The Chapter comprises of Carry Forward and Set Off of Losses in the case of Companies, Computation of Taxable Income of Companies; Computation of Corporate Tax Liability; Minimum Alternate Tax; and Tax on Distributed Profits of Domestic Companies. Surcharge, Minimum Alternate Tax, Problems on MAT. The Finance Act, 2022 has inserted a new section 79A to the Income-tax Act to restrict set off of losses consequent to search, requisition and survey. It has been provided that in case the total income of any previous year of an assessee includes any undisclosed income detected as a result of: (a) Search initiated under section 132; or (b) A requisition made under section 132A; or (c) A survey conducted under section 133A other than under section 133A(2A). Then, no set-off of any loss, whether brought forward or otherwise, or unabsorbed depreciation, shall be allowed against such undisclosed income while computing the total income of the assessee for such previous year. The total income of accompany is also computed in the manner in which income of any assessee is computed. A company is assessed in its own name; i.e. a company pays tax on its income as a distinct unit. A tax paid by a company is not deemed to have been paid on behalf of its shareholders. It is determined as follows: 1. First ascertain income under the different heads of income. 2. Income of other persons may be included in the income of the company under sections 60 and 61( para 206 and 207) 3. Current and brought forward losses should be adjusted according to the provisions of sections 70 to 80 (as per para 226 to 233).Para 335 of section 79 provides all the provisions regarding set off and carry forward of losses of closely held companies. 4. The total income so derived under computation of different heads of income is “Gross Total Income”. 5. Following deductions are allowed from the Gross total income so computed, under section 80C to 80 U

1. Corporate Tax Planning
Unit III
Computation of Corporate Tax
Carry Forward and Set Off of Losses in the case of Companies,
Computation of Taxable Income of Companies; Computation of
Corporate Tax Liability; Minimum Alternate Tax; and Tax on
Corporate Tax Liability; Minimum Alternate Tax; and Tax on
Distributed Profits of Domestic Companies.
Prepared By
Mr. Dayananda Huded M.Com NET, KSET
Teasching Assistant,
Rani Channamma University, P. G. Centre, Jamkhandi
E-Maill: dayanandch65@gmail.com
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Mr. Dayananda Huded

2. Carry Forward and Set Off of Losses in the case of Companies
• 1) Speculative business losses can be set off against the speculative business income
of the firm in subsequent 4 years
• 2) Non-speculative business losses can be set off against any business profit of the
firm in subsequent 8 years.
• 3) Long-term Capital losses can be set off against long-term capital gains in the
period specified in (2).
• 4) Short term capital losses can be set of against long term capital gains as well as
• 4) Short term capital losses can be set of against long term capital gains as well as
short term capital gains of the firm in the period specified in (2).
• 5) Unabsorbed depreciation can be set-of against business or any other income of the
firm.
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Mr. Dayananda Huded

3. • Losses from Non-speculative Business (Regular Business) Loss
• Can be carry forward up to next 8 assessment years from the assessment year in
which the loss was incurred
• Can be adjusted only against Income from business or profession
• Not necessary to continue the business at the time of set off in future years
• Cannot be carried forward if the return is not filed within the original due date.
• Speculative Business Loss
• Can be carry forward up to next 4 assessment years from the assessment year in
• Can be carry forward up to next 4 assessment years from the assessment year in
which the loss was incurred
• Can be adjusted only against Income from speculative business
• Cannot be carried forward if the return is not filed within the original due date.
• Not necessary to continue the business at the time of set off in future years
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Mr. Dayananda Huded

4. • Specified Business Loss under 35AD
• No time limit to carry forward the losses from the specified business under 35AD
• Not necessary to continue the business at the time of set off in future years
• Cannot be carried forward if the return is not filed within the original due date
• Can be adjusted only against Income from specified business under 35AD
• Capital Losses
• Capital Losses
• Can be carry forward up to next 8 assessment years from the assessment year in
which the loss was incurred
• Long-term capital losses can be adjusted only against long-term capital gains.
• Short-term capital losses can be set off against long-term capital gains as well as
short-term capital gains
• Cannot be carried forward if the return is not filed within the original due date
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Mr. Dayananda Huded

