Income Computation and Disclosure Standards (ICDS) are meant for computation of income under normal provisions of the Act. Thus, ICDS, as such, should not have any impact in computation of Minimum Alternate Tax (‘MAT’) for corporate taxpayers which will continue to be based on “book profits” determined under the current Indian GAAP or coming-soon Ind-AS.
However, it is expected that with the applicability of ICDS, the difference between the accounting income and taxable income is only going to widen. This may also result in some companies coming under the purview of MAT.
For example, if a company books expected loss from service transactions in the accounts, it will not be allowed for computing the taxable income. However, when such loss is allowed for tax purposes in the future financial years, the company may have book profits which may become taxable under section 115JB of the Act.
It seems like every change in the taxation regime in the country attempts to prepone the tax incidence and increase the coffers of the Government.
The article has been contributed by CA Prashant Kumar Dutt.