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Commentary
Updated up to The Finance Act, 2016
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44 Records 
INTRODUCTION
1.1 History of Minimum Alternate Tax (MAT)
1.2 Rationale for MAT
1.3 Salient features of MAT Regime u/s 115JB
1.4 MAT payable
WHO IS LIABLE TO PAY MAT
2.1 Who is liable to pay MAT
2.2 "Company"
2.3 MAT not applicable to income from life insurance business
2.4 Where company has no taxable income but has a positive book profit
2.5 Where company has negative net profit as per its P&L account but has a positive book profit
2.6 Where company has positive net profit and taxable income but negative book profit
2.7 Applicability to foreign companies
2.8 Applicability to assessees covered by presumptive tax provisions
2.9 Exemption to sick industrial companies
2.10 MAT not applicable where company incurring commercial losses not attributable to tax incentives
2.11 Applicability of MAT to section 25 companies (now section 8 Companies) and mutual concerns
2.12 Applicability of MAT to shipping companies covered by Tonnage Tax Scheme
2.13 Applicability of MAT to company eligible for tax holiday
2.14 Applicability of MAT to company whose total income is Nil
2.15 When liability to MAT arises
2.16 Domestic companies which opt for new concessional 25% tax regime under section 115BA
BOOK PROFIT
3.1 Definition of 'book profit'
3.2 Computation of book profit
3.3 Implicit relationship of 'book profit' with distributable profit i.e. profit available for distribution or appropriation
3.4 'Book profit' quarantined from 'total income'
3.5 Auditor's certificate
3.6 Reopening of assessment where retrospective amendments made to section 115JB
NET PROFIT AS PER PROFIT AND LOSS ACCOUNT
4.1 "Net profit as shown in the profit and loss account"
4.2 Preparation of Profit and Loss Account in accordance with section 115JB(2)
4.3 Relevance of sections 348 and 349 of the Companies Act, 1956 [now section 198 of the Companies Act, 2013] (see Appendix) for calculating net profits for section 115JB purposes
4.4 Profit and Loss account as per Revised Schedule VI [now Schedule III]
4.5 Prior Period Items and extraordinary items
4.6 Gain due to restatement at the balance sheet date of foreign currency term loan
4.7 Profit on sale of assets credited to profit & loss account being long-term capital gain eligible for section 54EC benefit
4.8 Treatment of the cessation of liability on account of settlement loan liability with bank for the purpose of book profits
4.9 Income received by assessee, which had earlier been written off as a bad debt
4.10 Deduction under section 80-IB cannot be allowed while computing book profit under section 115JB
4.11 Accumulated depreciation standing in provision for depreciation account as credit balance in respect of assets sold or disposed of
4.12 Capital gains exempt under section 47(iv)
4.13 Interest on borrowed capital not debited to P&L account
4.14 Income by way of interest on Zero Coupon Bonds not accrued during previous year
4.15 Loss on sale of fixed assets debited to P&L account
4.16 Income covered by the principle of mutuality
4.17 Waiver of loan and interest by the lender (gains)
4.18 Central Govt. grant for modernization of machinery and compensation from State Govt. for loss of assessee company's compound wall
4.19 Amount received on transfer of marketing rights and technical know-how
4.20 Reimbursement of advance tax by parties
4.21 Profit on sale of shares received by company under family arrangement
4.22 Gains arising on pre-payment of deferred sales tax loans at NPV as per State Govt. Schemes
4.23 Notional difference in maintenance expenditure on account of change in accounting procedure
4.24 Loan admitted as income by assessee
4.25 Incremental liability towards leave encashment not debited to P&L but otherwise disclosed in notes to accounts
4.26 Where the Company Revises its accounts which were adopted by AGM and submits revised return
4.27 Change in accounting policy from treating preliminary expenses as deferred revenue to writing off in one go and qualified by auditor - Whether violation of Schedule VI [now Schedule III]
