MAT Treatment

[Guest]

Dear Experts,

                       I want to know that how we can show MAT effect in the books of accounts. and how we can utilize MAT entitlement in this current year. please reply...

Vikram Singh

[CAGOPALJI AGRAWAL]

It is shown as amount recoverable. On the face of P&L, it is shown as negative provision under the caption MAT credit entitlement.

[Guest]

Sir,

   I have previous three year MAT credit entitlement which is show in loan and advance (Assets) heading So can I utilies it. if yes, then how. please guide me sir.

Vikram Singh 

[CAGOPALJI AGRAWAL]

If your normal tax liability is greater than current year MAT, then you can set off the difference liability with carried forward MAT credit. Suppose your normal tax liability for the current year is Rs. 100/- and MAT for the current year is 75/- then you can set off extra liability of Rs. 25 (100-75) from carried forward MAT credit if your BF mat is Rs. 25/- or more. If it is less than 25/- say Rs. 20/- then you can set off Rs.20/- and pay current tax as 80/

AI Summary

MAT credit entitlement can be carried forward and set off against excess normal tax liability over current year MAT. MAT credit entitlement is recognised as an asset (often under loans and advances) and shown on the P&L as a negative provision under the caption MAT credit entitlement. When current year normal tax liability exceeds current year MAT, the excess may be set off against carried forward MAT credit to the extent of the available balance, reducing the carried forward entitlement and leaving any remaining normal tax payable.