MAT - Computation of Book Profits - Additions - Explanation 1 to Section 115JB(2) - Income Tax - Ready Reckoner - Income Tax

MAT - Computation of Book Profits - Additions - Explanation 1 to Section 115JB(2) For the purposes of this section, book profit means the profit as shown in the statement profit and loss account for the relevant previous year prepared as per section 115JB(2) above, as increased by the following amounts if following amounts are DEBITED TO PROFIT LOSS ACCOUNT a. the amount of income tax paid or payable, and the provision thereof; TO BE ADDED NOT TO BE ADDED Income Tax Wealth Tax [ Such tax is abolished ] DDT under section 115-O Securities transaction Tax Interest under Income tax Act. Interest under Wealth Tax Act and other Acts Surcharge and Education Cess Penalties Commodities Transaction Tax [ Section 36(1)(xvi) ] b. the amounts carried to any reserves by whatever name called (other than the reserve specified u/s 33AC ) Transfer to reserves as per any statue is to be added back. Excess provisions are reserves and are to be added back. Transfer to reserves under section 10AA , 80IA , etc. shall be added back. c. the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; (that means provisions made to meet unascertained liabilities); TO BE ADDED NOT TO BE ADDED Provision for leave encashment/ warranty on adhoc basis Provision for leave encashment/ warranty on scientific basis Provision for gratuity on adhoc basis Provision for gratuity on basis of Actuary Provision for losses, contingencies Bad Debts written off. d. the amount by way of provision for losses of subsidiary companies; Even the actual loss of the subsidiary company debited to Profit Loss Account shall be added back for computing book profits. e. the amount or amounts of dividend paid or proposed; f. the amount or amounts of expenditure relatable to any income to which section 10 (other than provisions contained in section 10(38) thereof) or section 11 or section 12 apply: The expenditure incurred on following income is to be added back: Income exempt under section 10 except 10(38) or Income exempt under section 11 12 fa. Share of member of an association of persons or body of individuals in the income of the association or body [ Section 86 ] the amount or amounts of expenditure relatable to, income, being share of the assessee in the income of an association of persons or body of individuals, on which no income-tax is payable in accordance with the provisions of section 86; or fb. the amount of expenditure relatable to income accruing or arising to an assessee, being a foreign company , from,- (A) the capital gains arising on transactions in securities; or (B) the interest, dividend, royalty or fees for technical services chargeable to tax at the rate or rates specified in Chapter XII (i.e. Determination of Tax in Special Cases), if the income-tax payable thereon in accordance with the provisions of this Act, other than the provisions of this Chapter, if tax rate on above income is less than MAT rate 15%. fc. the amount representing notional loss on transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by the trust referred to in section 47(xvii) or the amount representing notional loss resulting from any change in carrying amount of said units or the amount of loss on transfer of units referred to in section 47(xvii). fd. the amount or amounts of expenditure relatable to income by way of royalty in respect of patent chargeable to tax under section 115BBF (i.e. Tax on Income From Patent). (Inserted by FA, 2016 , w.e.f. 1-4-2017) g. the amount of depreciation (i.e. entire depreciation including depreciation on revalued assets). h. the amount of deferred tax and provision thereof . i. the amount or amounts set aside as provision for diminution in the value of any asset, j. the amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such asset k. Any amount of Gain on transfer of units referred to in section 47(xvii) (i.e. any transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust to the transferor) (Applicable from the assessment year 2016-17) the amount of gain on transfer of units referred to in section 47(xvii) computed by taking into account the cost of the shares exchanged with units referred to in the said clause or the carrying amount of the shares at the time of exchange where such shares are carried at a value other than the cost through profit or loss account, as the case may be; The following shall be added back while computing the Book profits: Provision for bad and doubtful debts as it amounts to provision for diminution in value of assets, namely, debtors. Provision for diminution in value of any investment or asset as per AS-13 / AS-28 . the amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such asset, (if such amount is not credited to the Profit Loss Account)