MAT on INDAS co's
As per Section 115JB (1) of Income Tax Act ,1961 in case of a company if the income-tax payable under the normal provisions of Income-tax Act,1961 is less than 18.5% of its book profit, then such book profit shall be deemed to be the total income of the assessee and tax shall be payable @18.5% ( add cess and surcharge, if applicable) on such book profit.
*Book Profit is the amount arrived at by making some additions/(deletions) as specified under section 115JB(2),to the profits calculated as per Schedule III of companies Act,2013
Where as on the other hand, the Central Government had notified the new Indian Accounting Standards (‘Ind AS’) vide the Companies (Indian Accounting Standards) Rules, 2015 which laid down a roadmap for implementation of Ind AS.
For an Ind AS compliant company profit & loss account is bifurcated into two parts:
- Net profit or loss for the year;
- Net Other Comprehensive Income (‘OCI’) (including items to be reclassified into profit & loss account in subsequent periods and items not to be reclassified into profit & loss account in subsequent periods)
Which results in the profits based on Ind AS compliant financial statements likely to be different from the profits based on existing Indian GAAP.
Abstracted MAT Provisions-IND AS companies
Considering that the book profit based on Ind AS compliant financial statements is likely to be different from the book profit based on existing Indian GAAP, Section 115JB provides a separate framework for computation of book profit for IND AS companies in the year of adoption and thereafter.
MAT computation for IND AS companies
For MAT calculation of IND AS companies, the starting point is the net profit as per the statement of profit and loss before considering any items forming a part of Other Comprehensive Income (OCI)
Further no adjustments to the net profits before other comprehensive income should be made other than those already specified under explanation 1 to section 115JB(2).
|Net Profit Before Tax as per Statement of P&L||XXX|
|Add/Less||Effects of normal MAT provisions - Explanation 1 to Sec.115JB(2)||XXX|
|Book profit to be used to compute MAT||XXX|
*Year of convergence: The year in which IND AS are adopted by the company as per IND AS 101
** Transition amount: The aggregate of amounts adjusted in other equity (excluding capital reserve and securities premium reserve) on the convergence date.
|Book profit to be used to compute MAT (As computed above)||XXX|
|Add/less||1. Amount credited/(debited) to P/L on distribution of non-cash assets to shareholders in demerger as per IND AS 10 (Appendix A)||XXX|
|Add/less||2. Amount credited/(debited) to other comprehensive income under the head “items that will not be re-classified to profit/loss [ except the following 3,4,5 items which are to be included at the specified point of time ]||XXX|
|Add/less||3. Changes in revaluation surplus for fixed assets & intangible assets- to be included in the year of realisation/ disposal / retirement or otherwise transferred||XXX|
|Add/less||4. Gains or losses from investments in equity instruments measured at fair value through other comprehensive income -to be included in the year of realisation / disposal / retirement or otherwise transferred||XXX|
|Add/less||5. Remeasurement of defined benefit plans (Ind AS 19)- To be included in book profits every year as the remeasurements gains and losses arise||XXX|
|Add/less||6. All adjustments recorded in ‘Other Equity’ (excluding Capital Reserve and Securities Premium Reserve) on the transition date and which would otherwise never subsequently be reclassified to the profit and loss account, shall be included in the book profits, equally over a period of 5 years starting from the year of first time adoption of Ind AS.||XXX|
|Add/less||7. Adjustments in respect of Investment in JV, Subsidiary & Associates measured at FV – to be included in the in the year of realization of such investment.||XXX|
|Add/less||8. Adjustments on account of cumulative translation difference relating to foreign operation -to be included in the year of disposal of such foreign operations||XXX|
|Add/less||9. All adjustments relating to retained earnings on the transition date, shall be included in the book profits, equally over a period of 5 years starting from the year of first time adoption of Ind AS.||XXX|
|Total Book profit Computed as per Sec 115JB||XXX|
Note : Any deffered tax adjustments recorded in Reserves and Surplus on account of transition to IND AS shall be included
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Ankit C Shetty