13. Special Provision For Payment Of Income Tax By Certain Companies Or Minimum Alternate Tax (MAT) On Companies" [ Assessments of 'Companies']

Applicability. See, 115JB is applicable on companies (Including foreign companies) with effect from Assessment year 2001-02.

 

Scheme of MAT. In case of an assessee, being a company, if the income tax payable on the total income computed under this Act (normal provisions) is less than 10% (plus surcharge if total income exceeds Rs. 1I crore and education cess) of its Book Profits, the tax payable for the relevant previous year shall be deemed to be 10% (plus surcharge and education cess) of such book Profits [Section-115JB (1)].

 

Explanation As we all know that a company is liable to pay income tax on its total income. The total income of company may comprise of :

 

(I) Income under the head “House property”                               (Section 22 to 27)

 

(ii) Income under the head ‘Profits and Gains of Business or Profession” (Section 28 to 44)

 

(iii) Income under the head “Capital Gain”                                  (Section 45 to 55)

 

(iv) Income under the head “Income from Other Sources”       (Section 56 to 59)

 

The provisions for calculation of income under each head are provided in the sections indicated above. The total of Income under all the above four heads, after applying the provisions of set off & carry forward of losses etc. is called Gross total income.

 

Out of this Gross total income, deductions. are allowed under section 80 of Income Tax Act. The amount so arrived at is called Total Income of the company and company is liable to pay tax on the total income at prescribed rates.

 

Section 115JB (1) is an overriding section and provides a specific tax rate on a specific figure of total income for every Company. It provides a new concept of ‘Book profits’ which is to be treated as total income of the company and on this figure of Book profits, tax is required to be calculated at 10% plus surcharge and education cess.

 

Tax liability of company

 

(i)         Tax on total income of company as computed as per normal provisions of Income Tax Act; or

 

(ii)        Tax @ 10% on Book profits

 

whichever is higher

 

Credit of tax paid under mat [Section 115JAA (la)]

 

Where any amount of tax is paid under section 1 15JB(1) by an assessee, being a company for the assessment year commencing on the 1St day of April, 2006 and any subsequent assessment year, then, credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section.

 

The amount of credit to be given shall be the difference between tax paid for any assessment year u/s 1 15JA(l) or u/s 1 15JB (as the case may be) and the amount of tax payable by the assessee on its total income.

 

Necessity of preparing Profit & Loss Account in accordance with the provisions of Companies Act, 1956

 

Sub section (2) of Sec. 115 JB means that for the purposes of MAT (i.e. section 1 15JB1 every company shall leave to prepare its profit and loss Account for the relevant previous year as per the provisions of the Companies Act 1956.

 

Points to be kept in mind while preparing Annual Accounts by the Companies

 

While preparing the annual accounts (including profits and loss account)

 

(i)         the accounting policies,

 

(ii)        the accounting standards followed for preparing such accounts including profit and loss account,

 

(iii)        the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the shareholders of the company in its annual general meeting accordance with the provisions of section 210 of the Companies Act,1956. [Proviso to section 115JB]

 

In the absence of above provision the companies can prepare two sets of profits and loss account:

 

1.         One for presenting at Annual General Meeting and second for the purpose of section 11 5JB. It is possible to reduce the profit figure second Profit and Loss Account prepared for Sec. 115JB.

 

2.         Where the company has adopted or adopts the accounting year under the Companies Act, 1956, which is different from the previous year under this Act,

 

(i)         the accounting policies,

 

(ii)        the accounting standards followed for preparing such accounts including profit and loss account,

 

(iii)       the method and rates adopted for calculating the depreciation ; shall correspond to the accounting policies, accounting standards and the method and rate for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year.

 
 
 

More Topics..on Assessment @ Company
Company Taxation : Assessments of 'Companies'
Important Definitions : Assessments of 'Companies'
Types Of Companies : Assessments of 'Companies'
Residential Status Of A Company [Section 6(4)] : Assessments of 'Companies'
Incidence Of Tax—Scope Of Total Income : Assessments of 'Companies'
Types of incomes : Assessments of 'Companies'
Set off and Carry Forward of Losses of Companies : Assessments of 'Companies'
Carry Forward of Losses : Assessments of 'Companies'
Provisions for Losses Of Companies: Assessments of 'Companies'
Carry Forward & Set-Off Losses Of Certain Companies [Section 79]
Deductions Out Of Gross Total Income : Assessments of 'Companies'
Payment Of Tax By Certain Companies Or Minimum Alternate Tax (MAT)
Calculation of Book Profits [Explanation to Sec. 115JB(2)] : Assessments of 'Companies'
Explanation of Certain Items of Statutory Additions : Assessments of 'Companies'
Treatment of Certain Statutory Deductions : Assessments of 'Companies'
Dividend Tax—Special Provisions Relating To Tax On Distributed Profits Of Domestic Companies
Credit of Tax paid under MAT [Section 115JAA(1A)] : Assessments of 'Companies'
   
   
   
   
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