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INCOME TAX REFUND CREDITED TO P & L A/C

VIKASH (CA FINAL 2ND GROUP) (142 Points)

23 March 2010

Dear Sir

Plz tell me

1. About the treatment in respect of Income Tax Refund (Without Interest on Refund) Credited to P & L A/c under MAT Calculation.

2. And tell me in respect of Brought Forward Business Loss Debited to P & L A/c under MAT Calculation.

Vikash Mangal

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8 Replies

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 23 March 2010

Not a very clear question. However answering as per my understanding:

1. In case of a company the income tax refund due is generally shown in the balance sheet under the head loans & advances. Hence there is no chance of it going to the profit & loss a/c. Only interest on refund can go to the Profit & Loss a/c. So as such no treatment for the same in calculating MAT.

However if excess provision for taxation is made i. e. income tax refund is more than refund shown in the balance sheet for reasons other than interest in refund then the same will be a below the line item and hence will not hit in the profit & loss a/c

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 23 March 2010

And for your second query deduction of the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account is allowed while calculating book profits under MAT

Explanation.—For the purposes of this clause,—

(a) the loss shall not include depreciation;

(b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil.

vivek singhal (Chartered accountant) (79 Points)
Replied 23 March 2010

i m fully agree with aditya maheshwari.

PRAVEEN KUMAR (MBA (Finance) B.Com.(P)) (3443 Points)
Replied 23 March 2010

Yes, Aditya is right

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 23 March 2010

Also you cannot debit the brought forward loss of earlier years in the profit & loss a/c as the profit & loss a/c has an opening balance and a closing balance.

vijay krishnan (article ) (30 Points)
Replied 20 September 2010

What if incometax refundable was written of in p&l and subsequently it is received .Since while writing it off it is debited to p&l when you get the refund u have to defenitly credit p&L a/c .

In that case while computing MAT do we have to deduct the amount credited ??

also in 115JB deductions does not have income tax refund mentioned.

PANKAJ AGRAWAL (Student CA Final ) (45 Points)
Replied 23 May 2014

sir but when we file the return of income tax & we have refund receivable of Rs say 15000, then we debit the income tax refund receivable A/c & credit the income tax refund A/c.so, my question is where to show income tax refund A/c in Books as it is not an income. Assume assesse is company or partnership firm.