5. No Set Off of Loss Against Undisclosed Income Discovered During Search
• The Finance Act, 2022 has inserted a new section 79A to the Income-tax Act to
restrict set off of losses consequent to search, requisition and survey. It has been
provided that in case the total income of any previous year of an assessee includes
any undisclosed income detected as a result of:
• (a) Search initiated under section 132; or
• (b) A requisition made under section 132A; or
• (c) A survey conducted under section 133A other than under section 133A(2A).
• (c) A survey conducted under section 133A other than under section 133A(2A).
• Then, no set-off of any loss, whether brought forward or otherwise, or unabsorbed
depreciation, shall be allowed against such undisclosed income while computing the
total income of the assessee for such previous year.
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Mr. Dayananda Huded

6. Computation of Taxable Income & Tax Liability of Companies
• The total income of accompany is also computed in the manner in which income of any
assessee is computed. A company is assessed in its own name; i.e. a company pays tax on
its income as a distinct unit. A tax paid by a company is not deemed to have been paid on
behalf of its shareholders. It is determined as follows:
• 1. First ascertain income under the different heads of income.
• 2. Income of other persons may be included in the income of the company under sections
60 and 61( para 206 and 207)
60 and 61( para 206 and 207)
• 3. Current and brought forward losses should be adjusted according to the provisions of
sections 70 to 80 (as per para 226 to 233).Para 335 of section 79 provides all the
provisions regarding set off and carry forward of losses of closely held companies.
• 4. The total income so derived under computation of different heads of income is “Gross
Total Income”.
• 5. Following deductions are allowed from the Gross total income so computed, under
section 80C to 80 U:-
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Mr. Dayananda Huded

7. Section Nature of Deduction
80G Donations to charitable institutions and funds (para 242)
80GGA Donations to scientific research or rural development (para 244)
80GGB Contribution to political parties (para 245)
80 IA Profits and gains from industrial undertakings engaged in infrastructure , etc
80 IAB Profits and gains by an undertaking or enterprise engaged in development of special Economic Zone
80 IAC Profits and Gains derived from eligible start-up
80 IB Profits and gains from certain industrial undertakings and other than infrastructure development
undertakings
80 IBA Profits and gains from housing projects
80 IBA Profits and gains from housing projects
80 IC Profits and gains of certain undertakings in certain states
80 ID Profits of hotels and convention centres
80 IE Profits of undertakings in North Eastern States
80 JJA Profits from the business of collecting and processing of bio-degradable waste
80 JJAA Employment of new employees
80 LA Income of oofshore Banking units
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6. The resulting sum is net income.

8. Surcharge
• In the case of a domestic company, where the total income of a domestic company is
more than Rs. 1 crore but does not exceed Rs 10 crores, a surcharge of 7 per cent is
levied on the tax, and in case of income exceeding Rs 10 crores – 12 per cent of the
tax amount,” says Yeeshu Sehgal, Head of Tax Market, AKM Global, a tax and consulting
firm.
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Mr. Dayananda Huded

9. Minimum Alternate Tax
• As per Explanation 1 to section 115JB(2) "book profit" for the purposes of section 115JB means
net profit as shown in the statement of profit and loss prepared in accordance with Schedule
III to the Companies Act, 2013 as increased and decreased by certain items prescribed in this
regard. The items to be increased and decreased are as follows:
• (a) increased by all amounts credited to other comprehensive income (OCI) in the statement
of profit and loss that will not be re-classified to profit or loss;
• (b) decreased by all amounts debited to other comprehensive income (OCI) in the statement
of profit and loss that will not be re-classified to profit or loss;
• (c) increased by all amounts or aggregate of amounts debited to the statement of profit and
loss on distribution of non-cash assets to shareholders in a demerger of companies in
accordance with Appendix A of Ind AS 10; and
• (d) decreased by all amounts or aggregate of amounts credited to the statement of profit and
loss on distribution of non-cash assets to shareholders in a demerger of companies in
accordance with Appendix A of Ind AS 10.
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Mr. Dayananda Huded

