How to Calculate Tax Liability Of Company?

              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
18.5% of Book Profits
Add :- Surcharge @5% or 2%  (if Book Profit > 1 crore)
Less :- Marginal Relief
Add :- Education Cess @ 3%
Minimum Alternate Tax

Calculation of Book Profit
Net profit as P& L a/c
XXX
Add :- P3RID3E
P1-Provision for uncertain liabilities (provision for gratuity ,provision for leave encashment /salary ,provision for contingency liability etc )NOTE -2
XXX
P2– Provisions for dim mutation in value of assets (provision for Investment fluctuation ,provision for impairment of assets ) 
XXX
P3– Provision for loss of subsidiary Co (even actual loss of subsidiary is disallowed )
XXX
R-Transfer to Reserves (As this is not an expenses )
XXX
I-                   Income tax & Interest on Income Tax  (i.e. provision of Income Tax of Current year & its Interest )
XXX
D1-Deferred Tax (As part of Income Tax )
XXX
D2– Dividend & Distribution Tax
XXX
D3 – Depreciation on revaluation  
XXX
E- Expenses related to Income exempt u/s 10 & 12 (except section 10 (38 )
XXX
XXX
XXX
Less :- DPRES
D- Deferred Tax
XXX
p- Amount Withdrawn  from provision & reserve (Note 3 )
XXX
R- Amount withdrawn  from  revaluation reserve (Note 4 )
XXX
E – Incomes exempt u/s 10 & 12 (Except 10 (38)
XXX
S- Profit of Sick Industrial Unit (Net ) (during the period of sickeness )
XXX
(XXX)
Less :- Brought forward business loss (as per a/c ‘s )
XXX
Unabsorbed Depreciation (as per a/c’s )
XXX
(XXX)
                                           Book Profit
XXX


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 )


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