Rajesh Raman ( ) (292 Points)
20 January 2012
Resham
(Carpe Diem !!!)
(6535 Points)
Replied 20 January 2012
This is just some basic historical info for you to have a background, hope it helps:
Normally, a company is liable to pay tax on the income computed in accordance with the provisions of the income tax Act, but the profit and loss account of the company is prepared as per provisions of the Companies Act. There were large number of companies who had book profits as per their profit and loss account but were not paying any tax because income computed as per provisions of the income tax act was either nil or negative or insignificant. In such case, although the companies were showing book profits and declaring dividends to the shareholders, they were not paying any income tax. These companies are popularly known as Zero Tax companies. Inorder to bring such companies under the income tax act net, section 115JA was introduced w.e.f assessment year 1997-98.
According to this section, if the taxable income of a company computed under this Act, in respect of previous year 1996-97 and onwards is less than 18 %(amended) of its book profits, the total income of such company is chargeable to tax for the relevant previous year shall be deemed to an amount equal to 18 % of such book profits.
A new tax credit scheme is introduced by which MAT paid can be carried forward for set-off against regular tax payable during the subsequent five year period subject to certain conditions, as under:-
CAclubindia
