14. Calculation of Book Profits [Explanation to Sec. 115JB(2)]" for the Purpose of MAT[ Assessments of 'Companies']

 

The term Book profit is the key term on which the system of MAT is based.

 

For the purpose of MAT ; Book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2) ; and

 

(i)         It shall be increased by the following if debited earlier.

(a)       the amount of income tax, paid or payable, and the provision therefore ; or

 

(b)       the amount carried to any reserves, by whatever name called ; or

 

(c)        the amount or amounts set aside to make provision for meeting liabilities other than ascertained liabilities, or

 

(d)       the amount by way of provision for losses of subsidiary companies ; or

 

(e)       the amount of dividends paid or proposed ; or

(f)         the amount or amounts of expenditure relatable to any income to which Section 10 or Section IOA or Section lOB or section 11 or section 12 apply.

 

(g)       the amount of depreciation debited to the profit and loss account (w.e.f. Assessment Year 2007-08; or

(h)       the amount of deferred tax and the provision therefore.

(ii)        It shall be reduced by the following if credited earlier.

(a)       the amount withdrawn from any reserve or provision

(b)       the amount of income to which any of the provision of section 10 or IOA or lOB or 11 or Section 12 apply,

(c)        the amount of depreciation debited to profit and loss account (excluding the depreciation on account of revaluation of assets; or

(d)       the amount withdrawn from revaluation reserve and credited to the profit and loss account to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to clause (iia); or

(e)       the amount of loss brought forward or unabsorbed depreciation which ever is less as per Books of accounts ; (discussed in details on next pages) ; or

(f)         the amount of profit of such industrial company for the assessment year commencing on and from the assessment year relevant to previous year in which the said company became a sick industrial company and ending with the assessment year during which the entire net-worth of such company becomes equal to or exceed the accumulated losses.

(g)       the amount of profit derived by a tonnage tax company (Section 1 15VO)

(h)       the amount of deferred tax, if any such amount is credited to the profit and loss accout. [Inserted by the Fiance Act, 2008, w.r.e. from assessment year 2001-02]

Book Profit

The Finance Act, 2008 has clarifed that in case deferred tax has been debited to the Profit and Loss Account, then the book profit shall be increased by the amount of deferred tax and the provisions thereof. In case the amount of deferred tax has been credited to profit and loss account, then the amount of profit given in profit and loss account shall be reduced by the amount of deferred tax.

The term “Net-worth” shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985.

 

The above scheme of calculation of “Book Profits” can be summarized as follows :

 
 

More Topics..on Assessment @ Company
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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'
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Set off and Carry Forward of Losses of Companies : Assessments of 'Companies'
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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
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