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Mat query unabsorbed depreciation and joint accounts

13 September 2012

I have a query regarding MAT.

I have a client who has two branches- One in HP (claiming 80ID) and another in Delhi.

In AY 2011-2012 , HP branch had a profit of Rs 8 lacs and Delhi Branch had a loss of Rs5 lacs. Delhi branch had an unabsorbed loss of Rs3 lacs and unabsorbed dep of Rs 2 lacs. Net profit from Joint accounts -Rs3 lacs

In AY 2012-13 , while calculating MAT , can I deduct Rs 2 lacs from Book Profits ??

My client says that they can deduct Rs 2 lacs from MAT amount but I don't agree since we have to look at the joint accounts and not just one branch.I have been filing one ITR and not separate ITR's for different branches.

What is your opinion??

I will be glad if you could solve my query as early as possible.

Regards

Mayank Kapoor

+919871009350

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11 Replies

CA Madhvi (...Blissful...) (1658 Points)
Replied 13 September 2012

yeah mayank..u r right...as per MAT provisions unabosorbed dep or loss whiever is lower is only allowed..here which is nil..as delhi branch has profit..and u r filing single return...so u cant adujust unab dep of 2 lacs against book profit...

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CA Vishal Jain (Chartered Accountant) (137 Points)
Replied 13 September 2012

as per provisions of Sec 115JB while calculating book profit assessee can adjust carried forward loss or unabsorbed dep whichever is lower, loss will not include depreciation, for the purpose of this section loss or unab dep are taken as per books of accounts not as per income tax act.

from your question my understanding is that you are taking loss and dep as per income tax act computation and not as per your books, you can adjust loss or dep which is in books and not the loss or dep c/f as per act, if their are accumulated profits (joint) in books you can not adjust anything from book profit

Mayank Kapoor (.) (159 Points)
Replied 13 September 2012

Thanks Madhvi. Appreciate your quick reply :)

Mayank Kapoor (.) (159 Points)
Replied 13 September 2012

VIshalji

I am Not talking anything about loss and dep as per I.T. Tax.

My point is that the client thinks that he can claim the unabsorbed dep or unabsorbed loss ( whichever is lower) of one branch (Delhi) and deduct it from the calculation of MAT for the current year.

I tried to explain him that 18.50% from the book profits include the profit from HP as well profits from delhi, so he cannot just claim unabsorbed dep of one branch whereas the net effect from both the branches taken together last year was profit after tax.

I hope this clears your doubt.

CA Vishal Jain (Chartered Accountant) (137 Points)
Replied 14 September 2012

Hi Mayank

i agree with you that you will take the combined position of both branches into consideration for calculation of book profit ond taxable income, but what i was trying to explain is that you have to consider combined position as per books of accounts, if as per act there is taxable income but as per books there is loss than you can adjust book loss while calculating book profit for charging MAT, loss c/f in return is of no use in MAT calculation

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Varshit Shah (Self Employed) (676 Points)
Replied 14 September 2012

Dear Mayank ,

Your client is RIGHT.

See if all the answers to the below questioned is Yes , then you have to deduct the amount of Business loss or Unabsorbed depreciation - Whichever is lower. but before applying this one thing u must be clear is that Your Loss & Depreciation should belong to the SAME year. For eg. In year 1 there is loss & no unabsorbed depreciation or in year 2 there is a Unabsorebed depreciation of year 2 & no business loss then in both the year you can not take the benefit of such deduction. (For better under standing refer 115JB from Vinod Singhania's book )

Q 1.) PAN of both the branch is same (i.e. SINGLE PAN)?
Q.2 ) You club the Income of both the branch & file single return as SINGLE ENTITY ?
Q.3 ) You consider Profit of both the branch in single B/s.?

As you also agree that Your Profit of the Entity at the end is 3 Lakhs.(After adding Profit from both the branches)
So when you'll make an computation for regular tax u'll consider this unabsorbed depreciation & business loss. - If yes , then you must consider the same for MAT..

So in given cas adjusted book profit will be 1 lakh & u'll require to pay MAT on this.

Pls refer following link.
/forum/mat-deduction-of-brought-frw-loss-or-depreciation-w-e-l-13497.asp#.UFLvtI0geSo

https://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=5638

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Mayank Kapoor (.) (159 Points)
Replied 14 September 2012

Dear Mr. Shah

Where is the unabsorbed dep or unabsorbed loss?? I consolidate the income and by consolidating I get a net profit after tax. where is the unabsorbed loss or unabsorbed dep??

Varshit Shah (Self Employed) (676 Points)
Replied 14 September 2012

Mayank i had overlooked 2 things

1.) I have not seen the years mentioned by you

2.)I got confused bcoz words Unabsorbed used by you. ( Generally we use words Unabsorbed only when your loss remains even after set-off against other incomes )
Nywys ,

AY 11 -12
Hariyana Branch - 8 lacs Profit
Delhi Branch - (5) lacs Loss ( 5 lacs break up = 3 lacs Business Loss & 2 lacs - Depreciation )
Net Profit of Entity - 3 Lacs Profit
( For AY 11-12 there is no carried forward of losses)

As there is no Brought forward loss or unabsorbed depreciation the same should not be considered for MAT calculation in AY 12-13.

Approach of your client is wrong.

One thing that i felt bad is the way you have asked " Dear Mr. Shah

Where is the unabsorbed dep or unabsorbed loss?? I consolidate the income and by consolidating I get a net profit after tax. where is the unabsorbed loss or unabsorbed dep?? "

Just see Mr.Mayank here , each and every people give their valuable time to solve the doubts without any personal benefit. So NEKI BHI KAR AUR GALI BHI KHA - that should not be the way.

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