4.28 Revised accounts pursuant to scheme of amalgamation which has retrospective effect
INCOME-TAX PAID/PAYABLE/ PROVISION FOR INCOME-TAX
5.1 Addition to net profit of income-tax amount
5.2 "Amount of income-tax"
5.3 Deferred tax
5.4 Provision for wealth-tax - Whether can be added to net profit
5.5 Foreign income tax
AMOUNTS CARRIED TO RESERVES
6.1 Addition to net profit of amounts carried to reserves
6.2 Conditions to be satisfied for addition under clause (b) of Explanation 1
6.3 "Reserve" contemplated by clause (b)
6.4 Amounts carried to debenture redemption reserve/loan redemption reserve
6.5 Profit on sale of land directly credited to capital reserve
6.6 Profit on redemption of investments (mutual fund units) taken to capital reserve without routing it through profit and loss account
6.7 Gain on repossession of vessels by creditor on assessee-company's default credited directly by assessee to capital reserve
PROVISIONS FOR UNASCERTAINED LIABILITIES
7.1 Unascertained liabilities to be added to net profits
7.2 Ascertained liabilities of a capital nature to be added to net profits
7.3 Ascertained liability - Connotation of
7.4 Liability other than ascertained liability (i.e., contingent liability)
7.5 Is provision for product warranties an ascertained liability
7.6 Where assessee suffered losses due to earthquake and made provision for repairs as per Government agency's estimates
7.7 Where provision for ascertained liability made in a year different from the year in which the liability arose
7.8 Distinction between 'condition precedent to creating a liability' & 'condition precedent to discharging a liability'
7.9 Provision for gratuity made on the basis of actuarial valuation
7.10 Provision for bonus
7.11 Where provisions for ascertained liabilities erroneously credited to Reserves
7.12 Provision for future losses
7.13 Provisions for liquidated damages
7.14 Provision towards leave encashment of employees
7.15 Provision for site restoration expenses
PROVISION FOR LOSSES OF SUBSIDIARY COMPANIES
8.1 Addition of provision for losses of subsidiary companies to net profits
8.2 Share of loss from a firm
DIVIDENDS PAID OR PROPOSED
9.1 Addition to net profits of dividends paid or proposed
EXPENDITURES RELATED TO TAX-FREE INCOMES
10.1 Addition of expenditures related to tax-free incomes to net profit
10.2 Share of loss from firm
10.3 No basis for the argument that only direct expenses have to be added back
10.4 Which amount to be added to book profit-amount debited to P&L or disallowance computed under rule 8D
EXPENDITURE RELATABLE TO SHARE OF INCOME IN AOP/BOI
11.1 Expenditure relatable to company's share of income in any AOP OR BOI
11.2 "Relatable to"
EXPENDITURE RELATABLE TO INCOME OF FOREIGN COMPANY TAXABLE AT LESS THAN MAT RATE OF 18.5%
12.1 Expenditure relatable to foreign company's income taxable at less than MAT rate of 18.5%
12.2 "Relatable to"
NOTIONAL LOSS OF SPONSORS OF REITs AND INVITs ON EXCHANGE OF SHARES IN SPV FOR UNITS OF REIT/INVIT OR DUE TO CHANGE IN VALUE OF UNITS OR LOSS ON TRANSFER OF UNITS
13.1 Notional Loss/Actual Loss from on its of REIT/InVIT to sponsor-company
EXPENDITURE RELATABLE TO ROYALTY INCOME IN RESPECT OF PATENTS TAXABLE UNDER SECTION 115BBF
14.1 Expenditure relatable to resident company's royalty income from patents chargeable to tax u/s 115BBF @10% (i.e. at less than mat rate of 18.5%)
14.2 "Relatable to"
AMOUNT OF DEPRECIATION
15.1 Accounting for depreciation
15.2 Adjustments to net profit related to depreciation
AMOUNT OF DEFERRED TAX AND PROVISION THEREFOR
16.1 Addition to/deduction from net profits of deferred tax
16.2 "Deferred tax" does not refer to deferred sales tax
AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET
17.1 Amount or amounts set aside as provision for diminution in the value of any asset
17.2 Examples of provisions for diminution in the value of assets
17.3 Write-off of Bad Debts v. Provision for Doubtful Debts
17.4 Withdrawals from provisions for diminution in assets/reversals of such provisions
