Book Profit u/s 115JB

This query is : Resolved

Aalhad Deshmukh (Querist)
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21 December 2010 Sir,

There are different opinions on consideration of FBT and Deferred Tax while calculating Book Profit u/s 115JB.
Whether adding back of FBT and Deferred Tax is justified for the purpose of sec. 115JB?
Are there any case laws supporting the same?

Regards.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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21 December 2010 as per CIRCULAR NO.8/2005 Explanatory Notes on the provisions relating to Fringe Benefit Tax

103. Whether FBT would be allowable deduction while computing book profit under section 115JB?

Ans. FBT is a liability qua employer. It is an expenditure laid out or expended wholly and exclusively for the purposes of the business or profession of the employer. However, sub-clause (ic) of clause (a) of section 40 of the Income tax Act expressly prohibits the deduction of the amount of FBT paid, for the purposes of computing the income under the head profits and gains of business or profession. This prohibition does not apply to the computation of book profit for the purposes of section 115JB. Accordingly, the FBT is an allowable deduction in the computation of book profit under section 115JB of the Income tax Act.

Deferred tax is not an allowable reduction as per retrospective amendment in 115JB.