CHAPTER XII-B — SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
CHAPTER XII-B — SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
SECTION 115JB — SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COMPANIES (MINIMUM ALTERNATE TAX)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · Live Provision — the current Minimum Alternate Tax
Status: LIVE. Section 115JB was inserted by the Finance Act, 2000, with effect from 1 April 2001 (assessment year 2001-02), and is the present Minimum Alternate Tax. It deems book profit to be the total income where the normal-provisions tax is less than the prescribed percentage of book profit, and it is paired with the tax-credit mechanism of section 115JAA.
Rate of MAT: Originally 7.5 per cent, raised over time to 18.5 per cent of book profit; reduced to 15 per cent of book profit by the Finance Act, 2019 (Taxation Laws (Amendment) Act, 2019) for the assessment year 2020-21 onwards (plus surcharge and cess). A concessional 9 per cent applies to units in International Financial Services Centres deriving income solely in convertible foreign exchange.
Finance Act, 2026 impact: AMENDED. Per the BharatTax Finance Act, 2026 Amendment Tracker (entry 12; sources: Finance Act, 2026; EY Alert), section 115JB is amended to EXTEND the MAT carve-out for certain non-residents: a non-resident opting for presumptive taxation in respect of two additional specified businesses — operation of cruise ships, and providing electronics-manufacturing services to a resident company — is excluded from the MAT charge under section 115JB, with effect from assessment year 2026-27. This extends the existing policy (already excluding foreign companies without a permanent establishment, and non-residents in certain presumptive businesses) to the two further specified businesses. [Practitioners should confirm the precise amended sub-section / Explanation 4 wording against the enacted text; the substance is stated here from the verified Amendment Tracker.]
A. SECTION COMMENTARY
A.1 Scheme and place in the Act
Section 115JB is the operative Minimum Alternate Tax. It applies to an assessee being a company. Where the income-tax payable on the total income computed under the normal provisions is less than the prescribed percentage (now fifteen per cent) of the company’s book profit, the section deems the book profit itself to be the total income, and the tax payable becomes that percentage of book profit (plus surcharge and cess). Sub-section (1) carries the rate and the deeming; the first proviso records the historical reduction of the rate; sub-section (2) prescribes the preparation of the profit and loss account; the Explanation (Explanation 1) defines ‘book profit’ with its list of add-backs and reductions; later sub-sections deal with the audit report in Form 29B (sub-section (4)), the saving of other provisions (sub-section (5)), the special treatment of SEZ units (sub-section (6), now spent by sunset), and the carve-outs for foreign companies and certain non-residents (Explanation 4 and the related sub-sections).
The defining feature distinguishing section 115JB from its ancestor section 115J is that it is a self-contained code that expressly attracts the advance-tax machinery; combined with the MAT-credit mechanism of section 115JAA, the levy operates as an accelerated minimum payment that is later creditable against normal tax.
A.2 ‘Book profit’ — the computation (editorial summary)
This is an editorial summary to make the case law intelligible; it is NOT a verbatim reproduction of Explanation 1. The starting point is the net profit shown in the profit and loss account prepared in accordance with Schedule III to the Companies Act, 2013 (formerly Parts II and III of Schedule VI to the Companies Act, 1956). To that net profit are ADDED (if debited to, or not credited to, the profit and loss account, as the case may be): the income-tax provision; amounts carried to any reserves; provisions for unascertained liabilities; provisions for losses of subsidiaries; dividends paid or proposed; expenditure relatable to exempt incomes (sections 10 [other than 10(38)], 11, 12); depreciation; the amount of deferred tax; and — following the Finance (No. 2) Act, 2009 — the amount set aside as provision for diminution in the value of any asset. From the figure so increased are DEDUCTED: amounts withdrawn from reserves or provisions if credited to the profit and loss account (subject to conditions); specified exempt incomes; depreciation (excluding the depreciation on revaluation of assets); the amount withdrawn from revaluation reserve to the extent it does not exceed the depreciation on revaluation; and the lower of brought-forward loss or unabsorbed depreciation as per the books. Special rules apply to companies undergoing insolvency resolution under the Insolvency and Bankruptcy Code (enhanced set-off of loss and unabsorbed depreciation) and to Indian-Accounting-Standards (Ind-AS) compliant companies (transition-amount and other adjustments inserted by the Finance Act, 2017).
A.3 Core doctrinal themes
Theme (1) — Sanctity of audited accounts (Apollo Tyres): the Assessing Officer accepts the net profit certified under the Companies Act and may make only the Explanation adjustments; he cannot recompute the commercial profit.
Theme (2) — Object is to capture real, commercial profit (Indo Rama Synthetics): MAT exists precisely to tax prosperous, dividend-paying companies whose normal-provisions income is low; the add-backs and reductions are construed to give effect to that object, and devices that drain the profit and loss account (e.g. set-off from revaluation reserve) are not permitted to reduce book profit.
Theme (3) — Add-back of provision for diminution in value of an asset (HCL Comnet, as legislatively reversed): a provision merely reducing the value of an asset (e.g. for doubtful debts) was originally not an add-back; the Finance (No. 2) Act, 2009 inserted clause (i) to Explanation 1 (with retrospective effect from 1 April 2001) to require its add-back, neutralising HCL Comnet for section 115JB years.
Theme (4) — Reductions are confined to the enumerated clauses, computed on book figures: the export-profit reduction is the full eligible deduction (Ajanta Pharma); the loss/depreciation reduction is the lower of book loss or book unabsorbed depreciation (Surana Steels; Bhari Information).
Theme (5) — Self-contained code: advance tax is payable on book-profit liability and interest under sections 234B/234C follows (Rolta India); MAT credit under section 115JAA is set off before interest (Tulsyan NEC).
Theme (6) — No concealment penalty where assessed on book profit (Nalwa Sons): if the final assessment is on section 115JB book profit, additions to the normally-computed income do not attract penalty under section 271(1)(c), because the tax is paid on the deemed book-profit income, not on the concealed normal income.
