Ritz. Ltd., an Indian company engaged in manufacture of solar panels, set-up and commenced manufacturing on 01/11/2019, in West Bengal, provides…

14. (a) Computation of total income and tax liability of Ritz Ltd. as per the normal provisions of the Act for A.Y. 2026-27 Particulars Amount (₹) Amount (₹) Profits and gains of business or profession Net profit as per Statement of Profit and loss 4,70,00,000 Add: Items of expenditure not allowable as deduction while computing business income Depreciation debited to statement of profit and loss 90,00,000 Provision for loss of subsidiary company [Not allowable, since it is not wholly and exclusively for the purpose of business of the assessee] 50,00,000 CSR Expenditure [Not allowable, since it is not wholly and exclusively for the purpose of business of the assessee] 10,00,000 Capital Expenditure on Land for R&D [Not allowed as deduction by virtue of section 35(1)(iv) read with proviso to section 35(2)(ia)] 20,00,000 Dividend declared 2,50,00,000 4,20,00,000 8,90,00,000 Less: Allowable expenditure Depreciation as per the Income tax Rules on: (i) Assets other than new Plant & Machinery (P&M) 60,00,000 (ii) New P & M @7.5% of ₹ 6 crore and additional depreciation @10%, since P&M has been put to use for less than 180 days in P.Y. 2025-26 1,05,00,000 Less: Items of income to be treated separately under the respective head of income Dividend from India companies 2,00,00,000 Excess realized on sale of land 30,00,000 3,95,00,000 4,95,00,000 Less: Set off of brought forward business loss 40,00,000 Business income 4,55,00,000 Capital Gains Short term capital gains on sale of land 40,00,000 Income from other sources Dividend 2,00,00,000 6,95,00,000 Less: Set-off of unabsorbed depreciation (can be set-off against any head of income except “Salaries”) 35,00,000 Gross Total Income 6,60,00,000 Less: Deduction u/s 80M (Lower of dividend received and dividend distributed before one month prior to the date for furnishing the return of Income) 2,00,00,000 Total Income 4,60,00,000 Computation of tax liability Tax @ 25% (since turnover of P.Y 2023-24 is less than 400 crores) 1,15,00,000 Add: Surcharge @ 7% (since total income is > 1 crore < 10 crore) 8,05,000 1,23,05,000 Add: Health and Education Cess @4% 4,92,200 Total tax liability 1,27,97,200 In order to determine the optimum tax liability, the provision of MAT also need to be checked while computing tax liability as per normal provisions of the Act. Applicability of minimum alternate tax: As per section 115JB, if income tax payable on total income is less than 15% of its book profit, such book profit shall be deemed to be total income and tax payable shall be at the rate of 15%. Computation of book profit u/s 115JB Particulars Amount (₹) Amount (₹) Net profit as per statement of profit and loss 4,70,00,000 Add: Depreciation debited to statement of profit and loss: 90,00,000 Add: Provision for loss of subsidiary company 50,00,000 Add: Dividend declared 2,50,00,000 3,90,00,000 8,60,00,000 Less: Depreciation as per books of accounts 90,00,000 Less: Business loss or unabsorbed depreciation whichever is lower 35,00,000 1,25,00,000 Book Profit 7,35,00,000 Computation of minimum alternate tax Tax @ 15% of book profit of ₹ 735 lakhs 1,10,25,000 Add: Surcharge @ 7% (since total income exceeds ₹ 1 crore) 7,71,750 1,17,96,750 Add: Health and Education Cess@4% 4,71,870 Minimum Alternate tax payable 1,22,68,620 Since 15% of book profit is less than tax payable as per normal provisions (₹ 1,22,68,620 < ₹ 1,27,97,200), total tax liability would be computed as under: Tax liability as per normal provisions 1,27,97,200 Less: MAT credit brought forward to the extent of (₹ 1,27,97,200 - ₹ 1,22,68,620) 5,28,580 Tax payable under normal provisions 1,22,68,620 MAT Credit to be carried forward: MAT credit brought forward 40,00,000 Less: MAT credit Utilized 5,28,580 MAT Credit to be carried forward 34,71,420 Computation of total income and tax liability of Ritz Ltd. as per section 115BAA Particulars Amount (₹) Total Income (as computed above as per normal provisions) 4,60,00,000 Add: Additional depreciation on new plant & Machinery @ 10% of ₹ 6,00,00,000. Since P&M has been put to use for less than 180 days in P.Y. 2025-26 60,00,000 Total Income 5,20,00,000 Computation of tax liability under section 115BAA Tax @ 22% on ₹ 5,20,00,000 1,14,40,000 Add: Surcharge @10% 11,44,000 1,25,84,000 Add: Health and Education Cess @ 4% 5,03,360 Total tax liability 1,30,87,360 Note - Companies exercising option u/s 115BAA are not liable to minimum alternate tax u/s 115JB. Since tax liability under regular provisions is ₹ 1,22,68,620 after set-off MAT credit vis-à-vis tax liability of ₹ 1,30,87,360 computed u/s 115BAA is lower, it is not beneficial to opt for special provision u/s 115BAA for A.Y. 2026-27. (b) Company had opted for concessional rates u/s 115BAB: Company is a domestic manufacturing company set up after 01.10.2019, and it has opted for section 115BAB in its very first year, its tax liability would be computed u/s 115BAB only. Further, companies exercised option u/s 115BAB are not liable to minimum alternate tax u/s 115JB. Computation of total income and tax liability of Ritz Ltd. under section 115BAB for A.Y. 2026-27 Particulars Amount (₹) Total Income as computed as per section 115BAA 5,20,00,000 Computation of tax liability u/s 115BAB Tax @ 22% on 5 lakhs [₹ 40 lakhs - ₹ 35 lakhs, it would be beneficial to set off unabsorbed depreciation against STCG since it is taxable @ 22%] 1,10,000 Tax @ 15% on ₹ 515 lakhs (being income derived from manufacturing business) 77,25,000 78,35,000 Add: Surcharge @ 10% 7,83,500 86,18,500 Add: Health and Education Cess @ 4% 3,44,740 Total tax liability 89,63,240 Since company has already exercised the options under special provision of section 115BAB, there is no question of regular provisions as option cannot be withdrawn subsequently. So, tax liability would be ₹ 89,63,240.