AMT & Deduction u/s 10AA (SEZ)

Question: 1

M/s. Beta & Co., a partnership firm in India, is engaged in development of software and providing
IT enabled services through two units, one of which is located in a notified Special Economic Zone
(SEZ) in Noida (commenced operations from 01.04.2013) and the other located in a domestic tariff
area (DTA). The particulars relating to previous year 2024-25 furnished by the assessee are as
follows:
Total Turnover. SEZ unit 210 lakhs; DTA unit 90 lakhs
Export Turnover, SEZ unit 150 lakhs; DTA unit 50 lakhs
Profit: SEZ unit 50 lakhs; DTA unit 240 lakhs.
Amount debited to Statement of Profit and Loss and credited to Special Economic Zone Re-
Investment Reserve Account 20 lakhs.
Considering that the firm has no other income during the year, compute the tax payable by the
firm for the A.Y.2025-26 by integrating, analyzing and applying the relevant provisions of income-
tax law

Answer:

Computation of total income and tax liability of M/s. Beta & Co., a partnership firm, as per the
normal provisions of the Act for A.Y. 2025-26
Particulars Rs.
(In lakhs)
Business income (before deduction u/s 10AA)
SEZ Unit 50.00
Add: Amount debited to SEZ Re-investment Reserve 20.00
70.00
DTA Unit 40.00
110.00
Less: Deduction u/s 10AA 25.00
= ₹70 lakhs 150 lakhs/ 210 lakhs = 50×50% 20.00
(being the 12th year)
Amount credited to SEZ Re-investment Reserve Account
- whichever is less is deductible 20.00
Total Income 90.00
Tax on total income @30% 27.00
Add: Health and Education Cess @4% 1.08
Tax liability (as per normal provisions) 28.08

Computation of Adjusted total income and Alternate Minimum tax of M/s. Beta & Co., a
partnership firm, as per the provisions of section 115JC for A.Υ.2025-26
Particulars Rs. In lakhs
Total income as per the normal provisions 90.00
Add: Deduction u/s 10AA 20.00
Adjusted total income 110.00
Tax @ 18.5% of Adjusted Total Income 20.350
Add: Surcharge @12% as the adjusted total income is1 crore 2.442
22.792
Add: Health and Education cess 4% 0.912
Alternate Minimum Tax as per section 115JC 23.704
Since the tax payable as per the normal provisions of the Act is more than the alternate minimum
tax payable, the total income as per normal provisions shall be liable to tax and the tax payable for
A.Y. 2025-26 shall be ₹28.08 lakhs.

Question: 2

PQR LLP, a LLP in India is engaged in development of software and providing IT enabled services
through two units, namely, Unit P and Unit Q Unit P is setup in Special Economic Zone (SEZ) and
Unit Q is set up in a Domestic Tariff Area (DTA). The LLP furnishes the following information
relating to its 5th year of operation ended on 31-3-2025:

Items (Amount in ₹ lakhs)

Unit P Unit Q
Export Turnover 1200 920
Domestic Turnover 200 460
Duty Drawback 38 38
Profit on sale of Import Entitlement 24 Nil
Salaries Paid 540 192
Other Expenses 420 473
Net Profit of the year 502 753

Additional Information:
Unit P: Expenses of ₹24 lacs are disallowable u/s 43B and export sales proceeds received in India
amounted to ₹1040 lakhs. Export sales of ₹1200 lakhs include freight and insurance of ₹200 lakhs
and realization of ₹1040 lakhs includes amount of insurance and freight charges of ₹140 lakhs.
Unit Q: Export sales received in India was ₹850 lakhs. Expenses charged and are to be disallowed as
per section 40A(3) are of ₹47 lakhs.
Compute tax payable by PQR LLP for the Assessment Year 2025-26.