A.4 Carve-outs and special entities
Foreign companies: after conflicting Authority for Advance Rulings decisions (Timken — not liable; Castleton — liable even without a permanent establishment), the Justice A.P. Shah Committee opined that section 115JB should not apply to foreign companies / FIIs-FPIs without a place of business or permanent establishment in India. The Government accepted this; the Finance Act, 2015 and the Finance Act, 2016 amended section 115JB to exclude, with retrospective effect, foreign companies whose income is taxed at special rates and foreign companies without a permanent establishment / not required to register under the Companies Act. The Finance Act, 2026 (per the verified Amendment Tracker) further extends the carve-out to non-residents opting for presumptive taxation in two additional specified businesses (cruise-ship operation; electronics-manufacturing services to a resident company), from assessment year 2026-27.
Banking, insurance and electricity companies: as originally enacted, section 115JB(2) required all companies to prepare the profit and loss account under Schedule VI; companies governed by their own statutes (the Banking Regulation Act, 1949; the insurance and electricity Acts), which prepare accounts in their statutory forms rather than under Schedule VI, were on a line of authority not exigible to MAT for years before the Finance Act, 2012. The Finance Act, 2012 amended sub-section (2) to permit such companies to prepare the profit and loss account in accordance with their governing Acts, thereby bringing them within section 115JB prospectively.
Companies opting for sections 115BAA / 115BAB: by the Taxation Laws (Amendment) Act, 2019, a company opting for the concessional corporate-tax regime is not liable to MAT under section 115JB and cannot carry forward or set off accumulated MAT credit (CBDT Circular No. 29 of 2019).
B. STATUTORY POSITION (verbatim heading and sub-section (1); Explanation summarised editorially)
Reproduced verbatim from the Income-tax Act, 1961 (Bare Act, as amended by the Finance Act, 2025):
Special provision for payment of tax by certain companies.
115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012, is less than eighteen and one-half per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of eighteen and one-half per cent:
Provided that for the previous year relevant to the assessment year commencing on or after the 1st day of April, 2020, the provisions of this sub-section shall have effect as if for the words "eighteen and one-half per cent" occurring at both the places, the words "fifteen per cent" had been substituted. [Sub-sections (2) to (7), the Explanations (including Explanation 1 defining ‘book profit’ and Explanation 4 on the non-resident / foreign-company carve-out) follow in the bare Act; their detailed text is summarised in Part A above and is not reproduced verbatim here. The Finance Act, 2026 carve-out extension is noted in the header from the verified Amendment Tracker.]
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Object of MAT and the self-contained-code character
Indo Rama Synthetics (I) Ltd. v. Commissioner of Income-tax (2011) 330 ITR 363 (SC).
Facts: The company revalued its fixed assets, crediting the increase of about Rs. 288.58 crore to a revaluation reserve. In a later year it transferred about Rs. 26.11 crore from that revaluation reserve and set it off against the depreciation charge in the profit and loss account, reducing the depreciation actually hitting profit. It then claimed that, because the creation of the reserve had not been debited to the profit and loss account, the withdrawal credited to it should be excluded from book profit under the relevant clause of the Explanation read with the proviso.
Issue: Whether an amount withdrawn from a revaluation reserve and credited to (or used to relieve) the profit and loss account can be reduced from book profit under section 115JB, where the creation of the reserve had not increased the book profit of any earlier year.
Held: The Supreme Court rejected the claim. Had the company charged the full depreciation against profit it would have shown a loss and could not have paid dividends; the manoeuvre of relieving depreciation out of the revaluation reserve was exactly the kind of profit-dressing that MAT is meant to defeat. The amount withdrawn from the revaluation reserve could not be reduced from book profit. The Court emphasised that the object of MAT is to bring out the real profit of companies.
Ratio / why it matters: The reduction for amounts withdrawn from reserves is available only where the creation of the reserve had increased book profit; otherwise the reduction would manufacture an artificial deduction. The decision is the leading authority on the object of section 115JB and on the revaluation-reserve adjustment.
Relevance to this section: Foundational on both the purpose of MAT and the construction of the reserve-withdrawal reduction clause.
Source: Supreme Court of India · decided January 2011 · (2011) 330 ITR 363 · verified via itatonline / latestlaws.
Cluster C-2 : Sanctity of accounts; the Assessing Officer’s limited power; depreciation
Apollo Tyres Ltd. v. Commissioner of Income-tax (2002) 255 ITR 273 (SC).
Held / Ratio: Decided on section 115J but governing section 115JB: the Assessing Officer may only verify that the accounts are certified under the Companies Act and then make the Explanation adjustments; he cannot go behind the audited net profit. The cornerstone of all MAT book-profit jurisprudence. (Full digest in the section 115J file.)
Source: Supreme Court of India · (2002) 255 ITR 273 · verified via Indian Kanoon / itatonline.
Malayala Manorama Co. Ltd. v. Commissioner of Income-tax (2008) 300 ITR 251 (SC); and Dynamic Orthopedics (P) Ltd. v. Commissioner of Income-tax (2010) 321 ITR 300 (SC).
Facts / Issue: Whether, for MAT book-profit purposes, a company is bound to provide depreciation at the rates specified in Schedule XIV to the Companies Act, or may charge depreciation at higher rates (e.g. on the straight-line or written-down-value basis) as adopted in its accounts.
Held: In Malayala Manorama the Supreme Court took the view, consistent with Apollo Tyres, that an assessee is entitled to provide depreciation in its books at rates higher than those in Schedule XIV, and that the Assessing Officer cannot disturb the depreciation so charged in arriving at book profit. In Dynamic Orthopedics a later Bench doubted Malayala Manorama and referred the question to a larger Bench, observing that Schedule XIV rates may be the minimum.
Ratio / why it matters: On the dominant view (Apollo Tyres / Malayala Manorama) the depreciation charged in the audited accounts governs book profit; the larger-Bench reference in Dynamic Orthopedics keeps the precise position on Schedule XIV open, and practitioners should note the pendency.
Relevance to this section: Directly relevant to the depreciation element of book-profit computation under section 115JB.
Source: Supreme Court of India · (2008) 300 ITR 251 and (2010) 321 ITR 300 · verified via Indian Kanoon / itatonline (note the larger-Bench reference; read the current status before relying).
