MAT u/s 115JB

Gaurav (CA Final) (74 Points)

20 July 2008

HI everybody....

My company is liable to pay TAX u/s 115JB. My question is how should I pass entry in books of accounts for this purpose. I am confused whether I should open MAT credit receivable account as I will be availing MAT credit in future years.

Please guide....

Thanks in advance

Gaurav Pancholia

(pancholia.gaurav @ gmail.com)

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4 Replies

Ashish Goyal (Service) (156 Points)
Replied 20 July 2008

It is not appropriate to consider MAT credit as a deferred tax asset for the purposes of Accounting Standard -22 (Accounting for Taxes on Income)
Although MAT credit is not a deferred tax asset under AS-22, but it can be considered as an "asset" and the same should be presented under the head "LOANS AND ADVANCES" considering it is of the nature of a pre-paid tax.
The MAT credit may be reflected as "MAT CREDIT ENTITLEMENT A/c"
The following entry is to be passed for recognizing the MAT credit as Asset:

MAT Credit Entitlement A/c Dr.

           To Profit and Loss A/c

While availing the MAT Credit, the following entry is to be passed:

Provision for Taxation A/c Dr

           To MAT Credit Entitlement A/c

MAT credit should be reviewed at each balance sheet date.
While writing down the carrying amount of MAT Credit entitlement, the following entry is to be passed:

Profit and Loss A/c Dr.

To MAT Credit Entitlement A/c

The difference between MAT paid and MAT Credit Entitlement can be treated as tax paid during the year.

Gaurav (CA Final) (74 Points)
Replied 20 July 2008

Thnks for your reply......

Please can u also give any thoughts on another query raised by me in respect of Arrears of Freedom Fighter pension receipt.

Gaurav (CA Final) (74 Points)
Replied 21 July 2008

Re: Ashish Goyal

Hi,

Thanks for your reply, but I didnt understand Ist entry given by you. By debiting MAT Credit nad crediting Profit & Loss, will mean Income entry, which I think is wrong as IT provision is to be debited.

Further provision for tax should be credited but you are debiting it.