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Introduction:-Law makers observed that there is many companies which are disclosing massive profit in the accounts as laid in the Annual General Meeting (AGM) before the shareholder but at the same time these companies also showing profit nil or bit above nil for the income tax purpose. Variance between profits as per the Companies Act and as per Income Tax Act was due to many dissimilar allowance of disallowance in the both Acts e.g. difference in method and rate of depreciation provided in both Acts.
To put an end on this trend and bring these kind of companies under the tax net, law maker framed concept of MAT, according to this concept corporate entity has to pay minimum tax. The concept of MAT is govern by the provisions contains in section 115JB of Income Tax Act, 1961. Applicability of MAT:-MAT is applicable to all companies including the foreign companies. Analysis of provision of section 115JB:- Where in case of a company, the income tax payable on the total income as computed under the income tax act in respect of any previous year is less than 18.5% of its BOOK PROFIT, then such book profit shall be deemed to be the total income of the assessee and the tax payable on such total income shall be the amount of income tax at the rate of 18.5%. This income tax is, further has to be enhance by surcharge (as applicable) and education cess (@3%).
In the simple words every company has to compute its income tax liability as per two sets of provisions. The set of provisions which results in higher income tax liability become the income tax payable. Followings are the two set of provisions:

1). Income tax computed as per normal provisions of income tax act.
2). Income tax computed as per provision of section 115JB of income tax act.

Meaning of Book Profit:-Book Profit is defined in the explanation 1 to section 115JB as book profit means the net profit as shown in the profit & loss account for the relevant previous year and as increased and decreased by some prescribed items.
In simple words to compute book profit, we have to take profit & loss account and make some prescribed additions and deletions to it.
Before going to analysis prescribed additions and deletions, we must understand the meaning of “Profit & Loss Account”. Meaning of profit & loss account for the purpose of book profit:-As per sub-section (2) of section 115JB:-

1). Assessee being a company on which the proviso to sub-section (2) of section 211 of the companies act, 1956 is applicable, shall for the purpose of section 115JB, prepare profit & loss account for the relevant previous year in accordance with the provisions of Act governing such company. (However, proviso to sub-section (2) of section 211 of the companies act, 1956 is applicable on Electricity, Insurance & Banking companies, these company is required to follows the provisions of governing laws for the purpose of making profit & loss account.
2). Assessee being a company other than a company refer above in (1), shall, for the purpose of section 115JB, prepare the profit & loss account in accordance with provision of part-II of schedule-VI to the Companies Act, 1956.

While preparing the profit & loss account for the purpose of book profit and for the purpose of laying accounts before the company at its AGM, following shall be same:-
1). The accounting polices 2). The accounting standards 3). The method & rates of depreciation. Analysis of prescribed additions and deletion to the net profit as shown in the profit & loss account:-Explanation 1 to sub-section (2) of section 115JB prescribed some items which has to be added or deleted from the net profit as shown in the profit and loss account. 1). Additions to net profit: Where followings amount (form I to IX) debited to profit & loss account:- 1. Amount of income tax paid or payable and the provision thereof. ( the word “Income Tax” includes CDT u/s 115-O, Interest under income tax act, Education Cess, Income tax and others) 2. The amount carried to any reserve by whatever name called. (like Reserve for expense, excess provision & etc.) 3. The amount set aside for unascertained liabilities i.e. provision for unascertained liability (like pro. for Bed Debts, prov. for gratuity on ad-hoc basic etc.) 4. Provision for loss of subsidiary companies 5. Amount of dividends paid or proposed. 6. Amount of expense relatable to any income to which section 10, 11, 12 (except sec. 10AA & 10(38)) apply. (Its mean income u/s 10AA & long term capital gain exempt u/s 10(38) are subject to MAT). 7. Amount of depreciation (including depreciation on account of revaluation of asset). 8. Amount of deferred tax and provision therefor. 9. Provision for diminution in the value of any assets. (Like pro. for diminution in the value of investment as per AS-13/28). 10. Amount standing in the revaluation reserve relating to revalued asset on the retirement or disposal of such asset. (if not credited to profit & loss account) 2). Deletion to net profit: 1. Amount withdrawn from any reserves or provisions and credited to profit & loss account provided that book profit of relevant previous year should have been increased by such amount. 2. The amount of income to which any of the provisions of section 10, 11 & 12 except 10AA & 10(38) apply. 3. Amount of depreciation debited to profit & loss account, excluding the depreciation on account of revaluation of assets. (i.e. actual depreciation not on part of revaluation has to be deleted from net profit) 4. Amount withdrawn from revaluation reserve and credited to profit & loss account to the extent of depreciation on account of revaluation of asset. 5. Amount of loss brought forward or unabsorbed depreciation, whichever is less as per the books of account. However loss shall not include the depreciation. (if loss brought forward or unabsorbed depreciation is nil then nothing shall be deducted.) 6. Amount of Deferred Tax, is any such amount is credited in the profit & loss account. Analysis of amendment proposed by Finance Bill-2015:- Finance Bill-2015 brings amendments in explanation-1 to sub-section (2) of section 115JB through clause-29 of the bill, as follows:- 1). Additions to net profit: Where followings amount (form I to IX) debited to profit & loss account:- 1. 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. In simple words, assessee is not liable to pay MAT on share in the income of AOP/BOI on which no income tax is payable u/s 86. 2. the amount or amounts of expenditure relatable to income from capital gains arising on transactions in securities (other than short term capital gains arising on transactions on which securities transaction tax is not chargeable), accruing or arising to an assessee being a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992. In Simple words, now FII is not liable to pay MAT on capital gain arising on transaction in securities, however, they are liable to pay MAT on short term capital gain arising on transaction in securities on which STT is not chargeable. 2). Deletion to net profit: 1. 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 profit and loss account 2. the amount of income from capital gains arising on transactions in securities (other than short term capital gains arising on transactions on which securities transaction tax is not chargeable), accruing or arising to an assessee being a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992, if any such amount is credited to the profit and loss account. MAT Credit: – When any amount of tax is paid as MAT by an assessee being a company, then, credit in respect of tax so paid shall be allowed to him in accordance with the provision of section 115JAA. 1). Allowable Tax Credit = Difference of MAT paid and income tax payable under normal provision of Income tax Act, 1961. (However, no interest shall be paid on this Tax credit by the revenue.) 2). Such tax credit shall be carry forward for 10 assessment year immediately succeeding the assessment year in which such credit is become allowable. 3). Tax credit shall be allowed set off in a year when tax becomes payable on the total income in accordance with the normal provisions of the Act. 4). Set off shall be allowed to the extent of difference between tax on the total income (under normal provision) and tax which would have been payable u/s 115JB for that assessment year. Applicability of other provisions of Income tax Act:-Section 115JB(5) states that save as otherwise provided in this section, all other provisions of this act shall apply to every company, mentioned in this section. Therefore the company to which MAT applies shall be liable to pay Advance Tax, interest u/s 234A, 234B & 234C. The company shall also be liable to pay penalty for concealment of income. Furnishing of the Report:-Every company to which this section applies shall furnish a report from a Chartered Accountant in the Form-29B certifying that the book profit has been computed in accordance with the provisions of the section 115JB and such report shall be furnished along with the return of income.