Ø Tax Payable for any assessment year can not be more less than 10% of book profit
Where in the case of a company, the income tax payable on the total income as computed under the income tax act, is less than 10% of its books profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by assessee on such income(book profit) shall be amount of the income tax at the rate of 10%.
Example :- suppose the book profit of a company for A.Y 2007-08 are Rs. 10,00,000, where total income as per provision of income tax act. Is rs. 1,00,000. The tax shall be payable as under :-
1. The total income as computed under income tax act 30% of rs. 1,00,000 30,000.00
2. Tax 10% on book profits of rs. 10,00,000 1,00,000.00
In this case tax payable on total income Rs. 30000 is less than 10% of the book profit Rs. 1,00,000. Hence in this case, deemed total income shall be rs. 10,00,000 and tax payable shall be as under :-
Tax Payable 1,00,000.00
Add: Surchage -
Add: Ed. Cess 3,000.00
Total Tax Payable 1,03,000.00
Ø Allowing Tax Credit in respect of tax paid on deemed income under MAT provision against tax liability in subsequent year (section 115JAA)
Where any amount of tax paid u/s 1115 JB (1)by a company for any A.Year beginning on after 1.4.2006, credit in respect of the taxes so paid for such assessment year shall be allowed on the difference of the tax paid u/s 115JB and the amount of tax payable by the co. on its total income computed in accordance with the other provision of act.
The Amount credit shall be allowed to be carried forward and set off in a year when the tax becomes payable on the total income under computed regulars provision. However, no carry forward shall be allowed beyond the SEVENTH ASSESSMENT YAER immediately succeeding the A.Y in which the tax credit becomes allowable. The sett off in respect of the brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on total income and the tax which would have been payable u/s 115JB for that A.Y . NO credit allowed in respect of MAT paid in any assessment year prior to 2006-07.
However, no intrest shall be allowed on the amount of tax credit available u/s 115JAA.
Example :-
A.Y | Tax Payable as per MAT | Tax Payable as per normal provision | Actual tax to be paid | Tax credit available/s 115JAA (excess, if any of 4 over 3 ) | Tax Credit set off/adjusted | Total Tax credit available |
1 | 2 | 3 | 4 | 5 | 6 | 7 |
2007-08 | 6,73,200 | 3,36,600 | 6,73,200 | 3,36,600 | - | 3,36,600 |
2008-09 | 8,24,000 | 3,70,800 | 8,24,000 | 4,53,200 | - | 7,89,800 |
2009-10 | 13,59,600 | 7,41,600 | 13,59,600 | 6,18,000 | - | 14,07,800 |
2010-11 | 10,30,000 | 14,21,400 | 10,30,000 | - | 3,91,400 | 10,16,400 |
2011-12 | 5,15,000 | 3,09,000 | 5,15,000 | 2,06,000 | - | 12,22,400 |
2012-13 | 6,18,000 | 18,47,820 | 6,25,420 | - | 12,22,400 | Nil |
Other Provision of section 115JB
Ø Profit and Loss of the company to be prepare as per provision of Companies Act.
Every company shall for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of parts II and III of schedule VI to the companies Act, 1956.
Ø Profit and loss account prepared for section 115JB(2) and annual accounts including profit and loss account prepared and placed before AGM should have same accounting polices, standards, etc (proviso to section 115JB(2)
While preparing the annual accounts including profit and loss account.
1. The accounting polices of the co.
2. The accounting standards followed by the co. for preparing such accounts including p & l a/c.
3. The method and rates adopted for calculating the depreciation by the company.
Shall be same as have been adopted for the purpose of preparing such accounts including p & l a/c as laid the co. at its AGM in accordance with on provision of section 210 of the companies Act, 1956.
Ø How to compute Book-Profit ( Explanation to 115JB (1) and (2)
Step 1. The net profit as show in the profit and loss a/c for the relevant previous year , shall be increased(+) by the following, if debited to the profit and loss account.
a. The amount of income tax paid or payable, and the provision therefor; or
b. The amount carried to any reserves by whatever name called; or
c. The amount or amounts set aside to provision made for meeting liabilities, other than ascertained liabilities; or
d. The amount by way of provision for losses of subsidiary co.; or
e. The amount of dividend paid or proposed; or
f. The amount of expenditure relatable to any income which section 10,11,12 applies
g. The amount of depreciation
Step 2. the profit as per p & l a/c shall be reduce (-) by the following.
a. The amount withdrawn from any reserves or provisions, if such amount is credited to the p & l a/c.
b. The amount of income to which any of the prevision section 10,11,12 or 80-IAB applies, if such amount credited in p & l a/c; or
c. The amount of depreciation debited to the p & l a/c (excluding the depreciation on account of revaluation of asset); or
d. the amount of withdrawn from revaluation reserve and credited to the p & l a/c, to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause c above; or
e. the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of accounts. The loss shall, however, not include depreciation. Future the provision of this clause shall not If the amount of brought forward loss or unabsorbed depreciation is Nil; or
f. the amount of profit of sick industrial company for the A.Y commencing from the A.Y relevant to the previous year in which the said co. has become a sick industrial co. under sub section (1) of section 17 of the sick industrial companies Act, 1985 and ending with the A.Y during which the entire net worth of such co. becomes equal to or exceeds the accumulated losses. ( net worth means paid up capital and free reserves. )( free reserve means all reserve credited out of the profit and share premium account but does not include reserve credited out of revaluation of assets, write back of depreciation provision and amalgamations)
g. the amount of profit derived from the activities of a tonnage tax company (section 115VO)
h. the amount of deferred tax, if any such amount is credited to the profit and loss account.
The amount computed after increasing & decreasing the above step 1 and 2, respectively, is know book profit.
0 comments:
Post a Comment