The Central Board of Direct Taxes (CBDT) recently amended its Circular No. 2112015 issued in 2015 prescribing monetary limit for appeals before various appellate authorities.
The recent letter prescribes methods for computing tax effect to determine maintainability of appeals where tax is assessed under the Minimum Alternative Tax (MAT) provisions.
The letter stated that “references are being received by the Board that in certain cases appellate authorities are dismissing appeals without going into the merits of the case by relying on the definition of ‘tax effect’ as defined in Circular No. 2112015, which prescribes the monetary limit for filing appeals before various appellate authorities. In certain situations where income is computed under the provisions of section 115JB or section II5lC of the Income Tax Act for the purposes of determination of ‘tax effect’, and the additions made under provisions other than sections 115JB or section 11SlC do not impact book profit, the appellate authorities are not considering the said additions for the purpose of ‘tax effect’ as defined in para 4 Circular No. 2112015.”
In view of the above, the Board inserted para 4.1 after the para 4 of the Circular No. 2112015 which reads as follows:
“4.1 Where income is computed under the provisions of section 115JB or section 115JC for the purposes of determination of ‘tax effect’, tax on the total income assessed shall be computed as per the following formula-
(A-B)+ (C-D)
where,
A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions);
B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of the disputed issues under general provisions;
C = the total income assessed as per the provisions contained in section 115JB or section 115JC;
D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section ll5JC been reduced by the amount of disputed issues under the said provisions:
However, where the amount of disputed issues is considered both under the provisions contained in section llSJE or section I 15JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.”
Read the full text of the Letter below.
