Calculation of Book Profit for MAT
Book profit for MAT is determined by adjusting net profit as per the statement of profit and loss in accordance with the Companies Act, by making specified additions (positive adjustments) and deletions (negative adjustments).
Positive Adjustments
The following items, if debited to the statement of profit and loss, must be added back:
- Income-tax, including interest, surcharge, cess, and provisions.
- Reserves created (exceptSection 33ACreserve).
- Provisions for unascertained liabilities or losses of subsidiary company.
- Dividend paid or proposed.
- Expenses relating to exempt income underSections 10,11, or 12.
- Expenditure related to a company’s share in AOP/BOI’s income on which no income tax is payable underSection 86.
- Expenses related to passive income of foreign companies, taxed at rates lower than the MAT rate (e.g., capital gain, interest, dividend, royalty, and FTS).
- Notional losses on exchange of SPV shares for business trust units.
- Actual gain on transfer of business trust units that were received in exchange of SPV shares.
- Expenditure related to royalty in respect of patents taxable undersection 115BBF.
- Depreciation.
- Deferred tax liabilities and provision therefore.
- Provisions for diminution in asset value.
- Revaluation reserves upon asset retirement/disposal.
Negative Adjustments
The following items, if credited to the statement of profit and loss, are deducted:
- Amounts withdrawn from any reserve or provision.
- Exempt incomes underSections 10,11, or 12.
- Depreciation (excluding revaluation-related depreciation).
- Deferred Tax Asset if credited.
- Amounts withdrawn from revaluation reserves (up to the amount of depreciation debited).
- Company’s share in AOP/BOI’s income on which no income tax is payable underSection 86.
- Passive income of foreign companies, taxed at rates lower than the MAT rate.
- Notional gains on exchange of SPV shares for business trust units.
- Actual loss on transfer of business trust units that were received in exchange of SPV shares.
- Royalty for patents underSection 115BBF.
- Unabsorbed depreciation and brought-forward losses of insolvent companies or companies whose board of directors is suspended by NCLT.
- Unabsorbed depreciation or brought-forward losses, whichever is less, in case of companies (other than insolvent companies)
- Profit of sick industrial company