Cluster C-3 : Add-backs — provision for diminution in the value of an asset (HCL Comnet) and the 2009 reversal
Commissioner of Income-tax v. HCL Comnet Systems & Services Ltd. (2008) 305 ITR 409 (SC).
Held / Ratio: A provision for bad and doubtful debts represents the diminution in the value of an asset and is not a ‘provision for liability’; under the Explanation as it then stood it could not be added back to book profit. (Full digest in the section 115JA file.)
Subsequent legislative reversal: The Finance (No. 2) Act, 2009 inserted clause (i) to Explanation 1 of section 115JB(2), with retrospective effect from 1 April 2001, requiring the add-back of ‘the amount or amounts set aside as provision for diminution in the value of any asset’. For all section 115JB years the provision for doubtful debts is therefore now added back; HCL Comnet must be read subject to this amendment. (Where a provision for doubtful debts is simultaneously reduced from the loans-and-advances/debtors on the asset side of the balance sheet, a distinct line of High Court authority treats it as a write-off rather than a mere provision — a point to be argued on the accounts.)
Source: Supreme Court of India · (2008) 305 ITR 409 · verified via itatonline; reversal by Finance (No. 2) Act, 2009 (legislative position, noted candidly).
Cluster C-4 : Reductions — export profits under section 80HHC; loss / unabsorbed depreciation
Ajanta Pharma Ltd. v. Commissioner of Income-tax (2010) 327 ITR 305 (SC).
Facts: A MAT company claimed, in computing book profit under section 115JB, a reduction of its export profits eligible under section 80HHC. The Assessing Officer restricted the reduction to 80 per cent, applying the phase-out in section 80HHC(1B); the assessee claimed the full (100 per cent) eligible export profit.
Issue: Whether, for the clause (iv)-type reduction in Explanation 1 to section 115JB, the figure to be reduced is the export profit ‘eligible’ for deduction under section 80HHC, or only the ‘allowable’ deduction as cut down by the phase-out in section 80HHC(1B).
Held: The Supreme Court held that the entire eligible export profit is to be reduced; the ceiling in section 80HHC(1B) does not apply to the computation of book profit, the Explanation referring to the amount of profits ‘eligible for deduction’ and not to the reduced ‘allowable’ figure. MAT and the section 80HHC phase-out operate in different fields.
Ratio / why it matters: ‘Eligible’ is read as the full computed export profit, not the phased-out allowable deduction; the reduction clauses of section 115JB are construed on their own terms. The leading authority on export-profit reduction in MAT.
Relevance to this section: Governs the export-profit reduction; widely applied to other reduction clauses by analogy.
Source: Supreme Court of India · (2010) 327 ITR 305 · verified via taxmanagementindia / lawyersclubindia.
Commissioner of Income-tax v. Bhari Information Technology Systems (P) Ltd. (2012) 340 ITR 593 (SC); affirming DCIT v. Syncome Formulations (I) Ltd. (2007) 292 ITR (AT) 144 (Mum.)(SB).
Facts / Issue: Whether, for MAT purposes, the section 80HHC deduction (and similar reductions) is to be computed on the basis of the adjusted book profit under section 115JB, or on the profits computed under the normal provisions of the Act.
Held: The Supreme Court affirmed the Special Bench view in Syncome Formulations: for section 115JA/115JB, the deduction (e.g. under section 80HHC) for the purpose of the book-profit reduction is to be worked out on the basis of the adjusted book profit, and not on the income computed under the normal provisions. The restriction in sections 80AB / 80B(5) and the requirement first to set off brought-forward business loss/depreciation (leaving gross total income nil) are not imported into the MAT computation.
Ratio / why it matters: The MAT reduction is computed on book figures, self-containedly; normal-provisions restrictions do not cut it down. Settles the basis of computing the export-profit (and analogous) reduction under section 115JB.
Relevance to this section: Directly governs how the reduction clauses are quantified under section 115JB.
Source: Supreme Court of India · (2012) 340 ITR 593 · affirming (2007) 292 ITR (AT) 144 (Mum.)(SB) · verified via itatonline / BCAJ (SC affirmance of Syncome confirmed).
Surana Steels (P) Ltd. v. Deputy Commissioner of Income-tax (1999) 237 ITR 777 (SC).
Held / Ratio: ‘Loss’ includes depreciation; the loss/depreciation reduction is the lower of brought-forward book loss or book unabsorbed depreciation. Decided on section 115J; applies to the parallel clause of section 115JB. (Full digest in the section 115J file.)
Source: Supreme Court of India · (1999) 237 ITR 777 · verified via Indian Kanoon / CaseMine.
Cluster C-5 : Advance tax and interest — sections 234B / 234C are leviable
Joint Commissioner of Income-tax v. Rolta India Ltd. (2011) 330 ITR 470 (SC).
Held / Ratio: Section 115JB is a self-contained code; all companies are liable to pay advance tax on the book-profit liability, and interest under sections 234B and 234C is leviable on default. This is the opposite of the section-115J position in Kwality Biscuits, the later section being drafted to attract the advance-tax regime. (Full digest in the section 115JA file.)
Relevance to this section: The governing authority that section 115JB liability bears advance-tax interest.
Source: Supreme Court of India · (2011) 330 ITR 470 · verified via Indian Kanoon / itatonline.
Cluster C-6 : MAT credit (section 115JAA) set off before interest
Commissioner of Income-tax v. Tulsyan NEC Ltd. (2011) 330 ITR 226 (SC).
Held / Ratio: Brought-forward MAT credit under section 115JAA is set off against the tax payable before computing the advance-tax shortfall and interest under sections 234A/234B/234C; the credit accrues by operation of law when the MAT is paid. (Full digest in the section 115JAA file.)
Relevance to this section: Determines how MAT paid under section 115JB is credited and how interest is computed.
Source: Supreme Court of India · (2011) 330 ITR 226 · verified via itatonline / BCAJ.
Cluster C-7 : Penalty — no section 271(1)(c) concealment penalty where assessed on book profit
Commissioner of Income-tax v. Nalwa Sons Investment Ltd. (Delhi High Court; Special Leave Petition dismissed by the Supreme Court).
