1. In the case of companies, if tax payable on its total income as computed under the I.T. Act, 1961 in respect of any previous years, is less than 15% (for assessment year 2010-11 and 18% from assessment year 2011-12) of its “book profit”, then such book profit shall be deemed to be the total income of the company and tax shall be payable at 15% (for assessment year 2010-11 and 18% from assessment year 2011-12) on such total income.
The profit and loss account should be prepared in accordance with Parts II and III of Schedule VI of the Companies Act, 1956.
The Accounting Policies, the Accounting Standards adopted for preparing such accounts and the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts and laid before the company at its AGM.
2. “Book Profit” means the net profit as shown in the profit and loss account, as increased by –
a. the amount of income-tax paid or payable, and the provision therefore; or
b. the amounts carried to any reserves, by whatever name called other than a reserve specified under section 33AC; or
c. the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or
d. the amount by way of provision for losses of subsidiary companies; or
e. the amount or amounts of dividends paid or proposed; or
f. the amount or amounts of expenditure relatable to any income to which section 10 [other than the provisions contained in section 10(38) or section 10A or section 10B or section 11 or section 12 apply;
g. the amount of depreciation;
h. the amount of deferred tax and provision therefore
i. the amount or amounts set aside as provision for diminution in the value of any asset (w.r.e.f assessment year 2001-02)
[“Income tax” as referred to in (a) above will include:
- Any tax on distributed profits under section 115-O or on distributed income under section 115R
- Any interest charged under the Act
- Surcharge, if any, levied by the Central Acts from time to time
- Education Cess on income tax, if any, levied by the Central Acts from time to time
- Secondary and Higher Education Cess on income tax, if any, levied by the Central Acts from time to time]
if any amount referred to in clauses (a) to (i) is debited to the profit and loss account, and as reduced by –
i. The amount withdrawn from any reserve or provision, if any such amount is credited to the profit and loss account subject to the proviso stated in the section; or
ii. Incomes exempt under any of the provisions of section 10 [other than the provisions contained in section 10(38)] or section 10A or 10B or section 11 or section 12 apply, if any such income is credited to the profit and loss account; or
a. The amount of depreciation debited to profit and loss account (excluding the depreciation on account of revaluation of assets); or
b. The amount withdrawn from revaluation reserve and credited to profit and loss account, to the extent it does not exceed the amount of depreciation on account of revaluation of assets referred to in clause (iia);or
iii. The amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account.
However, for the purpose of this clause –
a. the loss shall not include depreciation;
b. the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil;
iv. The amount of profits eligible for deduction under section 80HHC.
v. The amount of profits eligible for deduction under section 80HHE.
vi. The amount of profits eligible for deduction under section 80HHF.
vii. The amount of profits of sick industrial company during the years in which such company has become sick industrial company under the provisions of Sick Industrial Companies (Special Provision) Act, 1985.
viii. The amount of deferred tax, if any such amount is credited to profit & loss account. (w.r.e.f assessment year 2001-02)
3. Provisions shall not affect carried forward of depreciation and losses under the applicable provisions mentioned in sub-section (3) of section 115JB.
4. Profits of an Entrepreneur in SEZ or Developer of SEZ are not liable for MAT.
5. Tax paid under section 115JB for A.Y. 2006-07 and any subsequent year would be allowed as a credit from the normal tax payable for any subsequent year in accordance with the provisions contained in section 115JAA for 7 assessment years (upto assessment year 2009-10) and for 10 assessment years from assessment year 2010-11.
6. A report in prescribed form (Form No. 29B and Rule 40B) from an accountant as defined in the section 288 shall be furnished along with the return of income.
7. In case of conversion of a private company or unlisted public company into Limited Liability Partnership, Mat credit of erstwhile company will not be allowed to the successor Limited Liability Partnership.