MAT Calculation
This query is : Resolved
23 April 2009
Can we deduct premium paid on redemption of shares from the profit earned for the purpose of MAT calculation ?
23 April 2009
The section 115JB provides that
(2) Every assessee, being a company, shall; for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III o f Schedule VI of the Companies Act; 1956 (1 of 1956):
Provided that while preparing the annual accounts including profit and loss account, -
(i) the accounting policies;
(ii) the accounting standards adopted for preparing such accounts including profit and loss account;
(iii) the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956):
It is pertinent to note that while preparing the account following the accounting standard and guidance notes issued by ICAI is necessary to claim that accounts have been prepared in accordance with the provisions of the Companies Act. Para 2 of Part II of Schedule VI to the Companies Act
Only adjustment permitted in the explanation I to section 115JB (2) are permitted from the profits as per P& L Account while calculating the book profit under section 115 JB.
(a) the amount of income-tax paid or payable, and the provision therefore; or
(b) the amounts carried to any reserves, by whatever name called; 3 [other than a reserve specified under section 33AC] or
(c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or
(d) the amount by way of provision for losses of subsidiary companies; or
(e) the amount or amounts of dividends paid or proposed; or
(f) the amount or amounts of expenditure relatable to any income which 10[section 10 [other than the provisions contained in clause (38) thereof] or 15[***]15section 11 or section 12 apply; or]10
11[(g) the amount of depreciation]11
17[(h) the amount of deferred tax and the provision therefore
The Supreme Court in the case of M/s Apollo Tyres Ltd vs. CIT: 255 ITR 273 has ruled that the assessing officer, while calculating the book profits of a company under section 115J of the Act, has only the power of examining whether the books of account are certified by the authority under the Companies Act as having been properly maintained in accordance with the Companies Act. The Court held that the assessing officer, thereafter, has limited power of making increase and reduction as provided for in the Explanation to section 115J.
Thus if the expenditure on premimum paid is debited to profit and loss account in accordance with the schedule VI of Companies Act there is no way the expenditure is not allowed for the purpose of computing book profit under MAT.
(2) Every assessee, being a company, shall; for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III o f Schedule VI of the Companies Act; 1956 (1 of 1956):
Provided that while preparing the annual accounts including profit and loss account, -
(i) the accounting policies;
(ii) the accounting standards adopted for preparing such accounts including profit and loss account;
(iii) the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956):
It is pertinent to note that while preparing the account following the accounting standard and guidance notes issued by ICAI is necessary to claim that accounts have been prepared in accordance with the provisions of the Companies Act. Para 2 of Part II of Schedule VI to the Companies Act
Only adjustment permitted in the explanation I to section 115JB (2) are permitted from the profits as per P& L Account while calculating the book profit under section 115 JB.
(a) the amount of income-tax paid or payable, and the provision therefore; or
(b) the amounts carried to any reserves, by whatever name called; 3 [other than a reserve specified under section 33AC] or
(c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or
(d) the amount by way of provision for losses of subsidiary companies; or
(e) the amount or amounts of dividends paid or proposed; or
(f) the amount or amounts of expenditure relatable to any income which 10[section 10 [other than the provisions contained in clause (38) thereof] or 15[***]15section 11 or section 12 apply; or]10
11[(g) the amount of depreciation]11
17[(h) the amount of deferred tax and the provision therefore
The Supreme Court in the case of M/s Apollo Tyres Ltd vs. CIT: 255 ITR 273 has ruled that the assessing officer, while calculating the book profits of a company under section 115J of the Act, has only the power of examining whether the books of account are certified by the authority under the Companies Act as having been properly maintained in accordance with the Companies Act. The Court held that the assessing officer, thereafter, has limited power of making increase and reduction as provided for in the Explanation to section 115J.
Thus if the expenditure on premimum paid is debited to profit and loss account in accordance with the schedule VI of Companies Act there is no way the expenditure is not allowed for the purpose of computing book profit under MAT.
25 April 2009
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