Section 115JB of Income Tax Act "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:
85[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.]
(2) Every assessee,-
(a) being a company, other than a company referred to in
clause (b), shall, for the purposes of this section, prepare
its statement of profit and loss for the relevant previous
year in accordance with the provisions of Schedule III to
the Companies Act, 2013 (18 of 2013); or
(b) being a company, to which the second proviso to
sub-section (1) of section 129] of the Companies Act, 2013
(18 of 2013) is applicable, shall, for the purposes of this
section, prepare its statement of profit and loss for the
relevant previous year in accordance with the provisions of
the Act governing such company:
Provided that while preparing the annual accounts including
statement of profit and loss,-
(i) the accounting policies;
(ii) the accounting standards adopted for preparing such
accounts including statement of profit and loss;
(iii) the method and rates adopted for calculating the
depreciation,
shall be the same as have been adopted for the purpose of
preparing such accounts including statement of profit and
loss and laid before the company at its annual general
meeting in accordance with the provisions of section 129 of
the Companies Act, 2013 (18 of 2013) :
Provided further that where the company has adopted or
adopts the financial year under the Companies Act, 2013 (18
of 2013), which is different from the previous year under
this Act,-
(i) the accounting policies;
(ii) the accounting standards adopted for preparing such
accounts including statement of profit and loss;
(iii) the method and rates adopted for calculating the
depreciation,
shall correspond to the accounting policies, accounting
standards and the method and rates for calculating the
depreciation which have been adopted for preparing such
accounts including statement of profit and loss for such
financial year or part of such financial year falling within
the relevant previous year.
Explanation 1.-For the purposes of this section, "book
profit" means the profit as shown in the statement of profit
and loss for the relevant previous year prepared under
sub-section (2), as increased by-
(a) the amount of income-tax paid or payable, and the
provision therefor; or
(b) the amounts carried to any reserves, by whatever name
called , other than a reserve specified under section 33AC;
or
(c) the amount or amounts set aside to provisions made for
meeting liabilities, other than ascertained liabilities; or
(d) the amount by way of provision for losses of subsidiary
companies; or
(e) the amount or amounts of dividends paid or proposed ; or
(f) the amount or amounts of expenditure relatable to any
income to which section 10 (other than the provisions
contained in clause (38) thereof) or section 11 or section
12 apply; or
(fa) the amount or amounts of expenditure relatable to
income, being share of the assessee in the income of an
association of persons or body of individuals, on which no
income-tax is payable in accordance with the provisions of
section 86; or
(fb) the amount or amounts of expenditure relatable to
income accruing or arising to an assessee, being a foreign
company, from,-
(A) the capital gains arising on transactions in securities;
or
(B) the interest, royalty or fees for technical services
chargeable to tax at the rate or rates specified in Chapter
XII,
if the income-tax payable thereon in accordance with the
provisions of this Act, other than the provisions of this
Chapter, is at a rate less than the rate specified in
sub-section (1); or
(fc) the amount representing notional loss on transfer of a
capital asset, being share of a special purpose vehicle, to
a business trust in exchange of units allotted by the trust
referred to in clause (xvii) of section 47 or the amount
representing notional loss resulting from any change in
carrying amount of said units or the amount of loss on
transfer of units referred to in clause (xvii) of section
47; or
(fd) the amount or amounts of expenditure relatable to
income by way of royalty in respect of patent chargeable to
tax under section 115BBF; or
(g) the amount of depreciation,
(h) the amount of deferred tax and the provision therefor,
(i) the amount or amounts set aside as provision for
diminution in the value of any asset,
(j) the amount standing in revaluation reserve relating to
revalued asset on the retirement or disposal of such asset,
(k) the amount of gain on transfer of units referred to in
clause (xvii) of section 47 computed by taking into account
the cost of the shares exchanged with units referred to in
the said clause or the carrying amount of the shares at the
time of exchange where such shares are carried at a value
other than the cost through statement of profit and loss, as
the case may be;
if any amount referred to in clauses (a) to (i) is debited
to the statement of profit and loss or if any amount
referred to in clause (j) is not credited to the statement
of profit and loss, and as reduced by,-
(i) the amount withdrawn from any reserve or provision
(excluding a reserve created before the 1st day of April,
1997 otherwise than by way of a debit to the statement of
profit and loss), if any such amount is credited to the
