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

The following amounts are to be REDUCED while computing Book Profits:- (i) the amount withdrawn from any reserves or provisions if any such amounts is credited to the statement of profit and loss account; However, any amount withdrawn from any reserve or provision, credited to profit loss account, shall be reduced only if the reserve or provision was created by debiting the profit and loss account. (ii) The following incomes shall not be liable to MAT and shall be reduced while computing book profits if these are credited to statement of profit loss account : Income exempt under section 10 except section 10(38) i.e. LTCG exempt under section 10(38) for the A.Y. 2005-06 and 2006-07; Income exempt under section 11 Section 12 (iia) the amount of depreciation debited to the statement of profit and loss (excluding the depreciation on account of revaluation of assets) (iib) the amount withdrawn from revaluation reserve and credited to the statement of profit and loss , to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause (iia) (iic) Share of profit from an AOP/BOI on which no income tax is payable in accordance with the provisions of section 86 (iid) the amount of income accruing or arising to 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. Section 115A if such income is credited to the statement of profit and loss and the income-tax payable thereon in accordance with the provisions of this Act, other than the provisions of this Chapter, is at a rate less than 15%. For Example , In case of foreign companies, divided is taxable 20% as per section 115A. The adjustment in respect of dividend received by a foreign company on its investment in India and Expenditure relatable thereto is required to be made for the purposes of calculation of book profit in case the tax payable on such dividend income is less than 15% on account of concessional tax rate provided in the applicable DTAA. In other words - Income to foreign company from interest, dividend, royalty or technical fees chargeable to tax at the rate specified in Chapter XII or capital gain arising on transactions in securities, if income tax payable in respect of these incomes under normal provisions (other than provisions governing MAT) is less than 15%. (iie) Notional gain on the units of business trust - The amount representing (A) notional gain on transfer of a capital asset, being share of a special purpose vehicle (SPV) to a business trust in exchange of units allotted by that trust referred to in section 47(xvii); or (B) notional gain resulting from any change in carrying amount of said units; or (C) gain on transfer of units referred to in section 47(xvii), In other words - The amount representing notional gain on transfer of a capital asset being share of special purpose vehicle to a business trust in exchange of units alloted by the trust or notional gain from change in carrying amount of such units or gain on transfer of such units, if credited to the statement of profit and loss. (iif) the amount of loss 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 loss 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. In other words - the Amount of actual loss on transfer of units of business trust ( SP of units Cost of shares of SPV) (iig) The amount of income by way of royalty in respect of patent chargeable to tax u/s 115BBF (Inserted by FA, 2016 , w.e.f. 1-4-2017) (iih) the aggregate amount of unabsorbed depreciation and loss brought forward in case of a - (A) Company and its subsidiary and the subsidiary of such subsidiary, where, the Tribunal, on an application moved by the CG u/s 241 of the companies Act, 2013 has suspended the BOD of such company and has appointed ne directors who are nominated by the CG under section 242 of the said act. (a company shall be subsidiary of another company, if such other company holds more than half in the nominal value of equity share capital of the company) (B) Against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating authority u/s 7 or 9 or 10 of the Insolvency and Bankruptcy Code, 2016 . (iii) the amount of loss brought forward or unabsorbed depreciation , whichever is less as per books of account in case of a company other than the company referred to in clause (iih). The loss shall not include depreciation; if either the figure of brought forward loss or unabsorbed depreciation is NIL , no deduction will be allowed from the book profit of the relevant year; (iv) the amount of profits of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company under section 17(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. (v) the amount of deferred tax , if any such amount is credited to the statement of profit and loss. (vi) The amount of profit derived from the activities of a tonnage tax company ( Section 115VO ) NOTES: The company can carry forward losses and depreciation to the extent it could have carried forward had section 115JB not there. The company to which MAT applies shall be liable to pay advance tax, interest under sections 234A, 234B and 234C. The company shall also be liable to pay penalty for concealment of income.