Direct Tax Laws & International TaxationMCQQuestion 5849 of 986

While computing 'Book Profit' for the purposes of Minimum Alternate Tax (MAT) under Section 115JB of the Income-tax Act, 1961, which of the following items is DEDUCTED from the net profit as per Statement of Profit and Loss?

Select Your Answer (Keyboard: A, B, C, D)

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Correct Answer

✅ Option C — Amount of brought forward loss or unabsorbed depreciation, whichever is less, as per books of account

All Options:

AAmount of income-tax paid or payable, and the provision therefor
BAmount of deferred tax and the provision therefor
CAmount of brought forward loss or unabsorbed depreciation, whichever is less, as per books of account ✓
DAmount transferred to any reserve, by whatever name called

Detailed Solution & Explanation

Under Section 115JB(2) of the Income-tax Act, 1961:
1. **Book Profit Adjustments**: Starting from Net Profit as per Statement of Profit and Loss (Schedule III):
2. **Additions**: Provision for income tax, transfers to reserves, provision for unascertained liabilities, deferred tax.
3. **Deductions**: Under Explanation 1, Clause (iii):

Deduction = \min (Brought forward business loss as per books, Unabsorbed depreciation as per books)

*(Note: Loss shall not include depreciation)*.
Hence, **Option C** is the correct answer.

Key Concepts to Understand

Depreciation

Allocation of the cost of a tangible fixed asset over its useful life due to wear and tear, efflux of time, or obsolescence.

Net Profit

The final profit of a business after deducting all indirect operating expenses, non-operating expenses, and taxes from Gross Profit. It represents the actual earnings available to the owners.

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