CA Pinky Agarwal Page 1

Illustrations on Minimum Alternate Tax (MAT) under section 115JB

The net profit of ABP Ltd. as per Profit & Loss Account for the previous year 2014-15 is Rs.100 lakhs after debiting/crediting the following items:

Question No 1

(i) Provision for income-tax: Rs.15 lakhs (ii) Provision for deferred tax: Rs.8 lakhs (iii) Proposed Dividend: Rs.20 lakhs (iv) Depreciation debited to Profit & Loss Account is Rs.12 lakhs. This includes depreciation on revaluation

of asset to the tune of Rs.2Iakhs. (v) Profit from unit established in Special Economic Zone: Rs.30 lakhs (vi) Provision for permanent diminution in value of investments: Rs.2 lakhs Brought forward losses and unabsorbed depreciation as per books of the company are as follows: Previous Brought forward loss Unabsorbed Depreciation year (Rs. in lakhs) (Rs. in lakhs) 2011-12 2 5 2012-13 - 3 2013-14 10 2 Compute book profit of the company under section 115JB for Assessment Year 2015-16.

Question No 2

The net profit as per the profit and loss account of XYZ Ltd., a resident company, for the year ended 31.3.2015 is Rs.190 lacs arrived at after making the following adjustments: (i) Depreciation on assets Rs. 100 lacs (ii) Reserve for currency exchange fluctuation Rs. 50 lacs (iii) Provision for tax Rs. 40 lacs (iv) Proposed dividend Rs.120 lacs Following further information are also provided by company: (a) Net profit includes Rs.10 lacs received from a subsidiary company. (b) Provision for tax includes Rs.16 lacs of tax payable on distribution of profit and of Rs.2 lacs of interest

payable on income-tax. (c) Depreciation includes Rs.40 lacs towards revaluation of assets. (d) Amount of Rs.50 lacs credited to P & L account was drawn from revaluation reserve. (e) Balance of profit and loss account shown in balance sheet at the asset side as at 31.3.2014 was Rs.30

lacs representing unabsorbed depreciation. Compute the income of the company for the year ended 31.3.2015 liable to tax under MAT.

CA Pinky Agarwal Page 2

Question No 3

Hyper Ltd., engaged in diversified activities, earned a net profit of Rs.14,25,000 after debit/credit of the following items to its profit and loss account for the year ended on 31.3.2015: (a) Items debited to Profit and Loss Account Rs. Expenses on Industrial Unit exempt under section 10A 2,10,000 Provision for Loss of Subsidiary 70,000 Provision for Sales Tax Demand (paid before due date) 75,000

Provision for Wealth Tax Demand 90,000 Provision for Income Tax Demand 1,05,000 Expenses on purchase/sale of equity shares 15,000 Depreciation 3,60,000 Interest on deposit credited to buyers on 31.3.2015 for advance received From them, on which TDS was deposited on 31.7.2015 90,000

(b) Items credited to Profit and Loss Account Income on Industrial Unit exempt under section 10A 2,70,000 Profit from 100% EOU under section 10B 60,000 Long term capital gain on sale of equity shares on which securities Transaction tax was paid 3,60,000 Income from units of UTI 75,000

The company provides the following additional information: (i) Depreciation includes Rs.1,50,000 on account of revaluation of fixed assets. (ii) Depreciation allowable as per Income-tax Rules is Rs.2,80,000. (iii) Brought forward Business Loss/Unabsorbed Depreciation: F.Y. Amount as per books Amount as per Income-tax Loss Depreciation Loss Depreciation 2010-2011 2,50,000 3,00,000 2,00,000 2,50,000 2011-2012 Nil 2,70,000 1,00,000 1,80,000 2012-2013 3,50,000 3,15,000 1,20,000 2,10,000

You are required to: (i) compute the total income of the company for the assessment year 2015-16 giving the reasons for

treatment of items and (ii) examine the applicability of section 115JB of the Income-tax Act, and compute book profit and the tax

credit to be carried forward.