statement of profit and loss:
Provided that where this section is applicable to an
assessee in any previous year, the amount withdrawn from
reserves created or provisions made in a previous year
relevant to the assessment year commencing on or after the
1st day of April, 1997 shall not be reduced from the book
profit unless the book profit of such year has been
increased by those reserves or provisions (out of which the
said amount was withdrawn) under this Explanation or
Explanation below the second proviso to section 115JA, as
the case may be; or
(ii) the amount of income to which any of the provisions of
section 10 (other than the provisions contained in clause
(38) thereof) or section 11 or section 12 apply, if any such
amount is credited to the statement of profit and loss; or
(iia) the amount of depreciation debited to the statement of
profit and loss (excluding the depreciation on account of
revaluation of assets); or
(iib) the amount withdrawn from revaluation reserve and
credited to the statement of profit and loss, to the extent
it does not exceed the amount of depreciation on account of
revaluation of assets referred to in clause (iia); or
(iic) the amount of income, being the share of the assessee
in the income of an association of persons or body of
individuals, on which no income-tax is payable in accordance
with the provisions of section 86, if any, such amount is
credited to the statement of profit and loss; or
(iid) the amount of income accruing or arising to an
assessee, being a foreign company, from,-
(A) the capital gains arising on transactions in securities;
or
(B) the interest, royalty or fees for technical services
chargeable to tax at the rate or rates specified in Chapter
XII,
if such income is credited to the statement of profit and
loss and the income-tax payable thereon in accordance with
the provisions of this Act, other than the provisions of
this Chapter, is at a rate less than the rate specified in
sub-section (1); or
(iie) the amount representing,-
(A) notional gain on transfer of a capital asset, being
share of a special purpose vehicle to a business trust in
exchange of units allotted by that trust referred to in
clause (xvii) of section 47; or
(B) notional gain resulting from any change in carrying
amount of said units; or
(C) gain on transfer of units referred to in clause (xvii)
of section 47,
if any, credited to the statement of profit and loss; or
(iif) the amount of loss on transfer of units referred to in
clause (xvii) of section 47 computed by taking into account
the cost of the shares exchanged with units referred to in
the said clause or the carrying amount of the shares at the
time of exchange where such shares are carried at a value
other than the cost through statement of profit and loss, as
the case may be; or
(iig) the amount of income by way of royalty in respect of
patent chargeable to tax under section 115BBF; or
86[(iih) the aggregate amount of unabsorbed depreciation and
loss brought forward in case of a-
(A) company, and its subsidiary and the subsidiary of such
subsidiary, where, the Tribunal, on an application moved by
the Central Government under section 241 of the Companies
Act, 2013 (18 of 2013) has suspended the Board of Directors
of such company and has appointed new directors who are
nominated by the Central Government under section 242 of the
said Act;
(B) company against whom an application for corporate
insolvency resolution process has been admitted by the
Adjudicating Authority under section 7 or section 9 or
section 10 of the Insolvency and Bankruptcy Code, 2016 (31
of 2016).
Explanation.-For the purposes of this clause,-
(i) "Adjudicating Authority" shall have the meaning assigned
to it in clause (1) of section 5 of the Insolvency and
Bankruptcy Code, 2016 (31 of 2016);
(ii) "Tribunal" shall have the meaning assigned to it in
clause (90) of section 2 of the Companies Act, 2013 (18 of
2013);
(iii) a company shall be a subsidiary of another company, if
such other company holds more than half in the nominal value
of equity share capital of the company;
(iv) "loss" shall not include depreciation; or]
(iii) the amount of loss brought forward or unabsorbed
depreciation, whichever is less as per books of account in
case of a company other than the company referred to in
clause (iih).
Explanation.-For the purposes of this clause,-
(a) the loss shall not include depreciation;
(b) the provisions of this clause shall not apply if the
amount of loss brought forward or unabsorbed depreciation is
nil; or
(iv) to (vi) [***]
(vii) the amount of profits of sick industrial company for
the assessment year commencing on and from the assessment
year relevant to the previous 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 (1 of 1986) and ending with the
assessment year during which the entire net worth of such
company becomes equal to or exceeds the accumulated losses.
Explanation.-For the purposes of this clause, "net worth"
shall have the meaning assigned to it in clause (ga) of
sub-section (1) of section 3 of the Sick Industrial
Companies (Special Provisions) Act, 1985 (1 of 1986); or
(viii) the amount of deferred tax, if any such amount is
credited to the statement of profit and loss.
