Kansal Cements Ltd., a resident company set up in the year 2010 is engaged in the manufacture of cement. Its Statement of Profit and Loss (from…

Computation of Total Income and tax liability of Kansal Cements Ltd. for the A.Y. 2024-25 under regular provisions of the Act Particulars Amount (in ₹) I Profits and gains of business or profession Net profit as per statement of profit and loss from Cement business 75,00,000 Add: Items debited but to be considered separately or to be disallowed (i) Depreciation as per the Companies Act 6,00,000 (ii) Interest expenditure towards borrowed funds for investing in shares [Allowability or otherwise of interest expenditure on earning dividend has to be considered separately under the head "Income from Other Sources". Since the amount has been debited to the statement of profit and loss, it has to be added back.] 1,50,000 (iii) Expenditure towards construction of tenements for company's workers [As Kansal Cements Ltd. acquired no ownership rights in the tenements and remained the property of the Housing Board, the expenditure of 5,00,000 was incurred wholly and exclusively for the welfare of the employees and, therefore, constituted legitimate business expenditure¹. Since the same has been debited to the statement of profit and loss, no further adjustment is required] Nil 7,50,000 82,50,000 Less: Items credited but not taxable or chargeable to tax under another head (ii) Dividend received from foreign company [Dividend received from foreign company is taxable under the head "Income from Other Sources". Since the same has been credited to the statement of profit and loss, the same has to be deducted while computing business income] 5,00,000 (iv) Waiver of amount by creditor² [Amount waived by the trade creditor is deemed income under section 41(1) as there is a benefit by way of remission or cessation of trading liability. Since the same has been credited to the statement of profit and loss, no further adjustment is required.] Nil (v) Upfront discounted interest to debenture holders [Since the liability of Kansal Cements Ltd. with respect to upfront interest payment had arisen this year, it would be eligible to claim the entire amount of 5lakhs of interest paid as deduction³ under section 36(1)(iii). As only 1/5th of the interest is debited to the statement of profit and loss, remaining 4/5th also has to be reduced] 4,00,000 9,00,000 73,50,000 Less: Depreciation as per the Income-tax Act, 1961 4,50,000 69,00,000 Profit from business of developing and building rental housing projects Net profit from business of developing and building rental housing projects 20,00,000 Income from housing project executed as a work contract 10,00,000 30,00,000 99,00,000 II Capital Gains Long term capital gain on compulsory acquisition of land Full value of consideration 8,00,000 [Additional compensation pursuant to order of the High Court] Less: Cost of acquisition Nil 8,00,000 Short term capital gain on damage of machinery due to fire Full value of consideration [Insurance compensation] 22,00,000 Less: WDV as on 1.4.2023 9,39,250 12,60,750 20,60,750 Computation of WDV as on 1.4.2023 Actual Cost as on 1.5.2020 20,00,000 Less: Depreciation for P.Y. 2020-21 [15%] 3,00,000 Less: Additional Dep.@ 20% 4,00,000 WDV 13,00,000 Less: Depreciation for P.Y. 2021-22 [15%] 1,95,000 WDV 11,05,000 Less: Depreciation for P.Y. 2022-23 [15%] 1,65,750 WDV as on 01.04.2023 9,39,250 III Income from Other Sources Dividend received from foreign company 5,00,000 Less: Interest expenditure of 1,50,000 allowed upto 20% of dividend 1,00,000 4,00,000 Gross Total Income 1,23,60,750 Less: Deduction under Chapter VI-A Under section 80-IAB [100% of profits from business of developing and building rental housing projects. No deduction is allowed in respect of income from housing project executed as a work contractor] 20,00,000 Under section 80M [Deduction in respect of inter-corporate dividend would be lower of dividend received included in the Gross Total Income (4 lakh) and dividend distributed on or before the due date (6 lakhs)] Note: On standalone reading of the provisions of section 80M, it is possible to take a view that deduction u/s 80M would be 5lakhs, being the lower of dividend received of 5 lakhs and dividend distributed on or before the due date of 6 lakhs. However, the amount of dividend included in the gross total income alone be considered as the amount of dividend received by the company for the purpose of deduction u/s 80M. 4,00,000 Total Income 99,60,750 Computation of tax liability Tax on long term capital gains of 8,00,000 @ 20% 1,60,000 Tax on other income of 91,60,750 @30%, since the turnover of the company for the previous year 2021-22 exceeds 400crores 27,48,225 29,08,225 Add: Health and education cess @4% 1,16,329 Tax liability 30,24,554 Tax liability (Rounded off) 30,24,550 Computation of Total Income and tax liability of Kansal Cements Ltd. for the A.Y. 2024-25 under concessional regime u/s 115BAA Particulars Amount (in ₹) Total Income under regular provisions of the Act 99,60,750 Add: Deduction under Chapter VI-A Under section 80-IAB [Not allowable u/s 115BAA] 20,00,000 Under section 80M [Allowed as per concessional tax regime u/s 115BAA] Nil 20,00,000 Total Income as per section 115BAA 1,19,60,750 Computation of tax liability Tax on long term capital gains of 8,00,000 @20% 1,60,000 Tax on other income of 1,11,60,750 @ 22% 24,55,365 26,15,365 Add: Surcharge @ 10% 2,61,537 28,76,902 Add: Health and education cess @ 4% 1,15,078 Tax liability 29,91,980 Tax liability (Rounded off) 29,91,980 Since the tax liability of Kansal Cements Ltd. computed under section 115BAA is lower than the tax liability computed under regular provisions of the Act, it is beneficial for Kansal Cements Ltd. to opt for the special provisions under section 115BAA for A.Y.2024-25. Concessional tax regime under section 115BAA would be beneficial to Kansal Cements Ltd. even if it is assumed that the MAT liability is higher or lower than the tax liability computed under regular provisions of the Act. Such an option, once exercised, would apply to subsequent assessment years. Further, once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.