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Framework for computation of book profit for the purposes of levy of MAT under section 115JB of the Income-tax Act, 1961 for Indian Accounting Standards (Ind AS) compliant companies

News and Press Release - Dated:- 5-8-2016 - Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, 5th August, 2016. PRESS RELEASE Subject: . A Committee had been constituted, with the approval of the Finance Minister, to suggest the in the year of adoption and thereafter. The Committee submitted its report dated 18th March, 2016 regarding the said framework. The above report of the Committee was placed on public domain for inviting comments from g .....

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rt dated 23rd July, 2016. The comments/suggestions may be submitted by 20th August, 2016 at the email addresses (dirtpl3@nic.in) or by post at the following address with Computation of book profit for Ind-AS compliant companies written on the envelope: Director (Tax Policy & Legislation)-III Central Board of Direct Taxes, Room No.147-G, North Block, New Delhi-110001 (Meenakshi J. Goswami) Commissioner of Income Tax (Media and Technical Policy) Official Spokesperson, CBDT. Shri Atulesh Jindal .....

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ggestions received from stakeholders on the interim report, which was placed in the public domain vide Press Release dated 28th April, 2016, have been examined by the Committee. 2. The recommendation/ suggestions on the main issues relating to first time adoption raised by the stakeholders are as under. I. Fixed Assets - Adjustment to retained earnings Issue: As per Indian Accounting Standard (Ind AS) 101, First-time Adoption of Indian Accounting Standards, an entity may elect to measure an item .....

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ent for MAT: The Committee in its interim report had suggested that as aforesaid adjustments shall never be reclassified to the Profit and Loss Account, the amount of adjustment should be included in the book profit in the year of first time adoption of Ind AS. In response to this, the stakeholders have raised concerns regarding taxation of unrealised gains/losses, The Committee has deliberated and recommends the following - Existing provisions for computation of book profits under section 115JB .....

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isposal/retirement of such assets shall be computed ignoring the aforesaid retained earnings adjustment. Other adjustments to fixed assets (like Decommissioning Liability, Foreign exchange capitalisation/decapitalization, Borrowing costs adjustments etc.) on the date of transition shall also be ignored in a similar manner, The same principles shall also apply to Intangible assets (Ind AS 38). II. Leases - Straight lining of lease rentals Issue: As per Indian Accounting Standard (lnd AS) 17, Leas .....

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straight lining is not permitted under lnd AS 17, In such cases any existing lease equalization liability/asset shall be adjusted to retained earnings on date of transition. Suggested treatment for MAT: The Committee in its interim report had suggested that as aforesaid adjustments shall never be reclassified to the Profit and Loss Account, the amount of adjustment should be included in the book profit in the year of first time adoption of lnd AS. In response to this, the stakeholders have rais .....

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9. C. The retained earnings adjustment should be included in the book profit over a period of three years starting from the year of first time adoption of Ind AS. Considering the dual aspects of significant one time charge and simplicity of implementation, the Committee recommends option C. III. Investments - Fair value adjustments through profit & loss account Issue: As per Indian Accounting Standard (Ind AS) 109, Financial Instruments, an entity shall measure its financial asset or financi .....

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teria and measured at fair value through profit or loss; Derivative assets and liabilities; Any other financial asset or financial liability carried at fair value through profit or loss. In such cases any adjustments arising from recognition of these items at fair value on first time adoption shall be adjusted to retained earnings on the date of transition. Suggested treatment for MAT: The Committee in its interim report had suggested that as aforesaid adjustments shall never be reclassified to .....

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