Explanation 2.-For the purposes of clause (a) of Explanation
1, the amount of income-tax shall include-
(i) any tax on distributed profits under section 115-O or on
distributed income under section 115R;
(ii) any interest charged under this Act;
(iii) surcharge, if any, as levied by the Central Acts from
time to time;
(iv) Education Cess on income-tax, if any, as levied by the
Central Acts from time to time; and
(v) Secondary and Higher Education Cess on income-tax, if
any, as levied by the Central Acts from time to time.
Explanation 3.-For the removal of doubts, it is hereby
clarified that for the purposes of this section, the
assessee, being a company to which the second proviso to
sub-section (1) of section 129 of the Companies Act, 2013
(18 of 2013) is applicable, has, for an assessment year
commencing on or before the 1st day of April, 2012, an
option to prepare its statement of profit and loss for the
relevant previous year either in accordance with the
provisions of Schedule III to the Companies Act, 2013 (18 of
2013) or in accordance with the provisions of the Act
governing such company.
Explanation 4.-For the removal of doubts, it is hereby
clarified that the provisions of this section shall not be
applicable and shall be deemed never to have been applicable
to an assessee, being a foreign company, if-
(i) the assessee is a resident of a country or a specified
territory with which India has an agreement referred to in
sub-section (1) of section 90 or the Central Government has
adopted any agreement under sub-section (1) of section 90A
and the assessee does not have a permanent establishment in
India in accordance with the provisions of such agreement;
or
(ii) the assessee is a resident of a country with which
India does not have an agreement of the nature referred to
in clause (i) and the assessee is not required to seek
registration under any law for the time being in force
relating to companies.
Explanation 4A.-For the removal of doubts, it is hereby
clarified that the provisions of this section shall not be
applicable and shall be deemed never to have been applicable
to an assessee, being a foreign company, where its total
income comprises solely of profits and gains from business
referred to in section 44B or section 44BB or section 44BBA
or section 44BBB and such income has been offered to tax at
the rates specified in those sections.
Explanation 5.-For the purposes of sub-section (2), the
expression "securities" shall have the same meaning as
assigned to it in clause (h) of section 2 of the Securities
Contracts (Regulation) Act, 1956 (42 of 1956).
(2A) For a company whose financial statements are drawn up
in compliance to the Indian Accounting Standards specified
in Annexure to the Companies (Indian Accounting Standards)
Rules, 2015, the book profit as computed in accordance with
Explanation 1 to sub-section (2) shall be further-
(a) increased by all amounts credited to other comprehensive
income in the statement of profit and loss under the head
"Items that will not be re-classified to profit or loss";
(b) decreased by all amounts debited to other comprehensive
income in the statement of profit and loss under the head
"Items that will not be re-classified to profit or loss";
(c) increased by amounts or aggregate of the amounts debited
to the statement of profit and loss on distribution of
non-cash assets to shareholders in a demerger in accordance
with Appendix A of the Indian Accounting Standards 10;
(d) decreased by all amounts or aggregate of the amounts
credited to the statement of profit and loss on distribution
of non-cash assets to shareholders in a demerger in
accordance with Appendix A of the Indian Accounting
Standards 10:
Provided that nothing contained in clause (a) or clause (b)
shall apply to the amount credited or debited to other
comprehensive income under the head "Items that will not be
re-classified to profit or loss" in respect of-
(i) revaluation surplus for assets in accordance with the
Indian Accounting Standards 16 and Indian Accounting
Standards 38; or
(ii) gains or losses from investments in equity instruments
designated at fair value through other comprehensive income
in accordance with the Indian Accounting Standards 109:
Provided further that the book profit of the previous year
in which the asset or investment referred to in the first
proviso is retired, disposed, realised or otherwise
transferred shall be increased or decreased, as the case may
be, by the amount or the aggregate of the amounts referred
to in the first proviso for the previous year or any of the
preceding previous years and relatable to such asset or
investment.
(2B) In the case of a resulting company, where the property
and the liabilities of the undertaking or undertakings being
received by it are recorded at values different from values
appearing in the books of account of the demerged company
immediately before the demerger, any change in such value
shall be ignored for the purpose of computation of book
profit of the resulting company under this section.
