09 September 2010
How do we ascertain unabsorbed depreciation for determining book profit for the purpose of MAT calculation. Can a Company having credit balance in profit & loss A/c (Balance Sheet) be said to have unabsorbed depreciation?
12 September 2010
Nilesh Shah writes: nilesh35@yahoo.com
Though the question is short; the answer is elaborate.
Proviso to clause (iii) of sub-section (2) of section 115JB reads:
The amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account.
It has been clarified that loss however shall not include depreciation. In this case, brought forward loss and unabsorbed depreciation, as per income-tax shall have no relevance. Further, where the value of the amount of either loss brought forward or unabsorbed depreciation is ‘nil’, no amount on account of such loss brought forward or unabsorbed depreciation would be reduced from the book profit.
The application of the provision is illustrated with the help of the following e.g.,
A.Y Profits/loss Profits/ before depre loss bef ciation and dep reciatio as ore dep per books reciat ion & Dep as per IT.
A.Y 2007-08 Loss 450000 Loss 100000 Dep 150000 Dep 500000
A.Y 09-10 Loss 1500000 Loss 1200000 Dep 300000 Dep 500000
A.Y 10-11 Profits 1500000 profits 1200000 Dep 300000 Dep 1000000
For the purpose of calculationg book profit:
A.Y 2007-2008 Book loss 450000 Depreciation 150000
Above both will be carried forward.
A.Y 2008-2009 Profits 750000 Less: Depre 300000 -------- 450000 Less: brought forward Loss or depreciation, Whichever is less 150000 Book profit for sec 115JB 300000
Amount to be carried forward Business loss 450000 Depreciation Nil
A.Y 00-10 Loss 1500000 Depreciation 300000 Book profits Nil
Amount to be carried forward Business loss 1950000 Depreciation 300000
A.Y 10-11 Profit 1500000 Less:Depreciation 300000 -------- 1200000 Less: business loss Or depreciation whichever is less 300000 ----------- Book profit for 115JB 900000
The income tax computation will be as follows:
A.Y 2007-2008. Business loss 100000 Depreciation 500000
Both will be carried forward, assuming Return is filed on time.
A.Y 08-09
Profits 625000 Less: current Depreciation 500000 --------- 125000 Less; business loss Of earlier year 100000 Depreciation of earlier Year 25000
Taxable income Nil
Unabsorbed depreciation Carried forward 475000
A.Y 09-10
Loss 1200000 Depreciation 500000
Amount to be carried forward Business loss 1200000 Depreciation 975000
A.Y 10-11.
Profits 1200000 Less: Current Depreciation 1000000 ----------- 200000 Less; Business loss Of A.Y 09-10 200000
Taxable income Nil
Amounts to be carried forward Buiness loss A.Y 09-10 1000000 Unabsorbed depreciation 975000
I hope the above e.g will solve all your doubts.
What is the amount of depreciation debited to the P&L a/c for the purpose of MAT i.e 115JB ? Its not easy, can try. If you don't get it , I will reply
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