ME

ASSIGNMENT 2

MAT

INTRODUCTION:

Law makers observed that there is many companies which are disclosing massive profit in the accounts as laid in the Annual General Meeting (AGM) before the shareholder but at the same time these companies also showing profit nil or bit above nil for the income tax purpose. Variance between profits as per the Companies Act and as per Income Tax Act was due to many dissimilar allowance of disallowance in the both Acts e.g. difference in method and rate of depreciation provided in both Acts.

To put an end on this trend and bring these kind of companies under the tax net, law maker framed concept of MAT, according to this concept corporate entity has to pay minimum tax. The concept of MAT is govern by the provisions contains in section 115JB of Income Tax Act, 1961.

APPLICABILITY OF MAT:

MAT is applicable to all companies including the foreign companies.

ANALYSIS OF PROVISION OF SECTION 115JB:

Where in case of a company, the income tax payable on the total income as computed under the income tax act in respect of any previous year 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 the tax payable on such total income shall be the amount of income tax at the rate of 18.5%. This income tax is, further has to be enhance by surcharge (as applicable) and education cess (@3%).

In the simple words every company has to compute its income tax liability as per two sets of provisions. The set of provisions which results in higher income tax liability become the income tax payable. Followings are the two set of provisions:

1) Income tax computed as per normal provisions of income tax act.

2) Income tax computed as per provision of section 115JB of income tax act.

MEANING OF BOOK PROFIT:

Book Profit is defined in the explanation 1 to section 115JB as book profit means the net profit as shown in the profit & loss account for the relevant previous year and as increased and decreased by some prescribed items.

In simple words to compute book profit, we have to take profit & loss account and make some prescribed additions and deletions to it.

Before going to analysis prescribed additions and deletions, we must understand the meaning of “Profit & Loss Account”.

MEANING OF PROFIT & LOSS ACCOUNT FOR THE PURPOSE OF BOOK PROFIT:

As per sub-section (2) of section 115JB:-

1) Assessee being a company on which the proviso to sub-section (2) of section 211 of the companies act, 1956 is applicable, shall for the purpose of section 115JB, prepare profit & loss account for the relevant previous year in accordance with the provisions of Act governing such company. (However, proviso to sub-section (2) of section 211 of the companies act, 1956 is applicable on Electricity, Insurance & Banking companies, these company is required to follows the provisions of governing laws for the purpose of making profit & loss account.)

2) Assessee being a company other than a company refer above in (1), shall, for the purpose of section 115JB, prepare the profit & loss account in accordance with provision of part-II of schedule-VI to the Companies Act, 1956.

While preparing the profit & loss account for the purpose of book profit and for the purpose of laying accounts before the company at its AGM, following shall be same:-

1) The accounting polices

2) The accounting standards

3) The method & rates of depreciation.

ANALYSIS OF AMENDMENT PROPOSED BY FINANCE BILL-2015:

Explanation 1 to sub-section (2) of section 115JB prescribed some items which has to be added or deleted from the net profit as shown in the profit and loss account.

1)      Additions to net profit:

Where followings amount (form I to IX) debited to profit & loss account:-

v  Amount of income tax paid or payable and the provision thereof. ( the word “Income Tax” includes CDT u/s 115-O, Interest under income tax act, Education Cess, Income tax and others)

v  The amount carried to any reserve by whatever name called. (like Reserve for expense, excess provision & etc.)

v  The amount set aside for unascertained liabilities i.e. provision for unascertained liability (like pro. for Bed Debts, prov. for gratuity on ad-hoc basic etc.)

v  Provision for loss of subsidiary companies

v  Amount of dividends paid or proposed.

v  Amount of expense relatable to any income to which section 10, 11, 12 (except sec. 10AA & 10(38)) apply. (Its mean income u/s 10AA & long term capital gain exempt u/s 10(38) are subject to MAT).

v  Amount of depreciation (including depreciation on account of revaluation of asset).

v  Amount of deferred tax and provision therefor.

v  Provision for diminution in the value of any assets. (Like pro. for diminution in the value of investment as per AS-13/28).

v  Amount standing in the revaluation reserve relating to revalued asset on the retirement or disposal of such asset. (if not credited to profit & loss account)

2) Deletion to net profit:

v  Amount withdrawn from any reserves or provisions and credited to profit & loss account provided that book profit of relevant previous year should have been increased by such amount.

v  The amount of income to which any of the provisions of section 10, 11 & 12 except 10AA & 10(38) apply.

v  Amount of depreciation debited to profit & loss account, excluding the depreciation on account of revaluation of assets. (i.e. actual depreciation not on part of revaluation has to be deleted from net profit)

v  Amount withdrawn from revaluation reserve and credited to profit & loss account to the extent of depreciation on account of revaluation of asset.

v  Amount of loss brought forward or unabsorbed depreciation, whichever is less as per the books of account. However loss shall not include the depreciation. (if loss brought forward or unabsorbed depreciation is nil then nothing shall be deducted.)

v  Amount of Deferred Tax, is any such amount is credited in the profit & loss account.

