Minimum Alternative Tax
This query is : Resolved
28 April 2011
Whether the MAT credit is allowed only for the baisic MAT paid or also for Surcharge & Education Cess.
Whether prior period expenditure/income should be adjusted or not while computing MAT.
For eg. Profit before Prior period Expenditure is Rs. 100
And Prior period expnse in Rs. 10
Whether shall be paid on Rs. 100 or Rs. 90.
Dear All,
Kindly gice your valuable inputs on the same.
Whether prior period expenditure/income should be adjusted or not while computing MAT.
For eg. Profit before Prior period Expenditure is Rs. 100
And Prior period expnse in Rs. 10
Whether shall be paid on Rs. 100 or Rs. 90.
Dear All,
Kindly gice your valuable inputs on the same.
28 April 2011
As per section 115JB of the Income tax act, 1961, MAT Credit is allowed including the amount of EC and SHEC. As per this section, only the items specified are either included or excluded while computing MAT. In those items, prior period items are not mentioned. Hence, MAT shall be calculated after prior period expense. i.e on Rs. 90 only,
28 April 2011
Hello Kishore,
1. MAT credit is allowed u/s. 115JA of the Act. And it says credit shal b allowed on the of the amount of tax paid u/s. 115JB of the act.
And 115JB specifies only 18.5%(from AY 2012-13)
It nowhere talks about SC & Cess therefore i am of the view it would on basic rate.
Sc & Cess is governed by Finance Act.
2. sec 115JB is a presumptive section and has to be strictly read as it is.
It talks about means the "net profit as shown in the profit and loss account for the relevant previous year"
Therefore again i m of the view that it shud b on Rs. 100/-.
1. MAT credit is allowed u/s. 115JA of the Act. And it says credit shal b allowed on the of the amount of tax paid u/s. 115JB of the act.
And 115JB specifies only 18.5%(from AY 2012-13)
It nowhere talks about SC & Cess therefore i am of the view it would on basic rate.
Sc & Cess is governed by Finance Act.
2. sec 115JB is a presumptive section and has to be strictly read as it is.
It talks about means the "net profit as shown in the profit and loss account for the relevant previous year"
Therefore again i m of the view that it shud b on Rs. 100/-.
30 April 2011
I agree with Mr Kishore, MAT Credit shall be for full value i.e. Including Cess. Cesses are integral part of all Tax liabilities including MODVAT Credits and Custom Credits.
About Other Point, Net profit shown under Companies Act shall be considered i.e. after Prior Period Expenditure. These are only accounting terminologies i.e. Profit for the year or profit for the relevant year but spirit remains that MAT has to be paid on net profit.
Just to make you realise, Mr Saurav, would you still hold your ground if There is prior period Income.
About Other Point, Net profit shown under Companies Act shall be considered i.e. after Prior Period Expenditure. These are only accounting terminologies i.e. Profit for the year or profit for the relevant year but spirit remains that MAT has to be paid on net profit.
Just to make you realise, Mr Saurav, would you still hold your ground if There is prior period Income.
01 May 2011
U might be correct Pankaj, but i would request you to once have a look at the language of the section 115JA.
wherein it specifically talks about the tax paid u/s. 115JB and not tax paid under the Act.
wherein it specifically talks about the tax paid u/s. 115JB and not tax paid under the Act.
03 August 2024
### MAT Credit and Adjustments
**1. MAT Credit on Basic MAT Paid:**
MAT credit is indeed allowed under Section 115JAA of the Income Tax Act. However, the credit is available only on the MAT paid under Section 115JB, and not on the surcharge or cess. Here’s a detailed explanation:
- **Section 115JAA:** This section provides for the MAT credit. The credit is allowed for the MAT paid in earlier years and is available against the normal tax payable in the subsequent years.
- **Basic MAT Rate:** The MAT credit is computed based on the MAT paid, which is 18.5% (or as specified in the relevant Finance Act) of the book profit under Section 115JB.
- **Surcharge and Cess:** As per Section 115JAA and Section 115JB, the MAT credit is calculated only on the basic MAT rate. The surcharge and cess paid under Section 115JB are not eligible for credit under Section 115JAA.
**2. Prior Period Expenditure/Income:**
- **Profit Before Prior Period Items:** Under Section 115JB, the MAT is computed on the net profit as per the profit and loss account. Prior period expenditure/income should be adjusted as they affect the profit and loss account.
- **Adjustment for Prior Period Items:** MAT is computed on the profit before prior period items. Therefore, for computing MAT, you should consider the profit before prior period expenditure. In your example:
- **Profit Before Prior Period Expenditure:** ₹100
- **Prior Period Expenditure:** ₹10
The profit for MAT calculation should be ₹100, not ₹90. This is because MAT is computed on the profit as per the P&L account before adjustments for prior period items.
### Summary:
1. **MAT Credit:** The credit under Section 115JAA is only on the basic MAT paid under Section 115JB and not on the surcharge or cess.
2. **Prior Period Expenditure:** MAT is calculated on the profit before adjustments for prior period expenditure/income. Therefore, for MAT purposes, you should use the profit before such adjustments.
The MAT credit and its application should be strictly in accordance with the provisions laid down in the Income Tax Act and the Finance Act. For precise calculations and adjustments, always refer to the latest guidelines and consult with a tax professional if needed.
**1. MAT Credit on Basic MAT Paid:**
MAT credit is indeed allowed under Section 115JAA of the Income Tax Act. However, the credit is available only on the MAT paid under Section 115JB, and not on the surcharge or cess. Here’s a detailed explanation:
- **Section 115JAA:** This section provides for the MAT credit. The credit is allowed for the MAT paid in earlier years and is available against the normal tax payable in the subsequent years.
- **Basic MAT Rate:** The MAT credit is computed based on the MAT paid, which is 18.5% (or as specified in the relevant Finance Act) of the book profit under Section 115JB.
- **Surcharge and Cess:** As per Section 115JAA and Section 115JB, the MAT credit is calculated only on the basic MAT rate. The surcharge and cess paid under Section 115JB are not eligible for credit under Section 115JAA.
**2. Prior Period Expenditure/Income:**
- **Profit Before Prior Period Items:** Under Section 115JB, the MAT is computed on the net profit as per the profit and loss account. Prior period expenditure/income should be adjusted as they affect the profit and loss account.
- **Adjustment for Prior Period Items:** MAT is computed on the profit before prior period items. Therefore, for computing MAT, you should consider the profit before prior period expenditure. In your example:
- **Profit Before Prior Period Expenditure:** ₹100
- **Prior Period Expenditure:** ₹10
The profit for MAT calculation should be ₹100, not ₹90. This is because MAT is computed on the profit as per the P&L account before adjustments for prior period items.
### Summary:
1. **MAT Credit:** The credit under Section 115JAA is only on the basic MAT paid under Section 115JB and not on the surcharge or cess.
2. **Prior Period Expenditure:** MAT is calculated on the profit before adjustments for prior period expenditure/income. Therefore, for MAT purposes, you should use the profit before such adjustments.
The MAT credit and its application should be strictly in accordance with the provisions laid down in the Income Tax Act and the Finance Act. For precise calculations and adjustments, always refer to the latest guidelines and consult with a tax professional if needed.
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