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As the number of zero tax companies and companies paying marginal tax had grown, the Minimum Alternate Tax Provision has been inserted in the Income Tax Act. It was felt that various concession given under the tax laws, big corporate groups become zero tax companies, to counter this, as the system of MAT was introduced.

In this article, I would like to share some of my views in respect of Presumptive Profit under the Head Business or Profession vis-à-vis section 115JB.

Applicable sections to calculate the Presumptive income under the head of business or profession are 44AD, 44AE, 44AF, 44B, 44BB, 44BBA and 44BBB.

According to all these above mentioned section, notwithstanding anything to the contrary contained in section 28 to 43C, In case an assessee engaged in those specified business as mentioned in those above sections , a sum equal to such percentage (as mentioned in the above section) of total turnover or gross receipt of assessee in the previous year on account of such business or as the case may be, a sum higher than aforesaid sum claimed to have been earned by the assessee shall be deemed to be the profit or gains of the business chargeable to tax under the head of “profit and gains of business or professions”.

Section 115JB    

Notwithstanding anything contained in any other provision of this act, where in the case of an assesse, being a company, the income tax payable on the total income as computed under this act in respect of any previous year relevant  to the assessment year commencing on or after 1st day of April 2001, is less than 18.5% of book profit, the tax payable for the relevant financial year shall be deemed to be 18.5% on such book Profit

Let analyze the two type of profit which are mention in the section 115JB. They are as follows:



Regular Profit:

Profit calculated applying Tax Laws and such profit will be the real profit of the assessee.

Book Profit:

Profit which is calculated by applying part ii and iii of schedule VI of companies act. This is the conservated profit of the assessee because some of provisions and reserves are allowed as deduction under the companies act.

Note: Presumptive income section override the sections from 28 to 43C whereas section 115JB overrides all the other section’s provision contained in any other section of this act.

Presumptive income tax vis-à-vis section 115JB

There are special provisions enacted under the head of “Profit or Gains of Business or Profession” which provide for determination of income on particular basis. The income derived from the source covered by the respective provision and computed in accordance with such provision shall be deemed to be the Profit and Gains of such business chargeable to tax under the head “Profit and Gain of Business or Profession”, which is also one of the head mention in ‘section14’. Therefore profit calculated under presumptive income provision is nevertheless income computed in accordance with the provision of this act under the head income from Business or Profession. Tax payable on such presumptive income together with income under other heads shall be compared with tax payable under section 115JB and then the liability shall have to be determined.


By: Dhruva Kalamanji Srikanth.

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Category Income Tax, Other Articles by - CA Dhruva Kalamanji