use of unabsorbed depreciation is only for one time ( means for mat or normal tax computation)
for eg.
net profit as per P&L a/c is (11-12) : 1,00,000/-
depreciation as per companies act :45,000/- depreciation as per income tax act :40,000/- provision for gratuity :25,000/- int and penalty on service tax :10,000/-
and unabsorbed depreciation is as under
10-11 is 30,000/- 09-10 is 20,000/-
and carry forward loss before depreciation is
10-11 is 25,000/- 09-10 is 32,000/-
now when you calculated mat u/s 115JB
You will utilized unaborbed depreciation and carry forward loss which ever is less ?
when you used that amount ( which ever is less ) you cant use that amount for normal tax calculation if you used for mat calculation
how to solve this illustration and what will be the carry forward amount of ( unabsorbed depreciation and carry forward loss ) for mat and income tax calculation ?
20 July 2024
To compute the MAT (Minimum Alternate Tax) under Section 115JB of the Income Tax Act, and to determine the carry forward of unabsorbed depreciation and losses, let's break down the calculation based on the provided data:
### Given Data: - Net profit as per P&L account for FY 2011-12: Rs. 1,00,000 - Depreciation as per Companies Act: Rs. 45,000 - Depreciation as per Income Tax Act: Rs. 40,000 - Provision for gratuity: Rs. 25,000 - Interest and penalty on service tax: Rs. 10,000 - Unabsorbed depreciation: - FY 2010-11: Rs. 30,000 - FY 2009-10: Rs. 20,000 - Carry forward loss before depreciation: - FY 2010-11: Rs. 25,000 - FY 2009-10: Rs. 32,000
### Calculation Steps:
1. **MAT Calculation:**
**Net Profit as per P&L account:** Rs. 1,00,000
Adjustments: - Add: Depreciation as per Companies Act: Rs. 45,000 - Add: Provision for gratuity: Rs. 25,000 - Add: Interest and penalty on service tax: Rs. 10,000
Total Adjusted Net Profit = Rs. 1,00,000 + Rs. 45,000 + Rs. 25,000 + Rs. 10,000 = Rs. 1,80,000
- Deduct: Depreciation as per Income Tax Act: Rs. 40,000
Adjusted Net Profit for MAT Calculation = Rs. 1,80,000 - Rs. 40,000 = Rs. 1,40,000
Now, compute MAT @ 18.5% on Adjusted Net Profit: MAT = 18.5% of Rs. 1,40,000 = Rs. 25,900
2. **Utilization of Unabsorbed Depreciation and Carry Forward Loss:**
- Unabsorbed Depreciation: - From FY 2010-11: Rs. 30,000 - From FY 2009-10: Rs. 20,000
Total unabsorbed depreciation available = Rs. 30,000 + Rs. 20,000 = Rs. 50,000
- Carry Forward Loss: - From FY 2010-11: Rs. 25,000 - From FY 2009-10: Rs. 32,000
Total carry forward loss available = Rs. 25,000 + Rs. 32,000 = Rs. 57,000
3. **Adjustment for MAT and Normal Tax Calculation:**
- For MAT Calculation: - Utilize unabsorbed depreciation and carry forward loss whichever is less. - Lesser of (unabsorbed depreciation or carry forward loss) = Rs. 50,000 (unabsorbed depreciation)
- For Normal Tax Calculation: - The balance of unabsorbed depreciation and carry forward loss after MAT calculation can be carried forward for normal tax computation.
These amounts will be carried forward for subsequent years' MAT and normal tax calculations, ensuring compliance with Section 115JB for MAT and regular tax provisions for the Income Tax Act.
For accurate computation and to ensure compliance with tax laws, it's recommended to consult with a qualified tax professional or chartered accountant familiar with Indian tax regulations.
CAclubindia
