115jb issue

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For the Accounting year 2008-09-in books of accounts of ABC Ltd  there is a business loss of Rs. 1200 lacs and Depreciation loss of Rs. 1500 lacs and the total Net loss is Rs. 2700 lacs. In the same year ABC Ltd has  deferred tax asset of Rs 900 lacs. Net loss after taxation for the year is 1800 lacs. This is adjusted against surplus brought forward from previous year of  Rs. 300 lacs and the balance is adjusted against General Reserve and surplus carried to balance sheet is shown as NIL.

For the Financial year 2009-10 ABC Ltd has Business Profit of 600 lacs and Depreciation loss of 1600 lacs. The net loss (after depreciation) also is adjusted against General Reserve and surplus carried to balance sheet is shown as NIL.

Query:
In the financial year 2010-11 ABC is expecting Net profit of 1000 lacs-

As per 115JB Explanation 1 (iii) from the book profit we have to reduce:

The amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account –

a)As per books of accounts in the year 2008-09
Business loss            1200 lacs
Depreciation loss     1500lacs
Lower of the two--   1200 lacs

b)As per books of accounts in the year 2009-10
Business Profit          600 lacs
Depreciation loss     1600  lacs
Lower of the two--     nil lacs


Can ABC deduct upto 1000 lacs  against Net Profit of 1000 lacs though ABC has adjusted in the year 2008-09 the net loss against general reserve and surplus brought forward from previous year-so that book profits will be NIL and taxable payable will be nil.

 

Replies (1)
Joseph, I appreciate your effort for bringing technical quetion to the forum. In my humble opinion, adjustment of loss made in books in previous year has no relevance on MAT calculation under section 115JB in the subsequent years. As per explanation 1 (iii) to section 115JB (2) read with foot note given to point b to explanation 1 (iii), there will be no deduction if either of them is NIL , It reads as under - "the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil" Therefore, there will be no deduction warranted from profit. Best Wishes CA Vishwas Aradhya itsvishwas @ gmail.com +91 95913 18000 Bagalore


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