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Mat calculation

Sahil Khan (Article) (53 Points)

27 March 2015

Could any one

let me know about the MAT calculation i.e, which section deals with it & method of computaion? THANK YOU.!!

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4 Replies

sunny (student) (21 Points)
Replied 27 March 2015

dear sir, pleas provided mat and cs related other

shahsunny92 @ gmail.com

09427452708

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 27 March 2015

Basic objective behind introduction of MAT provisions was to levy tax on zero tax companies.

Zero tax companies are companies showing profits in books and also paying out dividends, however, not paying tax/marginal tax on account of various incentives( for example: incentives under chapter VIA- C – in relation to certain incomes, etc). Therefore, Government wanted to get some tax from these companies also.

Section 115JB was introduced by Finance Act, – Provides for levy of tax on book profits at 18.5%

MAT is payable only if tax as per normal provisions of the Act is less than 18.5% of “book profits

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 27 March 2015

P&L account/statement is to be prepared in accordance with Schedule III of Companies Act, 2013(earlier Schedule VI of the companies Act, 1956); exception for banking, insurance, power generation companies, etc. -

Computation of Book Profit

The following amount(s) need to be deducted or added to profit/loss as shown in profit & loss statement/account while computing book profit (Provided they have been already been credited to debited to the P&L statement/account respectively so as to nullify there effect)

Reductions	Additions
Amount withdrawn from any reserve or provision	Amount carried to any reserves by whatever name called (other than reserves relating to shipping business created under Section 33AC)
Amount of income covered by section 10 [except section 10(38)], section 11 or section 12	Amount of expenditure in relation to incomes covered by section 10 [except section 10(38)];
The amount of loss brought forward or unabsorbed depreciation whichever is less as per books of account. Note: Loss and unabsorbed depreciation to be considered in the books as at the commencement of the year	Amounts of dividends paid or proposed to be paid;
Depreciation excluding depreciation on account of revaluation of assets. Any amount withdrawn from the revaluation reserve and credited to P&L A/c, to the extent it does not exceed the amount of depreciation on account of revaluation of assets	Amount of depreciation as per tax provisions. Balance in revaluation reserve relating to revalued asset on the retirement or disposal of such asset.
Amount of deferred tax, if any	Amount of deferred tax or provisions thereof; Amount of Income tax paid, payable or provision thereof; However, Income tax penalty or its interest . Tax including Wealth tax penalty or its interest. Penalties under other laws Need not be added back Amounts set aside as provision for diminution in the value of assets; Example: Provision for bad debts to be added Amounts set aside to provisions made for meeting unascertained liabilities, However, provisions made on scientific basis are not to added back for Example: Provision for encashment of leave (SC Judgment: BHARAT EARTH MOVERS)
Profits of a sick industrial company subject to certain conditions	Provisions for loss of subsidiaries