Facts: For assessment year 2001-02 the company returned a loss of about Rs. 43.47 crore under the normal provisions and book profit of about Rs. 3.86 crore under section 115JB. The normally-computed loss was reduced by additions and disallowances, and the Assessing Officer levied penalty under section 271(1)(c) on the additions. The final assessment, however, was on the section 115JB book profit (which was higher than the normally-computed income).
Issue: Whether penalty under section 271(1)(c) can be levied on additions to the normally-computed income where the assessee is ultimately assessed and taxed on book profit under section 115JB.
Held: The High Court held — and the Supreme Court declined to interfere by dismissing the Revenue’s SLP — that when the assessment is finally made on book profit under section 115JB, the additions to the normally-computed income are of no consequence to the tax actually levied; the tax is paid on the deemed book-profit income, so there is no tax sought to be evaded on the concealed normal income and no penalty under section 271(1)(c) can be imposed.
Ratio / why it matters: Where the tax is finally determined on section 115JB book profit, concealment in the normal computation does not yield a penalty under section 271(1)(c), because the concealment does not lead to any evasion of the tax actually paid. (Note: the CBDT later clarified the interplay where book profit exceeds normal income; and the penalty regime for later years is section 270A.)
Relevance to this section: The leading authority on the penalty consequences of a section 115JB assessment.
Source: Delhi High Court; SLP dismissed by the Supreme Court · widely reported (Nalwa Sons Investment Ltd.) · verified via itatonline / taxdose (existence and ratio confirmed; read the report for the precise citation).
Cluster C-8 : Applicability to foreign companies and entities governed by special statutes
Castleton Investment Ltd., In re (Authority for Advance Rulings); The Timken Company, In re (AAR); and the Justice A.P. Shah Committee Report (2015).
Facts / Issue: Whether section 115JB applies to a foreign company that has no permanent establishment or place of business in India. The AAR in Timken had indicated it would not; the AAR in Castleton held that section 115JB does apply to foreign companies even without a permanent establishment.
Held / Resolution: Following representations after Castleton, the Justice A.P. Shah Committee opined that Castleton was wrongly decided and that section 115JB should not apply to foreign companies / FIIs-FPIs without a permanent establishment or place of business in India for the period prior to 1 April 2015. The Government accepted the recommendation; the Finance Act, 2015 and the Finance Act, 2016 amended section 115JB (inserting Explanation 4 and related provisions, with retrospective effect from 1 April 2001) to exclude foreign companies whose income is chargeable at special rates and foreign companies without a permanent establishment / not required to register under the Companies Act.
Ratio / why it matters: MAT under section 115JB does not reach foreign companies (and FIIs/FPIs) without a permanent establishment or place of business in India; the carve-out is now statutory (Explanation 4), and the Finance Act, 2026 extends it further to certain non-residents in presumptive businesses.
Relevance to this section: Governs the territorial reach of section 115JB and the foreign-company carve-out that the Finance Act, 2026 builds upon.
Source: Authority for Advance Rulings (Castleton; Timken); Justice A.P. Shah Committee Report (2015); Finance Act, 2015 / Finance Act, 2016 amendments · verified via taxsutra / business-standard / mondaq (Committee recommendation and Government acceptance confirmed).
Banking / insurance / electricity companies (pre-Finance Act, 2012) — illustrative line: Krung Thai Bank PCL v. JDIT (ITAT, Mumbai) and cognate decisions.
Facts / Issue: Whether section 115JB (as it stood before the Finance Act, 2012) applied to a company — such as a bank, insurer or electricity company — that prepares its profit and loss account under its own governing statute (the Banking Regulation Act, 1949; the insurance and electricity Acts) and not under Schedule VI to the Companies Act.
Held / Ratio: On this line of authority, because the charging machinery of section 115JB(2) (pre-2012) presupposed accounts prepared under Schedule VI, a company that lawfully prepared accounts under its own statute fell outside section 115JB for years before the amendment. The Finance Act, 2012 then amended sub-section (2) to permit such companies to prepare the profit and loss account under their governing Acts, bringing them within MAT prospectively.
Relevance to this section: Explains the pre-2012 exclusion of banks, insurers and electricity companies and the corrective Finance Act, 2012 amendment.
Source: ITAT / High Court line on banking and electricity companies; Finance Act, 2012 amendment to section 115JB(2) (amendment verified; the precise case citation should be confirmed against the official report before reliance).
Cluster C-9 : Capital gains in book profit (applies via Veekaylal)
Commissioner of Income-tax v. Veekaylal Investment Co. (P) Ltd. (2001) 249 ITR 597 (Bombay).
Held / Ratio: Capital gains that Schedule VI requires to be carried through the profit and loss account form part of book profit and cannot be excluded on the ground that they are capital receipts. Decided under section 115J; applied to section 115JB. (Full digest in the section 115J file.)
Relevance to this section: Governs inclusion of capital gains in section 115JB book profit.
Source: High Court of Bombay · (2001) 249 ITR 597 · verified via reported digests.
D. PRACTITIONER NOTES
(1) Begin every book-profit dispute with Apollo Tyres (sanctity of accounts) and Indo Rama (object of MAT). (2) Add-backs: provision for diminution in value of an asset is added back post-2009 (clause (i) of Explanation 1), overriding HCL Comnet; revaluation-reserve withdrawals reduce book profit only if the reserve creation had increased book profit (Indo Rama). (3) Reductions are computed on book figures: full eligible export profit (Ajanta Pharma; Bhari Information / Syncome); lower of book loss or book unabsorbed depreciation (Surana Steels). (4) Advance-tax interest under sections 234B/234C applies (Rolta India); MAT credit is set off before interest (Tulsyan NEC). (5) A section 115JB assessment shields against section 271(1)(c) penalty on normal-computation additions (Nalwa Sons). (6) MAT does not reach foreign companies / FIIs-FPIs without a permanent establishment (A.P. Shah Committee; FA 2015/2016 Explanation 4); the Finance Act, 2026 extends the non-resident presumptive-business carve-out from AY 2026-27. (7) Companies on sections 115BAA/115BAB are outside MAT and lose brought-forward MAT credit. (8) Citations marked ‘existence and ratio confirmed’ should be read in full, and the verbatim FA 2026 amended wording confirmed against the enacted section, before reliance in pleadings.
