My Company's MAT liability is 700 lakh and Tax liability as per IT act is 600 lakh. So obviously, we have to pay MAT for 2008-09.
During the year we have paid advance tax 200 lakh and made provision for 500 lakh. both the items debited to P&L account.
1) Is it wrong to debit 200 lakh advance tax to P&L account?
My collegue argues that total Rs.700 lakh has to be shown as IT provision and Rs.200 lakh paid has to be shown as current asset.
We have Balance 500 lakh in provision which we will pay before assessment.
2) Since we are paying MAT, we are eligible for Rs.100 lakh (700-600)MAT credit.
What entries have to be passed for MAT credit and when these entries have to be made? In current year or in the year when we avail MAT credit.
Please clear my doubt ASAP.
CAclubindia