10. Minimum Alternate Tax
• Problem 1: The book profit of a company in the previous year 2021-22 computed in
accordance with section 115JB of the Income tax Act is Rs. 12, 00,000. Its total income
under the Income Tax Act for the same period is computed at Rs. 3, 50,000. Assume
turnover does not exceed Rs. 400 crore in previous year. Is the company liable to pay
Minimum Alternate Tax? If yes, how much has to be paid?
• Illustration 1: The taxable income of Essem Minerals Pvt. Ltd. computed as per the
provisions of Income-tax Act is Rs. 8,40,000. Book profit of the company computed as
per the provisions of section 115JB is Rs. 18,40,000. What will be the tax liability of
Essem Minerals Pvt. Ltd. (ignore cess and surcharge)?
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Mr. Dayananda Huded

11. • Illustration 2: The taxable income of SM Energy Pvt. Ltd. computed as per the
provisions of Income-tax Act is Rs. 28,40,000. Book profit of the company computed
as per the provisions of section 115JB is Rs. 18,40,000. What will be the tax liability of
SM Energy Pvt. Ltd.
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Mr. Dayananda Huded

12. • Illustration 3: From the following information compute tax payable
by Z Ltd. for the Assessment Year 2022-23:
• 1. Total Income of the company for the P.Y. 2021-22-Rs. 6,00,000
• 2. Book Profit u/s 115JB of the company for the P.Y. 2021-22-Rs.
8,00,000
• 3. Carried forward credit u/s 115JAA from the A.Y. 2021-22-
Rs.1,50,000
Rs.1,50,000
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13. • Illustration 3: The tax liability of Essem Minerals Ltd. for the financial year 2022-23 under the
normal provisions of the Income-tax Act is Rs. 8,40,000 and the liability as per the provisions
of MAT is Rs. 10,00,000. Will the company be entitled to claim any MAT credit in the subsequent
year(s) as per the provisions of section 115JAA? **
• Solution
• A company paying MAT is entitled to claim the credit of MAT paid in excess of normal tax
liability. In this case the liability of Essem Minerals Ltd. for the year 2022-23 under the normal
liability. In this case the liability of Essem Minerals Ltd. for the year 2022-23 under the normal
provisions is Rs. 8,40,000 and as per the provisions of section 115JB it is Rs. 10,00,000 (which
is higher than normal tax liability) and, hence, the company has to pay Rs. 10,00,000, i.e.,
liability as per MAT provisions.
• As per section 115JAA, if in any year a company pays its tax liability as per MAT, then it can
claim MAT credit being the excess MAT paid over the normal tax liability. In this case, as the
liability of MAT is higher, and, hence, the company will be entitled to claim MAT credit of Rs.
1,60,000 (being excess of MAT over normal tax liability of Rs. 8,40,000).
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Mr. Dayananda Huded

14. Tax on Distributed Profits of Domestic Companies
• The tax on distributed profits so paid by the company shall be treated as the final
payment of tax in respect of the amount declared, distributed or paid as dividends and
no further credit there for shall be claimed by the company or by any other person in
respect of the amount of tax so paid.
• No deduction under any other provision of this Act shall be allowed to the company or
a shareholder in respect of the amount which has been charged to tax under sub-
section (1) or the tax thereon.
section (1) or the tax thereon.
• The Domestic Company shall, in addition to the income tax chargeable in respect of its
total income, be liable to pay additional income-tax on any amount declared,
distributed or paid by such company by way of dividend (whether interim or
otherwise), whether out of current and accumulated profits. Such additional income
tax will be chargeable at the rate 15% plus surcharge
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15. • Relief in the case of inter corporate dividend in some cases: Section 115-O(1A)
• This section provides a relief when a holding company has received dividend from its
subsidiary company and in the same financial year the holding company declares
dividend to its shareholders. When dividend is declared, distributed or paid by the
holding company to its shareholders, dividend tax shall be payable to the following
format-
Particulars Amount
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Particulars Amount
Dividend declared , distributed or paid by the holding company to its shareholders (a) XXX
Less: Dividend received by holding company from its subsidiary from its subsidiary
company in the same financial year (b)
XXX
Balance [i.e. (a)-(b) on which dividend tax is payable by the holding company XXX

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