CHAPTER XII-B — SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
SECTION 115JB — SPECIAL PROVISION FOR PAYMENT OF TAX BY CERTAIN COMPANIES (MINIMUM ALTERNATE TAX)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · Live Provision — the current Minimum Alternate Tax
Status: LIVE. Section 115JB was inserted by the Finance Act, 2000, with effect from 1 April 2001 (assessment year 2001-02), and is the present Minimum Alternate Tax. It deems book profit to be the total income where the normal-provisions tax is less than the prescribed percentage of book profit, and it is paired with the tax-credit mechanism of section 115JAA.
Rate of MAT: Originally 7.5 per cent, raised over time to 18.5 per cent of book profit; reduced to 15 per cent of book profit by the Finance Act, 2019 (Taxation Laws (Amendment) Act, 2019) for the assessment year 2020-21 onwards (plus surcharge and cess). A concessional 9 per cent applies to units in International Financial Services Centres deriving income solely in convertible foreign exchange.
Finance Act, 2026 impact: AMENDED. Per the BharatTax Finance Act, 2026 Amendment Tracker (entry 12; sources: Finance Act, 2026; EY Alert), section 115JB is amended to EXTEND the MAT carve-out for certain non-residents: a non-resident opting for presumptive taxation in respect of two additional specified businesses — operation of cruise ships, and providing electronics-manufacturing services to a resident company — is excluded from the MAT charge under section 115JB, with effect from assessment year 2026-27. This extends the existing policy (already excluding foreign companies without a permanent establishment, and non-residents in certain presumptive businesses) to the two further specified businesses. [Practitioners should confirm the precise amended sub-section / Explanation 4 wording against the enacted text; the substance is stated here from the verified Amendment Tracker.]
A. SECTION COMMENTARY
A.1 Scheme and place in the Act
Section 115JB is the operative Minimum Alternate Tax. It applies to an assessee being a company. Where the income-tax payable on the total income computed under the normal provisions is less than the prescribed percentage (now fifteen per cent) of the company’s book profit, the section deems the book profit itself to be the total income, and the tax payable becomes that percentage of book profit (plus surcharge and cess). Sub-section (1) carries the rate and the deeming; the first proviso records the historical reduction of the rate; sub-section (2) prescribes the preparation of the profit and loss account; the Explanation (Explanation 1) defines ‘book profit’ with its list of add-backs and reductions; later sub-sections deal with the audit report in Form 29B (sub-section (4)), the saving of other provisions (sub-section (5)), the special treatment of SEZ units (sub-section (6), now spent by sunset), and the carve-outs for foreign companies and certain non-residents (Explanation 4 and the related sub-sections).
The defining feature distinguishing section 115JB from its ancestor section 115J is that it is a self-contained code that expressly attracts the advance-tax machinery; combined with the MAT-credit mechanism of section 115JAA, the levy operates as an accelerated minimum payment that is later creditable against normal tax.
A.2 ‘Book profit’ — the computation (editorial summary)
This is an editorial summary to make the case law intelligible; it is NOT a verbatim reproduction of Explanation 1. The starting point is the net profit shown in the profit and loss account prepared in accordance with Schedule III to the Companies Act, 2013 (formerly Parts II and III of Schedule VI to the Companies Act, 1956). To that net profit are ADDED (if debited to, or not credited to, the profit and loss account, as the case may be): the income-tax provision; amounts carried to any reserves; provisions for unascertained liabilities; provisions for losses of subsidiaries; dividends paid or proposed; expenditure relatable to exempt incomes (sections 10 [other than 10(38)], 11, 12); depreciation; the amount of deferred tax; and — following the Finance (No. 2) Act, 2009 — the amount set aside as provision for diminution in the value of any asset. From the figure so increased are DEDUCTED: amounts withdrawn from reserves or provisions if credited to the profit and loss account (subject to conditions); specified exempt incomes; depreciation (excluding the depreciation on revaluation of assets); the amount withdrawn from revaluation reserve to the extent it does not exceed the depreciation on revaluation; and the lower of brought-forward loss or unabsorbed depreciation as per the books. Special rules apply to companies undergoing insolvency resolution under the Insolvency and Bankruptcy Code (enhanced set-off of loss and unabsorbed depreciation) and to Indian-Accounting-Standards (Ind-AS) compliant companies (transition-amount and other adjustments inserted by the Finance Act, 2017).
A.3 Core doctrinal themes
Theme (1) — Sanctity of audited accounts (Apollo Tyres): the Assessing Officer accepts the net profit certified under the Companies Act and may make only the Explanation adjustments; he cannot recompute the commercial profit.
Theme (2) — Object is to capture real, commercial profit (Indo Rama Synthetics): MAT exists precisely to tax prosperous, dividend-paying companies whose normal-provisions income is low; the add-backs and reductions are construed to give effect to that object, and devices that drain the profit and loss account (e.g. set-off from revaluation reserve) are not permitted to reduce book profit.
Theme (3) — Add-back of provision for diminution in value of an asset (HCL Comnet, as legislatively reversed): a provision merely reducing the value of an asset (e.g. for doubtful debts) was originally not an add-back; the Finance (No. 2) Act, 2009 inserted clause (i) to Explanation 1 (with retrospective effect from 1 April 2001) to require its add-back, neutralising HCL Comnet for section 115JB years.
Theme (4) — Reductions are confined to the enumerated clauses, computed on book figures: the export-profit reduction is the full eligible deduction (Ajanta Pharma); the loss/depreciation reduction is the lower of book loss or book unabsorbed depreciation (Surana Steels; Bhari Information).
Theme (5) — Self-contained code: advance tax is payable on book-profit liability and interest under sections 234B/234C follows (Rolta India); MAT credit under section 115JAA is set off before interest (Tulsyan NEC).
Theme (6) — No concealment penalty where assessed on book profit (Nalwa Sons): if the final assessment is on section 115JB book profit, additions to the normally-computed income do not attract penalty under section 271(1)(c), because the tax is paid on the deemed book-profit income, not on the concealed normal income.
