Landmark Cases on Presumptive and Book Profits (MAT)

Receipts that are exempt from tax under the Income Tax Law cannot be included when computing book profits under Section 115JB of the Act.

Amendments to explanations under Sections 234B and 234C were clarificatory, confirming that assessees were entitled to credit for MAT paid under Section 115JAA even before the amendment, by virtue of Section 140A.

For the purposes of computing book profits under Section 115JB, only reserves created through the profit and loss account can be added back. Reserves not debited to the profit and loss account do not qualify for addition.

Capital gains must be included when computing book profit under section 115J of the Income-tax Act, 1961.

Depreciation need not be computed as per Schedule XIV of the Companies Act when computing profits for the purpose of Section 115J of the Income Tax Act. The Supreme Court expressed disagreement with the ratio laid down in Malayala Manorama.

MAT credit under section 115JAA of the Income-tax Act, 1961, includes surcharge and cess in the calculation of the entire component of taxes.

A sum appropriated as a debenture redemption reserve in the profit and loss account cannot be considered a "reserve" or an amount set apart for unascertained liabilities under Section 115JB(1) of the Income Tax Act.

MAT credit under Section 115JAA of the Income-tax Act includes tax, surcharge, and cess for calculating the credit, as the bifurcation is for administrative convenience and does not change the character of the payment as 'tax'.

The assessing officer cannot arbitrarily apply a higher net profit rate than that accepted by the lower appellate authorities when the assessment is under a presumptive income scheme.

A capital receipt, not falling within the definition of 'income' under Section 2(24), cannot be brought to tax under the Minimum Alternate Tax (MAT) provisions of Section 115JB, even if it relates to incentives like interest or power subsidy.

For the purpose of Section 115JB, the Assessing Officer has the power to examine the company's accounts beyond their face value to ensure they comply with the Companies Act, 1956.

Profits derived by an industrial undertaking from the business of generation or generation and distribution of power, even if consumed captively, are excludable for the purpose of calculating book profit under Explanation clause (iv) to Section 115JA of the Income-tax Act.

Disallowances under section 14A are not includible in book profit computed under section 115JB for the purpose of charging Minimum Alternate Tax (MAT).

Fringe Benefit Tax (FBT) not being part of income-tax, is not required to be added back while arriving at book profits under Section 115JB. Taxes borne by the assessee on non-monetary perquisites provided to employees, akin to FBT, do not constitute income-tax.

Where an assessee's profit declared under section 44AD presumptive taxation is accepted, the Assessing Officer cannot make separate additions by invoking other sections like 69C or 68 for expenses or cash credits.

Deductions under Section 80HHC are eligible based on the computation of profits as per Section 115JA/115JB of the Income-tax Act, which relates to book profits.

Disallowance of expenditure under Section 14A read with Rule 8D cannot be added to the book profit computed under Section 115JB of the Income Tax Act, 1961.

MAT credit under Section 115JAA of the Income Tax Act, brought forward from earlier years, is to be set off against the tax on total income, including surcharge and education cess, rather than being adjusted before charging such surcharge and cess.

Courts and tribunals cannot extend relief against explicit legislative intent, even if hardship results. The plain text of a tax law must be followed.

Courts and tribunals cannot extend relief against statutory provisions when the legislative intent is clear, adhering strictly to the letter of the law even if it appears to cause hardship.

Incentives received under the SHIS scheme are capital receipts, not chargeable under normal provisions, and are to be excluded from revenue and book profits for MAT purposes under Section 115JB.

Courts and tribunals cannot grant relief that contradicts legislative intent, even if it appears harsh, as the law must be applied as written.

The calculation of book profits under Section 115JB of the Income-tax Act, 1961, should be done on a composite and consolidated basis, not year-to-year. Unabsorbed depreciation and brought forward losses must be adjusted on an accumulated basis for set-off purposes.

A provision for gratuity made on an actuarial basis is deductible when computing book profits under Section 115JB of the Income Tax Act.

The provision for bad and doubtful debts should be added back to the book profit for the purpose of computing the tax liability under Section 115JB of the Income-tax Act, 1961. This is in line with decisions from other High Courts.

Subsidies are to be excluded when computing book profits under Section 115JB of the Income Tax Act. The starting point for calculating book profits under Section 115JB is the figure after appropriations and extraordinary items, not the profit figure above the line.

Reserves created otherwise than by debit to the profit and loss account, and not withdrawn, are excludable from book profits for the purpose of Section 115JB of the Act, especially when amendments are retrospective.