Clarification on 115JB

[JOHN SHANNEL]

We made provision for Doubtful debts & Provision for stock for the Ay 10-11 and disallowed the Expenses in MAT & also in Normal Taxation. In AY 11-12 the above said provision has been written off so whether the written off expenses is allowed in MAT and in Normal Taxation. Please clarify.

[CA Rachit Agarwal]

MAT is the tax based on the book profit. Hence now writing off the the provisions for doubtful debts would not impact the book profit.

Hence in our opinion the same cannot be allowed to be deducted from the book profit.

[DEV KUMAR KOTHARI]

For stock valuation there should be lower valuation and not a provision. Anyway both provisions can be considered as provision for diminution in the value of asset to which Caluse (i) under head , as reduced by  apply.

Accordingly amount withdrawn from such provision and credited to P & l a/c can be considered as item (i) under head as reduced by --.

Please read again the provisions of section 115JB with reference to full facts.

AI Summary

Book profit under Minimum Alternate Tax excludes write offs of earlier provisions, limiting deductions in MAT.
Whether write offs of provisions for doubtful debts and stock affect computation under Minimum Alternate Tax (book profit). One view: MAT is based on book profit, so writing off provisions does not reduce book profit and cannot be deducted. Another view: provisions for diminution in asset value (including stock) when withdrawn and credited to P&L may be considered under the statutory item reducing book profit; section 115JB should be examined with full facts.