A.4 Carve-outs and special entities
Foreign companies: after conflicting Authority for Advance Rulings decisions (Timken — not liable; Castleton — liable even without a permanent establishment), the Justice A.P. Shah Committee opined that section 115JB should not apply to foreign companies / FIIs-FPIs without a place of business or permanent establishment in India. The Government accepted this; the Finance Act, 2015 and the Finance Act, 2016 amended section 115JB to exclude, with retrospective effect, foreign companies whose income is taxed at special rates and foreign companies without a permanent establishment / not required to register under the Companies Act. The Finance Act, 2026 (per the verified Amendment Tracker) further extends the carve-out to non-residents opting for presumptive taxation in two additional specified businesses (cruise-ship operation; electronics-manufacturing services to a resident company), from assessment year 2026-27.
Banking, insurance and electricity companies: as originally enacted, section 115JB(2) required all companies to prepare the profit and loss account under Schedule VI; companies governed by their own statutes (the Banking Regulation Act, 1949; the insurance and electricity Acts), which prepare accounts in their statutory forms rather than under Schedule VI, were on a line of authority not exigible to MAT for years before the Finance Act, 2012. The Finance Act, 2012 amended sub-section (2) to permit such companies to prepare the profit and loss account in accordance with their governing Acts, thereby bringing them within section 115JB prospectively.
Companies opting for sections 115BAA / 115BAB: by the Taxation Laws (Amendment) Act, 2019, a company opting for the concessional corporate-tax regime is not liable to MAT under section 115JB and cannot carry forward or set off accumulated MAT credit (CBDT Circular No. 29 of 2019).
B. STATUTORY POSITION (verbatim heading and sub-section (1); Explanation summarised editorially)
Reproduced verbatim from the Income-tax Act, 1961 (Bare Act, as amended by the Finance Act, 2025):
Special provision for payment of tax by certain companies.
115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2012, is less than eighteen and one-half per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of eighteen and one-half per cent:
Provided that for the previous year relevant to the assessment year commencing on or after the 1st day of April, 2020, the provisions of this sub-section shall have effect as if for the words "eighteen and one-half per cent" occurring at both the places, the words "fifteen per cent" had been substituted. [Sub-sections (2) to (7), the Explanations (including Explanation 1 defining ‘book profit’ and Explanation 4 on the non-resident / foreign-company carve-out) follow in the bare Act; their detailed text is summarised in Part A above and is not reproduced verbatim here. The Finance Act, 2026 carve-out extension is noted in the header from the verified Amendment Tracker.]
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Object of MAT and the self-contained-code character
Indo Rama Synthetics (I) Ltd. v. Commissioner of Income-tax (2011) 330 ITR 363 (SC).
Facts: The company revalued its fixed assets, crediting the increase of about Rs. 288.58 crore to a revaluation reserve. In a later year it transferred about Rs. 26.11 crore from that revaluation reserve and set it off against the depreciation charge in the profit and loss account, reducing the depreciation actually hitting profit. It then claimed that, because the creation of the reserve had not been debited to the profit and loss account, the withdrawal credited to it should be excluded from book profit under the relevant clause of the Explanation read with the proviso.
Issue: Whether an amount withdrawn from a revaluation reserve and credited to (or used to relieve) the profit and loss account can be reduced from book profit under section 115JB, where the creation of the reserve had not increased the book profit of any earlier year.
Held: The Supreme Court rejected the claim. Had the company charged the full depreciation against profit it would have shown a loss and could not have paid dividends; the manoeuvre of relieving depreciation out of the revaluation reserve was exactly the kind of profit-dressing that MAT is meant to defeat. The amount withdrawn from the revaluation reserve could not be reduced from book profit. The Court emphasised that the object of MAT is to bring out the real profit of companies.
Ratio / why it matters: The reduction for amounts withdrawn from reserves is available only where the creation of the reserve had increased book profit; otherwise the reduction would manufacture an artificial deduction. The decision is the leading authority on the object of section 115JB and on the revaluation-reserve adjustment.
Relevance to this section: Foundational on both the purpose of MAT and the construction of the reserve-withdrawal reduction clause.
Source: Supreme Court of India · decided January 2011 · (2011) 330 ITR 363 · verified via itatonline / latestlaws.
Cluster C-2 : Sanctity of accounts; the Assessing Officer’s limited power; depreciation
Apollo Tyres Ltd. v. Commissioner of Income-tax (2002) 255 ITR 273 (SC).
Held / Ratio: Decided on section 115J but governing section 115JB: the Assessing Officer may only verify that the accounts are certified under the Companies Act and then make the Explanation adjustments; he cannot go behind the audited net profit. The cornerstone of all MAT book-profit jurisprudence. (Full digest in the section 115J file.)
Source: Supreme Court of India · (2002) 255 ITR 273 · verified via Indian Kanoon / itatonline.
Malayala Manorama Co. Ltd. v. Commissioner of Income-tax (2008) 300 ITR 251 (SC); and Dynamic Orthopedics (P) Ltd. v. Commissioner of Income-tax (2010) 321 ITR 300 (SC).
Facts / Issue: Whether, for MAT book-profit purposes, a company is bound to provide depreciation at the rates specified in Schedule XIV to the Companies Act, or may charge depreciation at higher rates (e.g. on the straight-line or written-down-value basis) as adopted in its accounts.
Held: In Malayala Manorama the Supreme Court took the view, consistent with Apollo Tyres, that an assessee is entitled to provide depreciation in its books at rates higher than those in Schedule XIV, and that the Assessing Officer cannot disturb the depreciation so charged in arriving at book profit. In Dynamic Orthopedics a later Bench doubted Malayala Manorama and referred the question to a larger Bench, observing that Schedule XIV rates may be the minimum.
Ratio / why it matters: On the dominant view (Apollo Tyres / Malayala Manorama) the depreciation charged in the audited accounts governs book profit; the larger-Bench reference in Dynamic Orthopedics keeps the precise position on Schedule XIV open, and practitioners should note the pendency.
Relevance to this section: Directly relevant to the depreciation element of book-profit computation under section 115JB.
Source: Supreme Court of India · (2008) 300 ITR 251 and (2010) 321 ITR 300 · verified via Indian Kanoon / itatonline (note the larger-Bench reference; read the current status before relying).
