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Mat on agriculture income

CA RAJA SAHA (Dy Manager(F &A)) (321 Points)

16 May 2013

Can anyone suggest what will be the MAT treatment on Non Exempted Agriculture Income ???

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7 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 16 May 2013

Agricultural income cannot be non-exempted. Agricultural income is exempt for MAT calculation.

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CA RAJA SAHA (Dy Manager(F &A)) (321 Points)
Replied 16 May 2013

40% non Agriculture Income for Tea Co. taxable under Rule 8 of Income tax Act. Please suggest wheather MAT will be applicable on that income.

Devendra (Chartered Accountant) (4775 Points)
Replied 16 May 2013

MAT to be applicable.

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 16 May 2013

See, R Saha Sir , MAT is applicable on Book Profits

As per explanation to sec 115JB in order to work out book profits certain adjustments are required to be made to the Profit as shown by Profit&Loss A/c prepared as per Co. Act,1956.

And one of the such adjustment is required in respect of Exempt Incomes(agic income exempt u/s 10)

Therefore, Book Profit=

Profit as per P/L(agric income included in P/L) xxxxxxx

Less: Incomes exempt u/s 10,11 or 12( excluding LTCG exempt u/s 10(38) xxxx

Book Profit after adjustment u/s 115JB on which MAT is payable... xxxxxxxx

CA RAJA SAHA (Dy Manager(F &A)) (321 Points)
Replied 16 May 2013

Under section 295(1)(b)(i) of the Act, the Board has been empowered to make rules for providing the manner in which and the procedure by which the income shall be arrived at in the case of income derived in part from agriculture and in part from business. Growing tea plants and manufacture of tea involves both agricultural and non-agricultural operations, and hence, in order to apportion the income from such operations as between agricultural income and business income, rule 8 has been inserted.

Manner of apportionment

8.2 Rule 8 stipulates that income from the sale of tea shall be computed as if it were income derived from business, and 40 per cent of such income shall be deemed to be income liable to tax.

This method of computation is to be applied only if the following conditions are satisfied:

u The seller must himself have grown the tea plants.

u The tea plants must have been grown in India.

Under this circumstances I think 40% of income of a Tea Co. must be liable to MAT ..What is your opinion Mr. Saurabh Maheshwari ?

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Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 17 May 2013

Originally posted by : R Saha
	Under section 295(1)(b)(i) of the Act, the Board has been empowered to make rules for providing the manner in which and the procedure by which the income shall be arrived at in the case of income derived in part from agriculture and in part from business. Growing tea plants and manufacture of tea involves both agricultural and non-agricultural operations, and hence, in order to apportion the income from such operations as between agricultural income and business income, rule 8 has been inserted. Manner of apportionment 8.2 Rule 8 stipulates that income from the sale of tea shall be computed as if it were income derived from business, and 40 per cent of such income shall be deemed to be income liable to tax. This method of computation is to be applied only if the following conditions are satisfied: u The seller must himself have grown the tea plants. u The tea plants must have been grown in India. Under this circumstances I think 40% of income of a Tea Co. must be liable to MAT ..What is your opinion Mr. Saurabh Maheshwari ?

Sir , the Rule 8 you arer talking of is applicable if the assessee is earning incomes from planting tea....similarly Rule 7A , Rule 7 and Rule 8 are also there which are made to tax some part of income derived from planting tea, coffree. rubber as Business Income and exempting other [part trreating as Agriculture Income.......

Your ques was MAT treatment vis-a-vis Non exempted Agricultural Income....But Agriculture Income is exempt fully u/s 10(1) .....Because under Business Income Agricultural Income from any agric activity is shown as NIL..... FOR THE LIMITED PURPOSE OF PARTIAL TAXATION THE SAME IS CLUBBED WITH NON-AGRIC BUSINESS INCOME .....................

But in books of accounts we directly credit every Income to P/L so the same is case with Agric Income.........

That's why: the Agric Income will allowed to be deducted from profit as per P/L...the logic is that in tex laws the agric income is exempt(with partial taxation) ...so the same also doesnot desreve MAT ....

Book Profits = Profit as per P/L(incl agric Injcome) less Agic Income (full Income even thoiugh a part istaxable for limited purpose)

CA Tripurari Kumar Thakur (Accounts Excutives) (144 Points)
Replied 17 May 2013

Mat is not applicable on income wchich are exempt under section 10..except 10(38) ..40% of the agreeculture income are taxable as business income so mat wiil also applicabale as well on the same.