Answer:

Computation of Total Income PQR LLP

Particulars Rs. In lakhs
Profit from Unit P [₹502 lakhs + ₹24 lakhs, being disallowance u/s 43B] 526
Profit from Unit Q [₹753 lakhs + ₹47 lakhs, being disallowance u/s 40A(3)] 800
1326
Less: Deduction u/s 10AA [See Working Note below] 348
Total Income 978
Tax on total income @ 30% 293.40
Add: Surcharge@12%, since total income > ₹1 crore 35.21
328.61
Add: HEC@4% 13.14
Tax liability (as per normal provisions) 341.75

Computation of Adjusted total income and AMT as per section 115JC for A.Y.2025-26
Particulars Rs. In lakhs
Total income as per the normal provisions 978
Add: Deduction u/s 10AA 948
Adjusted Total Income 1326
Tax@18.5% of Adjusted Total Income 245.31
Add: Surcharge @12% as the adjusted total income is > 1 crore 29.44
 274.75
Add: HEC @4% 10.99
Alternate Minimum Tax as per section 115JC 285.74

Since the tax payable as per the normal provisions of the Act is more than the alternate minimum
tax payable the total income as per normal provisions shall be liable to tax and the tax payable for
A.Y. 2025-26 shall be ₹341.75 lakhs.

Working Note: Computation of deduction u/s 10AA in respect of Unit P located in a SEZ

Particulars Rs. In lakhs

Total turnover of Unit P = 1200
(₹1200 lakhs + ₹200 lakhs) - 200 lakhs, being freight and insurance
included therein. Since freight and insurance has been excluded from
export turnover, the same has to be excluded from total turnover also
Export Turnover of Unit P
Export sale proceeds received in India 1040
Less: Insurance and freight not includible in export turnover 140
900
Profit "derived from" Unit P
Net profit for the year 502
Add: Disallowance u/s 43B 24
526
Less: Items of business income which are in the nature of ancillary profits
and hence, do not constitute profit 'derived from business for the
purpose of deduction u/s 10AA
Duty drawback 38
Profit on sale of import entitlement 24 62
Profit derived from Unit P 464
Deduction u/s 10AA
Profit derived from Unit P x Export T/o of Unit P x 100% = 464 x 900/1200 348
Total T/o of Unit P

Question: 3

M/s Turnip LLP is engaged in export of computer software from a Special Economic Zone. It
commenced its business on 1.4.2020. Compute tax payable of M/s Turnip LLP for the A.Y. 2025-26
from the following information:
The net profit of the firm as per its Profit & Loss Account for the year ended 31-3-2025 was ₹330
lakhs after debit/credit of the following items:
(1) Advertisement in a souvenir published by a political party ₹2.5 lakhs
(2) Remuneration to its working partners ₹220 lakhs
(3) Interest provided on the current account balance of the partners @ 15% p.a. ₹22.5 lakhs
(4) Depreciation ₹25 lakhs

Additional Information:
1) Depreciation allowable as per Income-tax Rules is ₹30 lakhs.
2) Payment of remuneration to working partners and interest on current account is authorized
by the Partnership Deed.
3) Brought forward business loss and depreciation from Assessment Year 2023-24 was ₹50 lakhs
and ₹30 lakhs respectively.
4) The total turnover and export turnover of the firm was 2₹5 crores and ₹20 crores, respectively.
Answer:

