Minimum Alternate Tax

[amit porwal]

With respect to the provisions contained u/s 115JB of the Income Tax Act, I would like certain clarifications as under: 1) MAT is NOT applicable on a Loss making Co. Is this view correct or not? 2)For computing Book Profits u/s 115JB, the net profit of the company is to be reduced by 'Brought Forward Losses or Unabsorbed Depreciation, whichever is less'. The issues: (a) what is meant by Unabsorbed Depreciation - that of earlier years, or of the current year. My view is that it is the unabsorbed depreciation of earlier years. If not, how come a company have Profits and still have unabsorbed depreciation during current year. Further, as current year depr as debited to the books of account is reduced from Net profit for computing Book Profits under the provisions of 115JB, where would the question of current year unabsorbed depreciation arise? (b) How would this clause be practically operational. Illustration: Net Profit as per Books (in accordance with Companies Act) -12 lacs Depr - 5 Lacs Brought Forward Unabsorbed Depr - Rs 8 Lacs Brought Forward Losses - scenario 1 - Rs 10 Lacs ; Scenario 2 - Rs 4 lacs ; Scenario 3 - Nil What would be book profits in this case ?

[Surender Gupta]

What is the meaning of loss making company you understand? MAT is calculated on the basis of book profit as per balance sheet prepared for ROC purposes not for Income tax purpose. In the book profit certain adjustments have to be made. Therefore, if the adjusted book profit is not positive, there can not by any MAT.

Regarding, unabsorbed depreciaion, there are various case laws on section 115JA, 115JB etc. You may go through the same.

AI Summary

Minimum Alternate Tax: calculated on adjusted book profits and not payable where adjusted book profit is non positive. MAT is computed on adjusted book profits derived from financial statements prepared for statutory purposes; if the adjusted book profit is nil or negative, MAT does not apply. In computing book profit, net profit as per books is reduced by the lesser of brought forward losses or unabsorbed depreciation, where unabsorbed depreciation denotes amounts carried forward from earlier periods rather than current year depreciation already charged in the accounts.