Amendment to the Finance Bill, 2017 | KPMG | IN

Amendment to the Finance Bill, 2017: Proposal for MAT-Ind AS compliant companies

Amendment to the Finance Bill, 2017

The Finance Bill, 2017 (the Bill) dated 1 February 2017 included proposals on ‘computation of book profit for Ind AS compliant companies for the purpose of levy of Minimum Alternate Tax (MAT) under Section 115JB of the Income Tax Act, 1961’.

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Background

The Finance Bill, 2017 (the Bill) dated 1 February 2017 included proposals on ‘computation of book profit for Ind AS compliant companies for the purpose of levy of Minimum Alternate Tax (MAT) under Section 115JB of the Income Tax Act, 1961’.

The Bill defined a new term ‘transition amount’ which means the amount or aggregate of the amount adjusted in other equity (excluding equity component of compound financial instruments, capital reserve, and securities premium reserve) on the date of adoption of Ind AS but excluding certain exclusions specified.

New development

The amendments to the Bill introduced in the Lok Sabha on 20 March 2017 have changed the definition of transition amount by omitting the term ‘equity component of compound financial instruments’. Therefore, the new definition proposed is as follows:

‘Transition amount’ means the amount or aggregate of the amount adjusted in other equity (excluding capital reserve and securities premium reserve) on the date of adoption of Ind AS but excluding certain exclusions specified.'

It appears that ‘exclusion of equity component of compound financial instruments in the definition of transition amount could have created inconsistencies in the tax treatment of certain convertible financial instruments vis-a-vis other similar instruments. Therefore, it is proposed that the transition amount would now include ‘equity component of compound financial instruments’ and the book profits in the year of adoption of Ind AS i.e. 1 April 2016 for phase I companies in the Ind AS road map and each of the subsequent four years should be adjusted with one-fifth of the transition amount.

The amendments to the Bill have been passed in the Lok Sabha; the approval of the Rajya Sabha and the assent of the President of India are pending.

Source: www.economictimes.com-Finance Bill 2017 passed in Lok Sabha dated 22 March 2017

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