Computation of total income and tax liability of M/s Turnip LLP for A.Y.2025-26 (under the
regular provisions of the Income-tax Act, 1961)
Particulars (Rs.In lakhs) (Rs.In lakhs)
Profits and gains of business or profession 330.00
Add: Items debited but to be considered separately or to
be disallowed
- Depreciation 25.00
- Remuneration to its working partners 220.00
- Interest provided on the current account balance of the 4.50
partners@15% р.а.
(Interest on current account would be fully allowed to the
extent of 12%, since the same is authorized by the
partnership deed. Thus, interest of 4.5, being in excess of 252.00
12% i.e., 22.5 x 3%/15% would be disallowed)
- Advertisement in a souvenir published by a political 2.50
party [not allowed as deduction as per section 37(2B)]
Less: Permissible expenditure and allowances 582.00
- Depreciation allowable as per Income-tax Rules, 1962 30.00
- Unabsorbed depreciation u/s 32(2) [allowable as
deduction while computing book profit as per 30.00 60.00
Explanation 3 to section 40(b)] 522.00
Book Profit
On first ₹3 lakh of book profit [₹3,00,000 × 90%] 2.70
On balance ₹519 lakh of book profit [₹519×60%] 311.40
314.10
Remuneration actually paid of ₹220 lakhs is fully allowable
as deduction, since it is lower than the specified limit 220.00
Business Income 302.00
Less: Brought forward business loss for A.Y. 2023-24 50.00
Gross Total Income 252.00
Less: Deduction u/s 10AA 241.60
Profit from SEZ unit x Export Turnover/ Total Turnover x
100%
= ₹302 lakhs x 20/25 x 100% (since it is the fifth year of
operation) = ₹241.60 lakhs
Less: Deduction u/s 80GGC
[Expenditure on advertisement in a souvenir published by -
a political party not allowable as deduction since it is
included within the meaning of the term "contribution"
only for the purpose of deduction u/s 80GGB in case of a
company]
Total Income 10.4
Tax liability
Tax @ 30% 3.1200
Add: Health & Education Cess @ 4% 0.1248
Tax Liability 3.2448
 Computation of adjusted total income of M/s Turnip LLP for levy of
Alternate Minimum Tax
Particulars Rs. In lakhs
Total Income (as computed above) 10.40
Add: Deduction u/s 10AA 241.60
Adjusted Total Income 252.00
Alternate Minimum Tax@18.5% 46.6200
Add: Surcharge@ 12% (since adjusted total income > ₹1 crore) 5.5944
52.2144
Add: Health and Education cess @ 4% 2.0886
Tax liability u/s 115JC 54.3030
Since the regular income-tax payable is less than the alternate minimum
tax payable, the adjusted total income shall be deemed to be the total
income and tax is leviable @18.5% thereof plus surcharge@12% and
cess@4%. Therefore, the tax liability is 54.3030 lakhs.
AMT Credit to be carried forward u/s 115JEE
Tax liability u/s 115JC 54.3030
Less: Tax liability under the regular provisions of the Income-tax Act, 1961 3.2448
Amount of Credit 51.0582

Question: 4

Discuss the correctness or otherwise of the following statement:

Units set up in an International Financial Services Centre are entitled to special tax concessions.

Answer:

The statement is correct

1. Exemption from STT and CTT: With effect from 1.6.2018, securities transaction tax is not
leviable in respect of taxable securities transactions entered into by any person on a
recognised stock exchange located in an International Financial Services Centre (IFSC) where
the consideration for such transaction is paid or payable in foreign currency.
Likewise, commodities transaction tax is not leviable in respect of taxable commodities
transactions entered into by any person on a recognised stock exchange located in unit of IFSC
where the consideration for such transaction is paid or payable in foreign currency.

2. Concessional rate on LTCGs on sale of securities, even if STT is not paid: Long-term capital
gains in respect of income arising from transaction undertaken in foreign currency on a
recognised stock exchange located in an International Financial Services Centre would be
taxed@10% u/s 112A, even though securities transaction tax is not paid in respect of such
transaction.

3. Concessional rate of tax on short-term capital gains, even if STT is not paid: Short term
capital gains arising from transaction undertaken in foreign currency on a recognised stock
exchange located in an International Financial Services Centre would be taxable at a
concessional rate of 15% u/s !11A even though securities transaction tax is not paid in respect
of such transaction.

4. Concessional rate of MAT: In case of a company, being a unit located in International Financial
Services Centre and deriving its income solely in convertible foreign exchange, the minimum
alternate tax u/s 115JB shall be chargeable at the rate of 9% instead of 15%.
5. Concessional rate of AMT: In case of a person, being a unit located in International Financial
Services Centre and deriving its income solely in convertible foreign exchange, the alternate
minimum tax u/s 115JC shall be chargeable at the rate of 9% instead of 18.5%.

6. Transaction in the following asset, by non-resident on recognized stock exchange located in

IFSC shall not be regarded as transfer if consideration is paid or payable in foreign currency -
(a) Bonds or GDR referred in sec. 115AC
(b) Rupee denominated bonds of an Indian company.
(c) Derivatives
(d) Other specified securities