REVALUATION RESERVE IN RESPECT OF ASSET RETIRED/DISPOSED OF
18.1 Revaluation reserve balance in respect of asset disposed of retired
18.2 Objective of clause (j)
18.3 Case Studies and Illustrations on MAT
ACTUAL LOSS TO SPONSOR OF REIT/INVIT ON TRANSFER OF UNITS
19.1 Actual loss to Sponsor of REIT/InVIT on transfer of units carried in books at Fair Value
WITHDRAWALS FROM RESERVES OR PROVISIONS
20.1 Deduction of withdrawals from reserves/provisions from net profit
20.2 Reduction from net profit of withdrawals from reserves
20.3 Meaning of 'credit to profit and loss account'
20.4 Reduction from net profit of withdrawals from provisions
20.5 Intent behind clause (i) of Explanation 1
TAX-FREE INCOMES UNDER SECTION 10/11/12
21.1 Tax-free incomes - Deduction from net profit
21.2 Would an item of receipt not falling under definition of income be excluded from "Book Profit"
21.3 Profit on sale of rural agricultural land
21.4 "If any such amount is credited to the profit and loss account"
SHARE OF INCOME FROM AOP/BOI OF WHICH THE COMPANY IS A MEMBER
22.1 Backdrop
22.2 Share of income from AOP/BOI to be excluded from book profit
INCOME OF FOREIGN COMPANY TAXABLE AT LESS THAN THE MAT RATE OF 18.5%
23.1 Applicability of clause (iid) of Explanation 1
23.2 Conditions for exclusion of income of foreign company from MAT
NOTIONAL GAIN ON EXCHANGE OF SHARES OF SPV FOR UNITS OF REIT/INVIT & ACTUAL GAIN FROM TRANSFER OF SUCH UNITS
24.1 Notional/Actual gain from units of REIT/InVIT (In case of sponsor-company)
ACTUAL LOSS TO SPONSOR OF REIT/INVIT ON TRANSFER OF UNITS
25.1 Actual loss to sponsor of ReIT/InVIT on transfer of units of REIT/InVIT carried at fair value
ROYALTY INCOME OF PATENTEE - COMPANY TAXABLE U/S 115BBF @ 10%
26.1 Concessional rate of tax @ 10% on royalty income from patent
26.2 MAT Treatment of royalty income taxable u/s 115BBF @ 10%
LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION
27.1 Loss brought forward/unabsorbed depreciation to be deducted from net profit
27.2 Where company does not own any depreciable asset
27.3 Where arrears of depreciation charged in current year's P&L Account
27.4 Whether arrears of depreciation disclosed in notes to accounts can be considered for the purposes of clause (iii) of Explanation 1
27.5 Set off of losses of amalgamating company
27.6 Whether deduction under clause (iii) can be denied by resorting to section 79 of the Act
27.7 Brought forward losses at the beginning of the year becomes nil at the end of year due to reduction of capital
PROFITS OF A SICK INDUSTRIAL COMPANY
28.1 Profits of sick industrial company to be deducted from net profits
28.2 Net worth
AMOUNT OF DEFERRED TAX CREDITED TO P&L ACCOUNT
29.1 Deferred Tax to be deducted only if credited to P&L
29.2 Clause (viii) of Explanation 1 not applicable to deferred sales tax
MAT CREDIT
30.1 Principles governing carry forward and set off of mat credit
30.2 What happens to unutilised mat credit when company converts itself into a LLP
30.3 How should the advance tax be calculated when the company has mat credit
APPLICABILITY OF AUDIT UNDER SECTION 115JB
31.1 Applicability of audit u/s 115JB
31.2 "Every company to whom this section applies"
31.3 Scope of audit under section 115JB
31.4 Report under section 115JB i.e. Form No. 29B
31.5 Respective responsibilities of the accountant and the company
31.6 Scope of examination
AUDIT REPORT : PARA 1 OF FORM NO. 29B
32.1 Examination of accounts and records
32.2 Nature of business
32.3 Where statutory audit under Companies Act/tax audit is not complete
AUDIT REPORT : PARA 2(a) OF FORM NO. 29B
32A.1 Certification of computation of 'book profit' and income-tax payable under section 115JB
32A.2 Reporting against para 2(a)
AUDIT REPORT : PARA 3 OF FORM NO. 29B
33.1 Certification of particulars in Annexure A
33.2 'True and correct'
AUDIT REPORT : ANNEXURE A TO FORM NO. 29B
34.1 Columns 1 to 4 of Annexure A - Routine Details
34.2 Column 5 - Total income of the company under the Income-tax Act
34.3 Column 6 - Income-tax payable on total income
