Section 115JA of Income Tax Act 1961: Deemed Income Relating to Certain Companies

Section 115JA was a minimum-tax provision for companies. For the assessment years to which it applied, a company whose total income computed under the Income Tax Act was less than 30% of its book profit was deemed to have total income equal to 30% of that book profit.

Meaning and purpose of Section 115JA

Section 115JA formed part of Chapter XII-B, titled Special Provisions Relating to Certain Companies. It operated through a non-obstante clause, meaning that for the limited purpose and period specified in the section it applied notwithstanding other provisions of the Income Tax Act, 1961.

The basic rule was straightforward: if a company's normally computed total income was below 30% of its book profit, its taxable total income for the relevant previous year was deemed to be 30% of book profit. The provision was therefore an earlier form of the minimum alternate tax framework.

Section 115JA(1): deemed total income

Sub-section (1) covered a company where the total income computed under the Act for the relevant previous year was less than 30% of book profit. In that situation, the company's total income chargeable to tax for that relevant previous year was deemed to equal 30% of book profit.

Section 115JA(2): preparation of profit and loss account

For the purposes of Section 115JA, every company covered by the section was required to prepare its profit and loss account for the relevant previous year in accordance with Parts II and III of Schedule VI to the Companies Act, 1956. The section also prescribed consistency rules for the method and rates of depreciation used in preparing that account.

These references must be read in their historical setting. They reflect the company-law framework expressly incorporated into Section 115JA for the assessment years for which that provision operated.

What was "book profit" under Section 115JA?

The Explanation to Section 115JA started with the net profit shown in the profit and loss account prepared under sub-section (2), and then required specified additions and reductions.

Amounts added back to net profit

Where debited to the profit and loss account, the specified additions included:

• income tax paid or payable and the provision for it;
• amounts carried to reserves, by whatever name called;
• provisions for liabilities other than ascertained liabilities;
• provisions for losses of subsidiary companies;
• dividends paid or proposed;
• expenditure relatable to income to which Chapter III applied; and
• provision for diminution in the value of an asset.

Specified reductions from net profit

Subject to the detailed conditions in the section, the reductions included specified withdrawals from reserves or provisions credited to the profit and loss account, Chapter III income credited to that account, and the lower of brought-forward loss or unabsorbed depreciation as per books. For this purpose, loss did not include depreciation, and the clause did not apply where either the brought-forward loss or unabsorbed depreciation was nil.

The historical text also provided reductions for specified profits connected with power undertakings, certain industrially backward areas, qualifying infrastructure facilities, sick industrial companies, and profits eligible under Sections 80HHC and 80HHE, subject to the statutory conditions then applicable.

Carry-forward amounts were not disturbed

Section 115JA(3) provided that the deemed-income rule in sub-section (1) did not affect determination of amounts relating to the relevant previous year that were to be carried forward under the provisions specified in that sub-section, including provisions dealing with depreciation and certain business or capital losses.

Application of other provisions

Under Section 115JA(4), except where Section 115JA itself provided otherwise, the other provisions of the Income Tax Act continued to apply to a company covered by the section.

Section 115JA and MAT credit

Section 115JAA dealt with tax credit in respect of tax paid on deemed income under Section 115JA and, in later operation, MAT under Section 115JB. Transitional rules under the Income-tax Act, 2025 preserve eligible unutilised MAT or AMT credits from the 1961 Act subject to the new Act's conditions.

Section 115JA compared with the later MAT framework

Official references

Editorial note: This page explains Section 115JA in its historical statutory context and highlights the current-law transition. For an assessment, appeal or litigation matter, the law applicable to the relevant assessment year or tax year and subsequent amendments should be checked.