MAT CREDIT:

When any amount of tax is paid as MAT by an assessee being a company, then, credit in respect of tax so paid shall be allowed to him in accordance with the provision of section 115JAA.

v  1). Allowable Tax Credit = Difference of MAT paid and income tax payable under normal provision of Income tax Act, 1961.

v  (However, no interest shall be paid on this Tax credit by the revenue.)

v  2). Such tax credit shall be carry forward for 10 assessment year immediately succeeding the assessment year in which such credit is become allowable.

v  3). Tax credit shall be allowed set off in a year when tax becomes payable on the total income in accordance with the normal provisions of the Act.

v  4). Set off shall be allowed to the extent of difference between tax on the total income (under normal provision) and tax which would have been payable u/s 115JB for that assessment year.

APPLICABILITY OF OTHER PROVISIONS OF INCOME TAX ACT:

Section 115JB(5) states that save as otherwise provided in this section, all other provisions of this act shall apply to every company, mentioned in this section.

Therefore the company to which MAT applies shall be liable to pay Advance Tax, interest u/s 234A, 234B & 234C. The company shall also be liable to pay penalty for concealment of income.

FURNISHING OF THE REPORT:

Every company to which this section applies shall furnish a report from a Chartered Accountant in the Form-29B certifying that the book profit has been computed in accordance with the provisions of the section 115JB and such report shall be furnished along with the return of income.

ASSIGNMENT 1

SMART CITY- MISSION OF INDIA

INTODUCTION:

A 'smart city' is an urban region that is highly advanced in terms of overall infrastructure, sustainable real estate, communications and market viability. It is a city where information technology is the principal infrastructure and the basis for providing essential services to residents. There are many technological platforms involved, including but not limited to automated sensor networks and data centres. Though this may sound futuristic, it is now likely to become a reality as the ‘smart cities’ movement unfolds in India.

In a smart city, economic development and activity is sustainable and rationally incremental by virtue of being based on success-oriented market drivers such as supply and demand. They benefit everybody, including citizens, businesses, the government and the environment.

SMART CITY FEATURES:

Some typical features of comprehensive development in Smart Cities are described below.

i.                     Promoting mixed land use in area based developments–planning for ‘unplanned areas’ containing a range of compatible activities and land uses close to one another in order to make land use more efficient. The States will enable some flexibility in land use and building bye-laws to adapt to change.

ii.                   Housing and inclusiveness - expand housing opportunities for all.

iii.                   Creating walkable localities –reduce congestion, air pollution and resource depletion, boost local economy, promote interactions and ensure security. The road network is created or refurbished not only for vehicles and public transport, but also for pedestrians and cyclists, and necessary administrative services are offered within walking or cycling distance.

iv.                  Preserving and developing open spaces - parks, playgrounds, and recreational spaces in order to enhance the quality of life of citizens, reduce the urban heat effects in Areas and generally promote eco-balance.

v.                    Promoting a variety of transport options - Transit Oriented Development (TOD), public transport and last mile para-transport connectivity.

vi.                  Making governance citizen-friendly and cost effective - increasingly rely on online services to bring about accountability and transparency, especially using mobiles to reduce cost of services and providing services without having to go to municipal offices. Forming e-groups to listen to people and obtain feedback and use online monitoring of programs and activities with the aid of cyber tour of worksites.

vii.                Giving an identity to the city - based on its main economic activity, such as local cuisine, health,education, arts and craft, culture, sports goods, furniture, hosiery, textile, dairy, etc.

viii.              Applying Smart Solutions to infrastructure and services in area-based development in order to make them better.

MOTIVATION FOR SMART CITIES:

v  As the global population continues to grow at a steady pace, more and more people are moving to cities every single day

v  Urban areas also contribute a higher share of GDP.

v   In India, the urban population is currently 31% of the total population and it contributes over 60% of India’s GDP

v   It is projected that urban India will contribute nearly 75% of the national GDP in the next 15 years.

v  Cities are accordingly referred to as the engines of economic growth

v  There is need for the cities to get smarter

v  To manage complexity, increase efficiency, reduce expenses, and improve quality of life .

CHALLENGES:

The concept is not without challenges, especially in India. For instance, the success of such a city depends on residents, entrepreneurs and visitors becoming actively involved in energy saving and implementation of new technologies. There are many ways to make residential, commercial and public spaces sustainable by ways of technology, but a high percentage of the total energy use is still in the hands of end users and their behaviour. Also, there is the time factor — such cities can potentially take anything between 20 and 30 years to build.