19 November 2011
Suppose tax under normal provisions is Rs10,000, while tax as under MAT provisions is Rs 100,000. We will recognise this asset(tax paid in excess as per normal tax provisions i.e. 90,000) in our books, if in the future(coming 10 yrs) there is a clear visibility that, this credit entitlement would be able to be used.
The following entries are relevant in this context:
(a) For recognising MAT CREDIT as an Asset:
MAT Credit Entitlement Account Dr. 90000
To Profit and Loss Account 90000
(b) At the time of availment of MAT Credit: (amount of availment possible, say 50,000) Provision for Taxation Account Dr. 50000
To MAT Credit Entitlement Account 50000
(c) At the time of writing down of MAT Credit Entitlement: (say balance 40000 could not be availed in 10 yrs) Profit and Loss Account Dr. 40000
To MAT Credit Entitlement Account 40000
The difference arising out of MAT paid and MAT Credit Entitlement can be treated as TAX PAID during the year.
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