(2C) For a company referred to in sub-section (2A), the book
profit of the year of convergence and each of the following
four previous years, shall be further increased or
decreased, as the case may be, by one-fifth of the
transition amount:
Provided that the book profit of the previous year in which
the asset or investment referred to in sub-clauses (B) to
(E) of clause (iii) of the Explanation is retired, disposed,
realised or otherwise transferred, shall be increased or
decreased, as the case may be, by the amount or the
aggregate of the amounts referred to in the said sub-clauses
relatable to such asset or investment:
Provided further that the book profit of the previous year
in which the foreign operation referred to in sub-clause (F)
of clause (iii) of the Explanation is disposed or otherwise
transferred, shall be increased or decreased, as the case
may be, by the amount or the aggregate of the amounts
referred to in the said sub-clause relatable to such foreign
operations.
Explanation.-For the purposes of this sub-section, the
expression-
(i) "year of convergence" means the previous year within
which the convergence date falls;
(ii) "convergence date" means the first day of the first
Indian Accounting Standards reporting period as defined in
the Indian Accounting Standards 101;
(iii) "transition amount" means the amount or the aggregate
of the amounts adjusted in the other equity (excluding
capital reserve and securities premium reserve) on the
convergence date but not including the following:-
(A) amount or aggregate of the amounts adjusted in the other
comprehensive income on the convergence date which shall be
subsequently re-classified to the profit or loss;
(B) revaluation surplus for assets in accordance with the
Indian Accounting Standards 16 and Indian Accounting
Standards 38 adjusted on the convergence date;
(C) gains or losses from investments in equity instruments
designated at fair value through other comprehensive income
in accordance with the Indian Accounting Standards 109
adjusted on the convergence date;
(D) adjustments relating to items of property, plant and
equipment and intangible assets recorded at fair value as
deemed cost in accordance with paragraphs D5 and D7 of the
Indian Accounting Standards 101 on the convergence date;
(E) adjustments relating to investments in subsidiaries,
joint ventures and associates recorded at fair value as
deemed cost in accordance with paragraph D15 of the Indian
Accounting Standards 101 on the convergence date; and
(F) adjustments relating to cumulative translation
differences of a foreign operation in accordance with
paragraph D13 of the Indian Accounting Standards 101 on the
convergence date.
(3) Nothing contained in sub-section (1) shall affect the
determination of the amounts in relation to the relevant
previous year to be carried forward to the subsequent year
or years under the provisions of sub-section (2) of section
32 or sub-section (3) of section 32A or clause (ii) of
sub-section (1) of section 72 or section 73 or section 74 or
sub-section (3) of section 74A.
(4) Every company to which this section applies, shall
furnish a report in the prescribed form from an accountant
as defined in the Explanation below sub-section (2) of
section 288, certifying that the book profit has been
computed in accordance with the provisions of this section
87[before the specified date referred to in section 44AB] or
along with the return of income furnished in response to a
notice under clause (i) of sub-section (1) of section 142.
(5) Save as otherwise provided in this section, all other
provisions of this Act shall apply to every assessee, being
a company, mentioned in this section.
88[(5A) The provisions of this section shall not apply to,-
(i) any income accruing or arising to a company from life
insurance business referred to in section 115B;
(ii) a person who has exercised the option referred to under
section 115BAA or section 115BAB.]
(6) The provisions of this section shall not apply to the
income accrued or arising on or after the 1st day of April,
2005 from any business carried on, or services rendered, by
an entrepreneur or a Developer, in a Unit or Special
Economic Zone, as the case may be:
Provided that the provisions of this sub-section shall cease
to have effect in respect of any previous year relevant to
the assessment year commencing on or after the 1st day of
April, 2012.
(7) Notwithstanding anything contained in sub-section (1),
where the assessee referred to therein, is a unit located in
an International Financial Services Centre and derives its
income solely in convertible foreign exchange, the
provisions of sub-section (1) shall have the effect as if
for the words "eighteen and one-half per cent" wherever
occurring in that sub-section, the words "nine per cent" had
been substituted.
Explanation.-For the purposes of this sub-section,-
(a) "International Financial Services Centre" shall have the
same meaning as assigned to it in clause (q) of section 2 of
the Special Economic Zones Act, 2005 (28 of 2005);
(b) "unit" means a unit established in an International
Financial Services Centre;
(c) "convertible foreign exchange" means a foreign exchange
which is for the time being treated by the Reserve Bank of
India as convertible foreign exchange for the purposes of
the Foreign Exchange Management Act, 1999 (42 of 1999) and
the rules made thereunder.