TaxTMI 
TaxTMI 
Clarifications on computation of book profit for the purposes of levy of Minimum Alternate Tax (MAT) under section 115JB of the Income-tax Act, 1961 for Indian Accounting Standards (Ind AS) compliant companies
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....l Government notified the Indian Accounting Standards (Ind AS) which are converged with International Financial Reporting Standards (IFRS) vide Companies (Indian Accounting Standards) Rules, 2015. Consequently, the Finance Act, 2017, has amended the provisions of section 115JB of the Income-tax Act, 1961 ('the Act') for Ind AS compliant companies w.e.f. 1st day of April, 2017 (A.Y. 2017-18). The Central Board of Direct Taxes ('the Board ') has received representations from various stakeholders seeking clarifications on certain issues arising therefrom. The matter was referred to an expert committee. The Committee after duly considering the representations from stakeholders has recommended issuance of clarifications by way of FAQs....
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....compliant companies? Whether Profit before other comprehensive income [Item number XIII in Part 2 (Statement of Profit and Loss) of Division II of Schedule III to the Companies Act 2013] or Total Comprehensive Income(including other comprehensive income)[Item number XV in Part 2 (Statement of Profit and Loss) of Division II of Schedule III to the Companies Act 2013] shall be the starting point? Answer: Starting point for computing Book profits for Ind AS compliant companies shall be Profit before other comprehensive income [Item number XIII in Part 2 (Statement of Profit and Loss) of Division II of Schedule III to the Companies Act 2013]. Question 3: As per Explanation to Section 115 JB (2C) of the Act, the convergence date is d....
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....se, the first time adoption adjustments as of 31^st day of March 2016 should be considered [i.e. the start of business on 1^st day of April 2016 (or, equivalently, close of business on 31^st day of March 2016)] for computation of MAT liability for previous year 2016-17 (Assessment year 2017-18) and thereafter. Question 4: As per Indian GAAP, proposed dividend was required to be recognized in the financial statements for the year for which it pertained to even though these were declared in the subsequent year. Section 115JB of the Act already provides for adjustments for dividend for computation of book profit. As per Ind AS, the amount of proposed dividend (including dividend distribution taxes) is required to be recognized in the ....
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.... for diminution in the value of any assets other than the ones mentioned in Question Number 1 above, shall not be considered for the purpose of computation of the Transition Amount. Therefore, adjustments relating to provision for doubtful debts shall not be considered for the purpose of computation of the transition amount. Question 7: Under Section 115 JB of the Act, transition amount has been defined as the amount or the aggregate of the amounts adjusted in the 'Other Equity' (excluding capital reserve and securities premium reserve) on the convergence date. Whether changes in share application money on reclassification to 'Other Equity' would form part of the Transition Amount? Answer: Share application money pending allotment whi....
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....f the revaluation or the amount after adjustment of the depreciation on the revaluation amount? Answer: The book profit of the previous year in which the items of PPE are retired, disposed, realised or otherwise transferred shall be increased or decreased, as the case may be, by the revaluation amount after adjustment of the depreciation on the revaluation amount relatable to such asset. This has been explained by an illustration as under: Particulars Erstwhile Indian GAAP Ind-AS (considering fair value/revaluati on adjustment on PPE) Fair Value/Revaluation Adjustments and corresponding depreciation WDV/Deemed Cost as on 1 April 2015 100 1000 900 Depreciation @ 10% for F.Y. 2015- 1....
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....or unabsorbed depreciation. Question 13: How Capital Reserves or Securities Premium existing as per old Indian GAAP reclassified to Retained Earnings/ Other Reserves on Convergence date be treated for MAT purpose. Answer: The Capital Reserves or Securities Premium existing as on the convergence date as per the erstwhile Indian GAAP which are reclassified to Retained Earnings/ Other Reserves under Ind AS and vice versa, shall not be considered for the purposes of Transition Amount. It is further clarified, that even after such reclassifications, the amount of revaluation reserve shall continue to be considered as revaluation reserve for the purposes of computation of book profit and shall also include transf....