Mat calculation - can anyone solve this

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 April 2013 ABC Pvt Ltd started its operations in FY 2011-12.
• It had a PBDT of Rs 2068235.00
• Depreciation as per Companies Act – Rs 50674.00
• Depreciation as per Income Tax Act – Rs 1734015.00
• Tax payable as per normal provisions is Rs 103274.00 [(2068235.00 – 1734015.00)*30.9%]
• Calculation of DTL
o Diff in depreciation – Rs 1683341.00
o Total Timing difference – Rs 1683341.00
o So, DTL created – Rs 520150.00
o DTL actually created by passing a journal entry as Deferred Tax A/c (P/L item) Dr to DTL (Current Liability item) Rs. 520150.00
• As said earlier, the ABC Pvt Ltd had a PBDT of Rs 2068235.00
• MAT Calculation :
o PBDT – Rs 2068235.00
o Less : DTL Provision – Rs 520150.00
o Book Profit for MAT – Rs 1548085.00
o So, tax @19.055% - Rs 294988.00 say Rs 295000.00
o Current tax provided by passing a journal entry as Income Tax A/c (P/L item) Dr to Provision for Tax (MAT) for AY 2012-13 (Provision) Rs 295000.00
• As the Tax payable is more under MAT, assessee paid tax of Rs 300000.00 along with interest.
• Now here the MAT Entitlement is Rs 191726.00 (295000.00 - 103274.00)
• But, no entry was passed in that year for MAT Entitlement.
• Now my question is that,
o Was the working for the year correct?
o If anything is wrong can we correct the mistake in the current year i.e. FY 2012-13
o How to pass entry relating to MAT entitlement.
o How to pass all entries again in the FY 2012-13

CA Krunal

CA Krunal (Expert)
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11 April 2013 When you pay MAT, you need to forsee whether you will be going to get MAT credit in coming year or not.

If answer is yes, you need to provide for current tax on the base of actual current tax liability and not on MAT liability

Further when you pay MAT, it should be debited to MAT receivable to bank account.
So whenever now onward you claim MAT credit you have to credit MAT receivable & if MAT credit is lapsed you have to account as a tax expense.

If answer is no, then proper entry have been passed except the current tax provision had to be created net of MAT credit as in past no MAT receivable was created.

Querist : Anonymous

Querist : Anonymous (Querist)

12 April 2013 can u plz elaborate in simple terms along with journal entries

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