Page 124 - DCOM508_CORPORATE_TAX_PLANNING

Unit 5: Computation of Taxable Income of Companies

2. Amount withdrawn from reserves created on or after 01.04.1997 if such amount was Notes

allowed to be charged to Net Profit for the purpose of Section 115JB or Section 115JA,
3. Income exempt under section 10 [other than 10(38), 10(23G)] or 11 or 12,
4. Amount of Deferred Tax
5. Amount withdrawn from Revaluation Reserve to the extent it does not exceed the

depreciation on revalued amount of Fixed Asset charged to Profit and Loss Account
6. Amount of depreciation, excluding amount of depreciation on Revalued amount of Fixed
Asset,

7. Lower of the following: -
(i) Brought Forward Loss (as per Books) – Loss does not include Depreciation,
(ii) Unabsorbed Depreciation (as per Books),
8. Profits eligible for deduction under section 80HHC or 80HHE or 80HHF, up to Assessment

Year 2005-06
9. Amount of Profits of Sick Industrial Company, during the period of sickness.

Notes The aforesaid computation of Book Profi t and Minimum Alternate Tax shall not
affect the determination of the amounts in relation to the relevant previous year to be
carried forward to the subsequent year(s) under the provisions of section 32(2) or of section
32A(3) or section 72(1)(ii) or section 73 or section 74 or of section 74A (3).

5.2.4 MAT Credit

A new tax credit scheme is introduced by which MAT paid can be carried forward for set-off
against regular tax payable during the subsequent five year period subject to certain conditions,

as under:
1. When a company pays tax under MAT, the tax credit earned by it shall be an amount which
is the difference between the amount payable under MAT and the regular tax. Regular tax
in this case means the tax payable on the basis of normal computation of total income of the
company.

2. MAT credit will be allowed carry forward facility for a period of five assessment years
immediately succeeding the assessment year in which MAT is paid. Unabsorbed MAT

credit will be allowed to be accumulated subject to the five year carry forward limit.
3. In the assessment year when regular tax becomes payable, the difference between the
regular tax and the tax computed under MAT for that year will be set off against the MAT
credit available.

5.2.5 Procedure for Computation of MAT under Section 115JB

The provisions of section 115JB provide for working out the income-tax payable as MAT on a
deeming basis. The MAT tax liability under section 115JB can be worked out by undergoing the
following steps:-

1. Compute the total income of the company ignoring the provisions of under Section 115JB.
2. Compute the income-tax payable on total income.

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