Skip to content

CS Professional · Advanced Direct Tax Laws and Practice · Computation of Total Income, Tax Liability and Filing of Return of Companies

Meridian Pharma Ltd, a domestic company, has net profit of ₹20,00,000 under Schedule III. The statement of profit and loss was debited with income-tax ₹3,00,000 and a provision for diminution in value of an asset ₹1,00,000. It was credited with a withdrawal of ₹2,00,000 from a reserve created earlier by debit to the statement, and the book profit of that earlier year was increased by that reserve. It was also credited with deferred tax ₹50,000. There are no other adjustments. What is the book profit under section 206 of the Income-tax Act, 2025?

Book profit is ₹21,50,000. Start with ₹20,00,000, add income-tax ₹3,00,000 and diminution provision ₹1,00,000, then reduce the reserve withdrawal ₹2,00,000 and deferred tax credited ₹50,000, as section 206 requires.

  1. A₹21,50,000Correct
  2. B₹22,00,000
  3. C₹20,50,000
  4. D₹23,50,000

Explanation

Add income-tax 3,00,000 and diminution provision 1,00,000: 24,00,000. Reduce reserve withdrawal 2,00,000 and deferred tax credited 50,000: 24,00,000 − 2,50,000 = 21,50,000. Option 22,00,000 ignores the deferred tax reduction.

Did you get it right without looking?

One question tells you little. A timed set on Computation of Total Income, Tax Liability and Filing of Return of Companies shows your real accuracy, how long you take and where you lose marks.

Practise Computation of Total Income, Tax Liability and Filing of Return of CompaniesFree diagnostic mock

More Computation of Total Income, Tax Liability and Filing of Return of Companies questions