addition of disallowance u/s 14A in the book profit for computing income under MAT

[Lalit Kishore]

While completing the assessment for A/Y 2008-09, the assessing officer made addition to the income u/s 14A, however the income under MAT was higher than the regular income hence the tax was calculated as per the provisions of section 115JB. However, whiile computing the tax on book profit, the book profit was increased by the disallowance u/s 14A. Is the action on part of AO correct as this was a disallowance after assessment and not as per books.

AI Summary

Disallowance Under Section 14A Cannot Be Added to Book Profit for MAT Calculation, Says Response on Assessment Query An assessing officer added disallowance under section 14A to the book profit while computing income under Minimum Alternate Tax (MAT) for the assessment year 2008-09, leading to a query about the correctness of this action. One response highlighted that MAT is calculated based on book profit as per the Companies Act, 1956, and disallowance under section 14A should not reduce MAT credit. Another response argued that section 14A applies only to income computation under Chapter IV and cannot be extended to MAT provisions under section 115JB, which is a separate code. Expenses related to exempt income should not be added back for MAT purposes.