Cluster C-3 : Add-backs — provision for diminution in the value of an asset (HCL Comnet) and the 2009 reversal
Commissioner of Income-tax v. HCL Comnet Systems & Services Ltd. (2008) 305 ITR 409 (SC).
Held / Ratio: A provision for bad and doubtful debts represents the diminution in the value of an asset and is not a ‘provision for liability’; under the Explanation as it then stood it could not be added back to book profit. (Full digest in the section 115JA file.)
Subsequent legislative reversal: The Finance (No. 2) Act, 2009 inserted clause (i) to Explanation 1 of section 115JB(2), with retrospective effect from 1 April 2001, requiring the add-back of ‘the amount or amounts set aside as provision for diminution in the value of any asset’. For all section 115JB years the provision for doubtful debts is therefore now added back; HCL Comnet must be read subject to this amendment. (Where a provision for doubtful debts is simultaneously reduced from the loans-and-advances/debtors on the asset side of the balance sheet, a distinct line of High Court authority treats it as a write-off rather than a mere provision — a point to be argued on the accounts.)
Source: Supreme Court of India · (2008) 305 ITR 409 · verified via itatonline; reversal by Finance (No. 2) Act, 2009 (legislative position, noted candidly).
Cluster C-4 : Reductions — export profits under section 80HHC; loss / unabsorbed depreciation
Ajanta Pharma Ltd. v. Commissioner of Income-tax (2010) 327 ITR 305 (SC).
Facts: A MAT company claimed, in computing book profit under section 115JB, a reduction of its export profits eligible under section 80HHC. The Assessing Officer restricted the reduction to 80 per cent, applying the phase-out in section 80HHC(1B); the assessee claimed the full (100 per cent) eligible export profit.
Issue: Whether, for the clause (iv)-type reduction in Explanation 1 to section 115JB, the figure to be reduced is the export profit ‘eligible’ for deduction under section 80HHC, or only the ‘allowable’ deduction as cut down by the phase-out in section 80HHC(1B).
Held: The Supreme Court held that the entire eligible export profit is to be reduced; the ceiling in section 80HHC(1B) does not apply to the computation of book profit, the Explanation referring to the amount of profits ‘eligible for deduction’ and not to the reduced ‘allowable’ figure. MAT and the section 80HHC phase-out operate in different fields.
Ratio / why it matters: ‘Eligible’ is read as the full computed export profit, not the phased-out allowable deduction; the reduction clauses of section 115JB are construed on their own terms. The leading authority on export-profit reduction in MAT.
Relevance to this section: Governs the export-profit reduction; widely applied to other reduction clauses by analogy.
Source: Supreme Court of India · (2010) 327 ITR 305 · verified via taxmanagementindia / lawyersclubindia.
Commissioner of Income-tax v. Bhari Information Technology Systems (P) Ltd. (2012) 340 ITR 593 (SC); affirming DCIT v. Syncome Formulations (I) Ltd. (2007) 292 ITR (AT) 144 (Mum.)(SB).
Facts / Issue: Whether, for MAT purposes, the section 80HHC deduction (and similar reductions) is to be computed on the basis of the adjusted book profit under section 115JB, or on the profits computed under the normal provisions of the Act.
Held: The Supreme Court affirmed the Special Bench view in Syncome Formulations: for section 115JA/115JB, the deduction (e.g. under section 80HHC) for the purpose of the book-profit reduction is to be worked out on the basis of the adjusted book profit, and not on the income computed under the normal provisions. The restriction in sections 80AB / 80B(5) and the requirement first to set off brought-forward business loss/depreciation (leaving gross total income nil) are not imported into the MAT computation.
Ratio / why it matters: The MAT reduction is computed on book figures, self-containedly; normal-provisions restrictions do not cut it down. Settles the basis of computing the export-profit (and analogous) reduction under section 115JB.
Relevance to this section: Directly governs how the reduction clauses are quantified under section 115JB.
Source: Supreme Court of India · (2012) 340 ITR 593 · affirming (2007) 292 ITR (AT) 144 (Mum.)(SB) · verified via itatonline / BCAJ (SC affirmance of Syncome confirmed).
Surana Steels (P) Ltd. v. Deputy Commissioner of Income-tax (1999) 237 ITR 777 (SC).
Held / Ratio: ‘Loss’ includes depreciation; the loss/depreciation reduction is the lower of brought-forward book loss or book unabsorbed depreciation. Decided on section 115J; applies to the parallel clause of section 115JB. (Full digest in the section 115J file.)
Source: Supreme Court of India · (1999) 237 ITR 777 · verified via Indian Kanoon / CaseMine.
Cluster C-5 : Advance tax and interest — sections 234B / 234C are leviable
Joint Commissioner of Income-tax v. Rolta India Ltd. (2011) 330 ITR 470 (SC).
Held / Ratio: Section 115JB is a self-contained code; all companies are liable to pay advance tax on the book-profit liability, and interest under sections 234B and 234C is leviable on default. This is the opposite of the section-115J position in Kwality Biscuits, the later section being drafted to attract the advance-tax regime. (Full digest in the section 115JA file.)
Relevance to this section: The governing authority that section 115JB liability bears advance-tax interest.
Source: Supreme Court of India · (2011) 330 ITR 470 · verified via Indian Kanoon / itatonline.
Cluster C-6 : MAT credit (section 115JAA) set off before interest
Commissioner of Income-tax v. Tulsyan NEC Ltd. (2011) 330 ITR 226 (SC).
Held / Ratio: Brought-forward MAT credit under section 115JAA is set off against the tax payable before computing the advance-tax shortfall and interest under sections 234A/234B/234C; the credit accrues by operation of law when the MAT is paid. (Full digest in the section 115JAA file.)
Relevance to this section: Determines how MAT paid under section 115JB is credited and how interest is computed.
Source: Supreme Court of India · (2011) 330 ITR 226 · verified via itatonline / BCAJ.
Cluster C-7 : Penalty — no section 271(1)(c) concealment penalty where assessed on book profit
Commissioner of Income-tax v. Nalwa Sons Investment Ltd. (Delhi High Court; Special Leave Petition dismissed by the Supreme Court).
