Special provisions for payment of tax
by certain companies(Assessment of companies )
Section 115 JB Minimum Alternate Tax
The provision of sec 115 JB shall apply only in respect of company assessee & not for others .The objective of Section 115 JB is to ensure collection of minimum amount of tax in case of companies which has book profits but do not have taxable income .This satiation arises as a result of such companies availing exemptions , incentives & deductions under various provisions of the Act . the provisions of section 115 JB has been enacted to restrict the availability of certain exemptions ,incentives & deductions to companies so as to collect a minimum amount of tax Accordingly , tax liability of a company is calculated as follows :-
Normal tax (as per normal provisions of Income Tax )
Minimum Alternate Tax
Computation Of Minimum Alternate Tax
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18.5% of Book Profits
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Add :- Surcharge @5% or 2% (if Book Profit > 1 crore)
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Less :- Marginal Relief
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Add :- Education Cess @ 3%
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Minimum Alternate Tax
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Calculation of Book Profit
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Net profit as P& L a/c
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XXX
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Add :- P3RID3E
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P1-Provision for uncertain liabilities (provision for gratuity ,provision for leave encashment /salary ,provision for contingency liability etc )NOTE -2
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XXX
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P2– Provisions for dim mutation in value of assets (provision for Investment fluctuation ,provision for impairment of assets )
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XXX
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P3– Provision for loss of subsidiary Co (even actual loss of subsidiary is disallowed )
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XXX
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R-Transfer to Reserves (As this is not an expenses )
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XXX
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I- Income tax & Interest on Income Tax (i.e. provision of Income Tax of Current year & its Interest )
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XXX
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D1-Deferred Tax (As part of Income Tax )
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XXX
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D2– Dividend & Distribution Tax
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XXX
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D3 – Depreciation on revaluation
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XXX
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E- Expenses related to Income exempt u/s 10 & 12 (except section 10 (38 )
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XXX
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XXX
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XXX
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Less :- DPRES
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D- Deferred Tax
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XXX
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p- Amount Withdrawn from provision & reserve (Note 3 )
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XXX
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R- Amount withdrawn from revaluation reserve (Note 4 )
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XXX
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E – Incomes exempt u/s 10 & 12 (Except 10 (38)
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XXX
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S- Profit of Sick Industrial Unit (Net ) (during the period of sickeness )
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XXX
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(XXX)
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Less :- Brought forward business loss (as per a/c ‘s )
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XXX
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Unabsorbed Depreciation (as per a/c’s )
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XXX
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(XXX)
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Book Profit
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XXX
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Note 1 :- Net profit should be calculated as per P&L a/c’s prepared in accordance with schedule VI of companies act ,1956 .Once NP is calculated as per the schedule VI the A.O cannot challenge the NP . Only those adjustment can be done which are prescribed by the law (i.e P3RID3E & DPRES )