Question: 5

PQR LLP, a limited liability partnership set up a unit in Special Economic Zone (SEZ) in the financial
year 2020-21 for production of washing machines. The unit fulfills all the conditions of section
10AA of the Income-tax Act, 1961. During the financial year 2023-24, It has also set up a
warehousing facility in a district of Tamil Nadu for storage of agricultural produce. It fulfills all the
conditions of section 35AD. Capital expenditure in respect of warehouse amounted to ₹75 Lakhs
(including cost of land ₹10 lakhs). The warehouse became operational with effect from 1st April,
2024 and the expenditure of ₹75 Lakhs was capitalized in the book on that date.
Relevant details for the financial year 2024-25 are as follows:
Particulars Rs.
Profit of unit located in SEZ 47,00,000
(It includes profit on sale of import entitlement licence is ₹ 4,00,000 and
Duty drawback of ₹ 3,00,000)
Export sales of above unit 80,00,000
(Out of export sales ₹80 lakhs repatriated in India in foreign currency
within time allowed by RBI is ₹72 lakhs)
Domestic sales of above unit 20,00,000
Profit from operating of warehousing facility (before considering 1,05,00,000
deduction u/s 35AD).
Compute income tax (including AMT u/s 115JC) payable by POR LLP for Assessment Year 2025-26

Answer:

Computation of total income and tax liability of PQR LLP for A.Y. 2025-26 (under the regular
provisions of the Income-tax Act, 1961)
Particulars Rs. Rs.
Profits and gains of business or profession
Profit from operation of warehousing facility 1,05,00,000
Less: Deduction u/s 35AD [See (2) below] 65,00,000 40,00,000
Business income of warehousing facility chargeable to tax
Profit from unit in SEZ 47,00,000
Gross Total Income 87,00,000
Less: Deduction u/s 10AA [See note (1) below] 28,80,000
Total Income 58,20,000
Computation of tax liability (under the normal/
regular provisions)
Tax@30% on ₹58,20,000 17,46,000
Add: HEC @ 4% 69,840
Total tax liability 18,15,840
 Computation of adjusted total income PQR LLP for levy of Alternate Minimum Tax

Particulars Rs. Rs.

Total Income (as computed above) 58,20,000
Add: Deduction u/s 10AA 28,80,000
87,00,000
Add: Deduction u/s 35AD
Less: Depreciation u/s 32 on building @ 10% of ₹65 lakhs 58,50,000
Adjusted Total Income 1,45,50,000
Alternate Minimum Tax @ 18.5% 26,91,750
Add: Surcharge cess 12% (since adjusted income total 3,23,010
income > 1 crore)
30,14,760
Add: HEC @ 4% 1,20,590
Tax liability u/s 115JC 31,35,350

Since the regular income-tax payable is less than the alternate minimum tax payable, the adjusted
total income shall be deemed to be the total income and tax is leviable 18.5% thereof plus
surcharge @ 12% and HEC@4% Therefore, the tax liability is ₹31,35,150

AMT Credit to be carried forward u/s 115JEE Rs.

Tax liability u/s 115JC 31,35,350
Less: Tax liability under the regular provisions of the Income x Act, 1961 18,15,840
13,19,510

Notes:

1. Deduction u/s 10AA in respect of Unit in SEZ =

= Profits of the Unit in SEZ x Export turnover of the Unit in SEZ - b±√b²-4ac
Total turnover of the Unit in SEZ 2a

40,00,000 x 72,00,000 = 28,80,000

1,00,00,000

(i) Items of business income which are in the nature of ancillary profits and hence, do not
constitute profit derived from business for the purpose of deduction u/s 10AA so as per the
case low of Liberty India Ltd. profit on sale of Import entitlement licence & duty drawback
are not included in profit for the purpose of deduction u/s 10AA.

(ii) Amount of export sales not repatriated in India within time allowed by RBI is not included in
Export sales

2. Deduction@100% of the capital expenditure is available u/s 35AD for A.Y. 2025-26 in respect of
specified business of setting up and operating a warehousing facility for storage of agricultural
produce which commences operation on or after 01.04.2012.

Further, the expenditure incurred, wholly and exclusively, for the purpose of such specified
business, shall be allowed as deduction during the previous year in which he commences
operations of this specified business if the expenditure is incurred prior to the commencement of
its operations and the amount is capitalized in the books of account of the assessee on the date of
commencement of its operations.
Deduction u/s 35AD would, however, not be available on expenditure incurred on acquisition of
land.