Facts: For assessment year 2001-02 the company returned a loss of about Rs. 43.47 crore under the normal provisions and book profit of about Rs. 3.86 crore under section 115JB. The normally-computed loss was reduced by additions and disallowances, and the Assessing Officer levied penalty under section 271(1)(c) on the additions. The final assessment, however, was on the section 115JB book profit (which was higher than the normally-computed income).
Issue: Whether penalty under section 271(1)(c) can be levied on additions to the normally-computed income where the assessee is ultimately assessed and taxed on book profit under section 115JB.
Held: The High Court held — and the Supreme Court declined to interfere by dismissing the Revenue’s SLP — that when the assessment is finally made on book profit under section 115JB, the additions to the normally-computed income are of no consequence to the tax actually levied; the tax is paid on the deemed book-profit income, so there is no tax sought to be evaded on the concealed normal income and no penalty under section 271(1)(c) can be imposed.
Ratio / why it matters: Where the tax is finally determined on section 115JB book profit, concealment in the normal computation does not yield a penalty under section 271(1)(c), because the concealment does not lead to any evasion of the tax actually paid. (Note: the CBDT later clarified the interplay where book profit exceeds normal income; and the penalty regime for later years is section 270A.)
Relevance to this section: The leading authority on the penalty consequences of a section 115JB assessment.
Source: Delhi High Court; SLP dismissed by the Supreme Court · widely reported (Nalwa Sons Investment Ltd.) · verified via itatonline / taxdose (existence and ratio confirmed; read the report for the precise citation).
Cluster C-8 : Applicability to foreign companies and entities governed by special statutes
Castleton Investment Ltd., In re (Authority for Advance Rulings); The Timken Company, In re (AAR); and the Justice A.P. Shah Committee Report (2015).
Facts / Issue: Whether section 115JB applies to a foreign company that has no permanent establishment or place of business in India. The AAR in Timken had indicated it would not; the AAR in Castleton held that section 115JB does apply to foreign companies even without a permanent establishment.
Held / Resolution: Following representations after Castleton, the Justice A.P. Shah Committee opined that Castleton was wrongly decided and that section 115JB should not apply to foreign companies / FIIs-FPIs without a permanent establishment or place of business in India for the period prior to 1 April 2015. The Government accepted the recommendation; the Finance Act, 2015 and the Finance Act, 2016 amended section 115JB (inserting Explanation 4 and related provisions, with retrospective effect from 1 April 2001) to exclude foreign companies whose income is chargeable at special rates and foreign companies without a permanent establishment / not required to register under the Companies Act.
Ratio / why it matters: MAT under section 115JB does not reach foreign companies (and FIIs/FPIs) without a permanent establishment or place of business in India; the carve-out is now statutory (Explanation 4), and the Finance Act, 2026 extends it further to certain non-residents in presumptive businesses.
Relevance to this section: Governs the territorial reach of section 115JB and the foreign-company carve-out that the Finance Act, 2026 builds upon.
Source: Authority for Advance Rulings (Castleton; Timken); Justice A.P. Shah Committee Report (2015); Finance Act, 2015 / Finance Act, 2016 amendments · verified via taxsutra / business-standard / mondaq (Committee recommendation and Government acceptance confirmed).
Banking / insurance / electricity companies (pre-Finance Act, 2012) — illustrative line: Krung Thai Bank PCL v. JDIT (ITAT, Mumbai) and cognate decisions.
Facts / Issue: Whether section 115JB (as it stood before the Finance Act, 2012) applied to a company — such as a bank, insurer or electricity company — that prepares its profit and loss account under its own governing statute (the Banking Regulation Act, 1949; the insurance and electricity Acts) and not under Schedule VI to the Companies Act.
Held / Ratio: On this line of authority, because the charging machinery of section 115JB(2) (pre-2012) presupposed accounts prepared under Schedule VI, a company that lawfully prepared accounts under its own statute fell outside section 115JB for years before the amendment. The Finance Act, 2012 then amended sub-section (2) to permit such companies to prepare the profit and loss account under their governing Acts, bringing them within MAT prospectively.
Relevance to this section: Explains the pre-2012 exclusion of banks, insurers and electricity companies and the corrective Finance Act, 2012 amendment.
Source: ITAT / High Court line on banking and electricity companies; Finance Act, 2012 amendment to section 115JB(2) (amendment verified; the precise case citation should be confirmed against the official report before reliance).
Cluster C-9 : Capital gains in book profit (applies via Veekaylal)
Commissioner of Income-tax v. Veekaylal Investment Co. (P) Ltd. (2001) 249 ITR 597 (Bombay).
Held / Ratio: Capital gains that Schedule VI requires to be carried through the profit and loss account form part of book profit and cannot be excluded on the ground that they are capital receipts. Decided under section 115J; applied to section 115JB. (Full digest in the section 115J file.)
Relevance to this section: Governs inclusion of capital gains in section 115JB book profit.
Source: High Court of Bombay · (2001) 249 ITR 597 · verified via reported digests.
D. PRACTITIONER NOTES
(1) Begin every book-profit dispute with Apollo Tyres (sanctity of accounts) and Indo Rama (object of MAT). (2) Add-backs: provision for diminution in value of an asset is added back post-2009 (clause (i) of Explanation 1), overriding HCL Comnet; revaluation-reserve withdrawals reduce book profit only if the reserve creation had increased book profit (Indo Rama). (3) Reductions are computed on book figures: full eligible export profit (Ajanta Pharma; Bhari Information / Syncome); lower of book loss or book unabsorbed depreciation (Surana Steels). (4) Advance-tax interest under sections 234B/234C applies (Rolta India); MAT credit is set off before interest (Tulsyan NEC). (5) A section 115JB assessment shields against section 271(1)(c) penalty on normal-computation additions (Nalwa Sons). (6) MAT does not reach foreign companies / FIIs-FPIs without a permanent establishment (A.P. Shah Committee; FA 2015/2016 Explanation 4); the Finance Act, 2026 extends the non-resident presumptive-business carve-out from AY 2026-27. (7) Companies on sections 115BAA/115BAB are outside MAT and lose brought-forward MAT credit. (8) Citations marked ‘existence and ratio confirmed’ should be read in full, and the verbatim FA 2026 amended wording confirmed against the enacted section, before reliance in pleadings.