34.4 Column 7 - Whether profit and loss account is prepared in accordance with the provisions of Parts II & III of Schedule VI to the Companies Act, 1956 (1 of 1956) [now Part II of Schedule III to the Companies Act, 2013]
34.5 Column 8 - Differences/variation in accounting policies, accounting standards, methods and rates of depreciation
34.6 Column No. 9 - Net profit according to profit and loss account referred to in (7) above
34.7 Column Nos. 10 and 11 - Adjustments to net profit as per Explanation 1
34.8 Columns 12 & 13 - Book profit figure and MAT Liability
34.9 Column 14 - Where income-tax payable by company in column 6 is less than 18.5% of book profits
34.10 Signing of Form No. 29B by CA (Partner/proprietor of CA firm)
AUDIT REPORT : MODEL AUDIT REPORT IN FORM NO. 29B
For computing the books profit of the company
AMT REGIME - APPLICABLE TO ALL NON-CORPORATE ASSESSEES W.E.F. A.Y. 2013-14
36.1 Extension of AMT to all non-corporate assessees w.e.f. A.Y. 2013-14
36.2 Generally only non-corporate assessees having business income would be covered under section 115JC
36.3 AMT not applicable to LLPs incorporated abroad
36.4 Applicability of AMT to assessees covered by presumptive tax under section 44AD
36.5 Applicability of AMT to assessees covered by presumptive tax under section 44ADA [i.e. professionals covered by section 44AA(1)]
36.6 Applicability of AMT to assessees covered by presumptive tax under sections 44AE, 44B, 44BB, 44BBA and 44BBB
36.7 Precondition for applicability of AMT to firms and LLPs
36.8 Precondition for applicability of AMT to non-corporate assessees other than firms and LLPs
36.9 Applicability of AMT to co-operative societies
36.10 Whether AMT applicable if total income is 'nil' and no regular income tax is payable
36.11 Steps for calculating AMT for LLPs and firms
36.12 Steps for calculating AMT for individuals, HUFs, AOPs, BOIs and AJPs
36.13 Deductions under Chapter VIA-C
36.14 Tax credit for AMT
36.15 Carry forward of tax credit (AMT) in case of conversion of firms into LLPs/conversion of firms/LLPs into companies
36.16 Variation of tax credit
36.17 Whether AMT credit treated as advance tax paid for sections 234A, 234B and 234C
36.18 Certificate required from 'accountant'
36.19 Application of other provisions of this Act - Section 115JE
36.20 Whether AMT credit treated as advance tax paid for sections 234A, 234B and 234C
APPLICABILITY OF AUDIT UNDER SECTION 115JC(3)
37.1 Form No. 29C Notified for Audit Report u/s 115JC(3)
37.2 Form 29C - Auditor's report under section 115JC
37.3 Comparison of Form No. 29B and Form No. 29C
37.4 Scope of audit u/s 115JC(3)
37.5 Respective responsibilities of the accountant and the company
37.6 Scope of examination
AUDIT REPORT : PARA 1 OF FORM NO. 29C
38.1 Examination of accounts and records
38.2 Nature of business
AUDIT REPORT : PARA 2(a) OF FORM NO. 29C
39.1 Certification of computation of ATI and AMT
39.2 Reporting against Para 2(a)
AUDIT REPORT : PARA 3 OF FORM NO. 29C
40.1 Certification of particulars in Annexure A
AUDIT REPORT : ANNEXURE A TO FORM NO. 29C
41.1 Columns 1 to 4 of Annexure A - Routine details
41.2 Column 5 - Total income of the assessee computed before giving effect to Chapter XII-BA
41.3 Column 6 - Income-tax payable on total income referred to in column 5
41.4 Column 7 - Amount of deduction claimed under any section included in Chapter VI-A under the heading 'C'.—"Deductions in respect of certain incomes"
41.5 Column 8 - Amount of deduction claimed under section 10AA
41.6 Column 9 - Adjusted total income of the assessee (5 + 7 + 8)
41.7 No column in the annexure for section 35AD deduction
41.8 Alternate minimum tax (18.5% of adjusted total income computed in column 9 above)
AUDIT REPORT : MODEL AUDIT REPORT IN FORM NO. 29C
FORM NO. 29C AUDIT REPORT : MODEL AUDIT REPORT IN FORM NO. 29C
APPENDICES
APPENDIX 1 RELEVANT EXTRACTS OF INCOME-TAX ACT, 1961
APPENDIX 2 COMPANIES (INDIAN ACCOUNTING STANDARDS) RULES, 2015
APPENDIX 3 REPORT OF MAT-IND AS COMMITTEE
APPENDIX 4 SCHEDULE III OF COMPANIES ACT, 2013
APPENDIX 5 RELEVANT FORMS OF INCOME-TAX RULES, 1962