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Treatment of income tax refund u/s 198 of companies act

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Vignesh P

Company Secretary

109 Points Posted on 02 August 2016

Hai all, The query is regarding treatment of income tax refund for computation of profits u/s 198 of the companies act 2013, Can the amount of Income tax refund (along with interest) be deducted from profits while calculating profit under section 198...? under what circumstances can Directors remuneration be deducted from profits....?? Can the whole amount of profits from sale of fixed assets be deducted while calculating profit u/s 198...?? Kindly clarify. Thanks and Regards Vignesh P

Replies (2)

P C Agrawal

Registered independent director Past Ch

8229 Points Posted on 03 August 2016

1) Profit u/s 198 practically denotes net profit before tax with some adjustments.

2) IT refund is an adjustment after arriving at net profit and is not to be considered u/s 198.

3) Profit on sale of all fixed assets has to be deducted u/s 198(3)(d).

4) Directors' remuneration is to be deducted for the purpose of Sec.198. However, only for the purpose of calculating ceiling of 11% net profit, directors' remuneration will be added back to profit u/s 198. [Ref. Sec.197(1)].

Vignesh P

Company Secretary

109 Points Posted on 04 August 2016

Thank you Sir,

For the purpose of Section 135 (CSR), it is explained that the computation of profits should be as per section 198. Is Directors remuneration deductable from profit in this context as well....?? Kindly clarify