Whether Short Term Capital Gains during the year not routed through Profit & Loss Account, but directly transferred to Capital Reserve be added to Book Profits while calculating MAT under section 115JB ?
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Profits / gains not routed through p &l be added for 115jb
Replies (2)
Sec 115JB gives a list of items that needs to be added and subtracted from the Net Profit to arrive at the book Profit. Only those income and expenses that are debited or credited to P& L can be taken for adjustment. Since in this case the gain is not routed to P&L it cannot be added back.
Companies Act does not prohibit such items to be shown as revenue when preparing the accounts for private limited companies. Doubtful whether you can get away with it. Book profit is no doubt sacrosanct courtesy the Apex Court decision in Apollo Tyres case. But then, that was under the assumption that the book profit was as per Companies Act. If that is not the case, then the IT Department may very well recompute the book profit.
Such a stand will only result in prolonged litigation.
My earlier reply was under the assumption that it was LTCG, but I stand corrected.
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