CHAPTER V
COMPUTATION OF BOOK PROFIT
104. (1) Notwithstanding anything in this Code, where the normal income-tax payable for a financial year by a company is less than the tax on book profit, the book profit shall be deemed to be the total income of the company for such financial year and it shall be liable to income-tax on such total income at the rate specified in Paragraph A of the Second Schedule.
(2) Subject to the provisions of this Chapter, the book profit referred to in sub-section (1) shall be computed in accordance with the formula—
A+B-(C+D)
Where
A= the net profit, as shown in the profit and loss account for the financial year prepared in accordance with the provisions of section 105;
B = the aggregate of the following amounts, if debited to the profit and loss account:
(a) the amount of any tax paid or payable under this Code, and the provision therefor;
(b) the amount carried to any reserves, by whatever name called;
(c) the amount set aside as provision for meeting unascertained liabilities;
(d) the amount by way of provision for losses of subsidiary companies;
(e) the amount of dividends paid or proposed;
(f) the amount of depreciation;
(g) the amount of deferred tax and the provision therefor;
(h) the amount set aside as provision for diminution in the value of any asset;
(i) the amount of any expenditure referred to in clause (a) of sub-section (1) of section 18; C = the aggregate of the following amounts:
(a) the amount of depreciation debited to the profit and loss account (excluding the depreciation on account of revaluation of assets);
(b) the amount withdrawn from the revaluation reserve and credited to the profit and loss account, to the extent it does not exceed the amount of depreciation on account of revaluation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 (a);
(c) the amount withdrawn from any reserve or provision if any such amount is credited to the profit and loss account and such amount has been taken into account for computation of the book profit of any preceding financial year;
(d) the amount of profits of a sick industrial company for any financial year comprised in the period commencing from the financial year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 and ending with the financial year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses;
(e) the amount of any income referred to in section 10 read with the Sixth Schedule, if credited to the profit and loss account;
(f) the amount of deferred tax, if any such amount is credited to the profit and loss account;
D = the amount of loss brought forward.
(3) In sub-section (2), the loss brought forward shall be—
(i) nil, if such loss brought forward (excluding depreciation) or unabsorbed depreciation as per books of account, as the case may be is nil; or
(ii) the amount of loss brought forward (excluding depreciation) or unabsorbed depreciation as per books of account, whichever is less, in any other case.
(4) In sub-section (2), the amount of tax shall include—
(a) any interest charged or chargeable under this Code;
(b) any tax on distributed profits under section 109 ;
(c) any tax on distributed income under section 110;
(d) any tax paid on branch profits under section 111; and
(e) any tax on wealth under section 112.
(5) Every company to which this section applies shall obtain a report in such form as may be prescribed from an accountant certifying that the book profit has been computed in accordance with the provisions of this section.
(6) In this Chapter—
(a) "normal income-tax" means the income-tax payable for a financial year by a company on its total income in accordance with the provisions other than the provisions of this Chapter;
(b) "tax on book profit" means the amount of tax computed on book profit at a rate specified in Paragraph A of the Second Schedule.
