MAT on sale on industrial property by private limited company

As per section 115JB of Income Tax Act 1961, MAT Shall apply to all companies including foreign companies subject to specified conditions. MAT shall be paid @ 15% on book profits. To calculate Book profits Some adjustements are required to make additions or deletions from Net profit of a company. Since, in your case transferring unit fulfills transfer definition u/s 2(47) and hence Capital gain shall attract. While calculating MAT, Gain on sale of property does not affect the book profit u/s 115JB. You can ignore this adjustment while calculating book profit.

Two separate questions: capital gains exemption, and MAT.

• Capital gains exemptions for reinvestment (company):

– Sec 54D: exemption only for compulsory acquisition of land or building used for an industrial undertaking, with reinvestment within 3 years. Not a voluntary sale.

– Sec 54G: shifting an industrial undertaking from an urban area to a non-urban area (voluntary transfer allowed), with reinvestment in machinery, land, building and shifting expenses within 1 year before or 3 years after.

– Sec 54GA: shifting to an SEZ.

Sec 54/54F/54EC apply only to individuals/HUF (54EC applies to anyone, up to Rs 50 lakh in bonds).

• MAT (Sec 115JB): book profit includes the accounting gain on sale. Exemptions like 54G don't reduce book profit. If MAT applies (normal tax is below 15% of book profit), the gain is effectively taxed at 15%.

• But MAT doesn't apply to companies opting for Sec 115BAA (22%). Most private companies are on 115BAA, so check. Under 115BAA, Sec 54G deduction is still allowed (it's under capital gains, not Chapter VI-A).

• If on the old regime: MAT on the gain, with MAT credit carried forward 15 years (Sec 115JAA).

Yes. If the company’s book profit is positive after recording the sale, the gain generally forms part of book profit for section 115JB MAT, even if the sale proceeds are fully reinvested in the new premises. Reinvestment by itself does not exempt the gain from MAT. The gain for accounts is generally based on sale consideration less the property’s carrying amount and related selling costs; tax treatment under the normal provisions may differ.

• If the premises is depreciable, accounting and tax computations can differ; the tax gain may be governed by the block-of-assets rules.
• Check whether the company qualifies for an applicable MAT exclusion or is subject to the alternative tax regime under section 115BAA/115BAB, where MAT does not apply.
• The accounting treatment, asset classification and applicable tax regime are key facts to verify.

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