existing rules, book profit is calculated as per section 115jb of the. Profit from sale of agricultural land is not book profit in 115jb. 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. Broadly speaking book profit in context of mat means profit as shown in the profit and loss account adjusted by additions and deductions as provided in respective sections that is section115j, section115ja and section 115jb. Profit from sale of agricultural land is not book profit. Tax liability as per the mat provisions are given in sec 115jb18. 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. 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. The procedure for the computation of book profit as per.

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. 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. First of all calculate tax as per normal provisions of income tax. Income tax computed as per provision of section 115jb of income tax act. 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.

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. Income tax payable, if any calculated, as per normal provisions of it act. Book profit under section 115jb the purpose of computing. 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. 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. Income tax minimum alternate tax mat and alternate minimum tax amt 05c section 115jb 2c adjustment in book profits inserted by fa, 2017. 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. Prior period expenses allowable as a deduction from book. Cbdt amends the report on computation of book profits for ind. Book profit us 115jb to be reduced by exempted capital gain q. The finance act, 2017 with the intent of providing a framework i to bring the adjustments being recorded on the transition. Book profit us 115jb to be reduced by exempted capital gain. 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.

For the purposes of this section, book profit means the net profit as shown in the. 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. Amount deductible in respect of remuneration of partners under section 40b with effect from the a. Section 115jaa provided for allowance of credit of tax paid by the companies under section 115ja115jb in subsequent years. Section 115jb of the act already provides for adjustments for dividend for computation of book profit. 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. The assessing officer ao compared each years bookloss and unabsorbed depreciation and adopted lesser of the two as eligible. 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. 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. Computation of book profit under sec 115jb income tax forum. Cbdt issues faqs on computation of book profit for levy of.