Mat calculation in case of b/f loss & nil depreciation

according to section115JB  you should pay the minimum alternate tax on book profit  that is profit calculated under the schedule vi (in your case 5 lac) reduced by any b/f loss or unabsorbed depreciation whichever is less.

according to sub clause (b) of the explanation to subsection (2) sub clause (iii), the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil 

and hence in your case unabsorbed depreciation is nill so book profit will be same as Rs 5lac and minimum alternative tax on that you need to pay

(interpretation of sections are subject to my best of knowledge if any wrong any one can correct) 

The tax liability in case of companies is higher of tax computed as per the normal provisions and Sec 115JB .

As per the normal provisions tax payable will be nil because of the set off of past losses.

As per MAT book profit will be computed by deducting b/f loss(excluding depreciation) and unabsorbed depreciation which ever is lower as per the books of accounts  from the net profit.

In your case:

Net profit: 500000

Less: Lower of B/F Loss 650000 and UD  Nil as per books of accounts i,e 0

Book Profit u/s 115JB: 500000

Therefore tax will be paid as per the provisions of MAT i,e 18.5% of 500000 (Book Profit)

PS: I have assumed loss return is filled within the due date to avail the benefit of set off

While computing Taxable Income we compute it in two ways as per books the accounting profit and the Profit for Tax purposes. The accouting profit which we get in P& L A/c  is added and subtracted with certain items mentioned in 115JB to arrive at the book profit one among the item to be reduced is B/f business loss [as per accounting records ] or unabsorbed depreciation whichever is less.After the abobe adjustment we compute 18.5% of the book profit and this amount willbe the tax payable on the book profit.

We compare the above amount with the Income for tax purposes the higher of the 2 is taken as tax payable.

In the above case Net profit 5,00,000 and less of Business loss and unabsorbed dep is 0 so tax payable  will be 5,00,000 @ 18.5%

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Agree with above answers

What will be journal entry :

In your case: Net profit: 500000 Less: Lower of B/F Loss 650000 and UD  Nil as per books of accounts i,e 0 Book Profit u/s 115JB: 500000 Therefore tax will be paid as per the provisions of MAT i,e 18.5% of 500000 (Book Profit)

 

Dear Sirs,

I'm having book loss only, no profit, but having finished goods Rs.1,00,000/- while process IT return department calculated Tax on finished goods under MAT and demand raised. is it correct?