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MAT

CA AKASH SANTHALIA (Fresher) (49 Points)

16 June 2011

dear sir,

As long term capital gain is exempted but i want to whether it is taxable in calculation of mat.?

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CA,CMA,CS Karan Gogia (Employed) (230 Points)
Replied 16 June 2011

while calculating MAT we start with p/L of company ....and add/deduct certain item....LTCG is exempt u/s 10(38)...and it is not deductible while calculating book profit(specifically mentioned in provision)...therefore it automatically get taxed...

the provision is as under

For the purposes of this section, “book profit” means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by—

(a) the amount of income-tax paid or payable, and the provision therefor; or

(b) the amounts carried to any reserves, by whatever name called ⁵²[, other than a reserve specified under section 33AC]; 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 to which ⁵³[section 10 (other than the provisions contained in clause (38) thereof) or ⁵⁴[***] section 11 or section 12apply; or]

⁵⁵[(g) the amount of depreciation,]

⁵⁶[(h) the amount of deferred tax and the provision therefor,

⁵⁷[(i) the amount or amounts set aside as provision for diminution in the value of any asset,

if any amount referred to in clauses (a) to (i) is debited to the profit and loss account, and as reduced by,—]]

⁵⁸[(i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the profit and loss account), if any such amount is credited to the profit and loss account:

Provided that where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation or Explanation below the second proviso to section 115JA, as the case may be; or]

(ii) the amount of income to which any of the provisions of ⁵⁹[section 10 (other than the provisions contained in clause (38) thereof)] or ⁶⁰[***] section 11 or section 12 apply, if any such amount is credited to the profit and loss account; or

⁶¹[(iia) the amount of depreciation debited to the profit and loss account (excluding the depreciation on account of revaluation of assets); or

(iib) the amount withdrawn from revaluation reserve and credited to the profit and loss account, to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause (iia); or]

⁶²[(iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account.

Explanation.—For the purposes of this clause,—

(a) the loss shall not include depreciation;

(b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or]

(iv) to (vi) ^62a[***]

(vii) the amount of profits of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17⁶³ of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses.

Explanation.—For the purposes of this clause, “net worth” shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3⁶⁴ of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); or

⁶⁵[(viii) the amount of deferred tax, if any such amount is credited to the profit and loss account.]