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what is brought forward loss as per books under MAT

pranay jangid (article trainee) (27 Points)

25 February 2010

According to MAT provisions-

"Brought forward loss or unabsorbed dep. whichever is less as per books is to be deducted for computing book profit.

But what is "brought forward loss" ?

Closing balance of Profit & Loss A/c or net loss before tax in current year and of previous years

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14 Replies

Amir (Learner) (4016 Points)
Replied 25 February 2010

Dear Pranjay,

Example - A Ltd. newly set up it's business in 2008-09

P/ L A/c for 2008-09

Expenses	Amount	Income	Amount
To opening Stock	Nil	By sales	10,000
To Purchases	8,000	By Closing Stock	2,000
To Expenses	6,000	By Net Loss	8,000
To Depreciation	6,000
	20,000		20,000

For FY 2009-2010,

Brought Forward Loss will be Rs. 2,000 (Rs. 8,000 - Rs. 6,000)

Unabsorbed Depreciation will be Rs. 6,000

C.Balaji (Learner) (1867 Points)
Replied 25 February 2010

Dear Amir brother...........

Is it not Loss before tax i.e. after adjusting other sources of income/loss??????

please clarify..............

Amir (Learner) (4016 Points)
Replied 25 February 2010

Dear Balaji,

Plz clarify ur question......??

What I could get is u want to know that the word "Brought Forward" includes incomes only from PGBP or from all heads of Income....

is it......??

Bhai, MAT is applicable on companies & all heads of Income comes in P/L A/c only..I mean in accounting we don;t prepare separate P/L for Business Income & Other sources........

Yes Brought Forward will includes incomes of all heads.............

C.Balaji (Learner) (1867 Points)
Replied 26 February 2010

Thank you for your reply brother...........

i understand now.....Thank you once again......

pranay jangid (article trainee) (27 Points)
Replied 02 March 2010

Dear Amir, let me clarify my query, suppose-

2008-09 2007-08

Net Loss (1,00,000) (50,000)

Op bal of P&L 1,50,000 2,00,000

Bal c/f to B/s 50,000 1,50,000

Now, in this case what is brought forward loss? Rs.150,000 (i.e. net loss of both the years of Rs. 100,000+50,000, after reducing unabsorbed depreciation) or there would be no brought forward loss since the closing balance of P& L is positive.

Amir (Learner) (4016 Points)
Replied 02 March 2010

Dear Pranjay,

In ur example in 2008-09, there would be NEITHER brought forward loss NOR Unabsorbed Depreciation.

Since closing balance is profit

Same case with 2009-10

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Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 02 March 2010

Yes and correspondigly there would be deduction for the purpose of computing book profit under MAT.

pranay jangid (article trainee) (27 Points)
Replied 03 March 2010

If there is NEITHER brought forward loss NOR Unabsorbed Depreciation as told by Mr. Amir then Aditya what do you mean by- "correspondigly there would be deduction for the purpose of computing book profit under MAT".

Isnt it mean that nothing is deductible for computing book profit since there is no brought forward loss or unabsorbed dep.

Am I Right Amir?

Am I Right Aditya?

Amir (Learner) (4016 Points)
Replied 03 March 2010

Dear Pranjay,

Yes nothing will be deducted in computing Book Profits...

Further I think Aditya Sir statement should be read as follows (I feel there is some typing error)-

"correspondigly there would be NO deduction for the purpose of computing book profit under MAT."

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Chintan Shah (-) (534 Points)
Replied 03 March 2010

Dear friend pranay,

As per my opinion in the example referred by you above, the b/f loss would be Rs. 150000. This is because

Under the regular provisions of the Act, the losses are carried forward and set off against profits of future years to determine the taxable income for the future years. The losses of the current year are never set off against the profits of the prior years. It may be noted that the profits of the prior year have already been offered to tax and hence, the intention is to provide the assessee the benefit of losses so that the total amount subjected to tax does not exceed the total profits earned by the assessee over the years. In your example if we consider that since there is a positive balance at the end of 2008-09 we are actually setting off the losses against the profits of earlier years that have already been offered to tax. No doubt that Section 115JB is a code in itself but reference to the general provisions of the act is necessary in order to avoid a strange result.

Regards,

Chintan