In this case, since the capital expenditure of ₹65 lakhs (i.e., ₹75 lakhs - ₹10 lakhs, being expenditure
on acquisition of land) has been incurred in the F.Y. 2023-24 and capitalized in the books of
account, ₹65,00,000, being 100% of ₹65 lakhs would quality for deduction u/s 35AD.

Question: 6

Victory Polyfibres, a partnership firm, has earned a gross total income ₹300 lakhs for the year
ended 31.3.2025. The firm has not undertaken any international transaction or specified domestic
transaction during the said year.
The above includes a profit of ₹220 lakhs from an undertaking having a turnover of ₹80 crores. This
is the fifth year and deduction u/s 80-IA of the Income-tax Act, 1961 is available to the extent of
₹200 lakhs.
There are some grey areas in the taxation working and hence, the assessee is contemplating to file
the return of income on 7.12.2025, after seeking clarifications from tax experts.
Advise the assessee-firm by working out the total income and tax payable, where the return is filed
on 31.10.2025 or when the same is filed on 7.12 2025
What is the practical solution as regards obtaining clarifications, which might or might not have an
impact on the total income?

Answer:

As per section 80AC, while computing the total income of an assessee of a previous year (P.Y.
2024-25, in this case) relevant to any assessment year (A.Y. 2025-26, in this case), any deduction is
admissible, inter alia, u/s 80-IA, such deduction shall not be allowed unless it furnishes a return of
income for such assessment year on or before the 'due date' specified in section 139(1).

Since the turnover of the partnership firm has exceeded ₹200 lakhs in the previous year 2024-25, it
would be subject to audit u/s 44AB, in which case the due date of filing its return of income for A.Y.
2025-26 would be 31st October, 2025 as per section 139(1).

Computation of total income and tax liability of M/s. Victory Polyfibres for A.Y. 2025-26.
1. Where the firm files its return of income on 31st October, 2025

Particulars Rs. In lakhs

Gross total Income 300.00
Less: Deduction u/s 80-IA 200.00
Total Income 100.00
Tax Liability @ 30% 30.00
Add: HEC @ 40% 1.20
Regular income -tax payable 31.20
Computation of Alternate Minimum Tax payable [Section 115JC]
Total Income 100.00
Add: Deduction u/s 80-IA 200.00
Adjusted Total Income 300.00
Alternate Minimum Tax (AMT) @ 18.5% on Rs.300 lakhs 55.50
Add: Surcharge @ 12% (Since adjusted total income > R. 1 crore) 6.66
62.16
Add: HEC @ 4% 2.49
Total tax payable (AMT) 64.65
Since the regular income-tax payable by the firm is less than the alternate minimum tax payable,
the adjusted total income shall be deemed to be the total income of the firm for P.Y. 2024-25 and
it shall be liable to pay income-tax on such total income @ 18.5%[Section 115JC(1)]. Therefore, the
this payable for the A.Y. 2025-26 would be ₹64.65 lakhs.

Tax credit for Alternate Minimum Tax [Section 115JD] Rs. In lakhs
Tax as per AMT. 64.65
Less: Regular income-tax payable 31.20
To be carried forward for set-off against regular income-tax payable (upto 33.45
a maximum of fifteen assessment years).

2. Where the firm files its return of income on 7th December 2025.
Where the firm files its return on 7.12.2025, it would be a belated return u/s 139(4). Consequently,
as per section 80AC, deduction u/s 80- IA would not be available. In such circumstances, the gross
total income of 300 lakhs would be the total income of the firm.

Particulars Rs. In lakhs

Income-tax@30% of ₹300 lakhs 90.000
Add: Surcharged 12% (since total income exceeds 100 lacs) 10.800
HEC @ 4% 4.032
Income-tax liability 104.832

Practical solution regarding obtaining clarifications

The practical solution regarding obtaining clarifications would be to file the return of income u/s
139(1) on or before the 'due date i.e., 31.10.2025, and claim deduction u/s 80-IA. In such a case,
the firm can claim deduction of ₹200 lakhs u/s 80-1A. Thereafter, consequent to the clarifications
obtained, if any change is required, it can file a revised return u/s 139(5) within 31.12.2025 (i.e.,
within 3 months before the end of A.Y. 2025-26) which would replace the original return files u/s
139(1).

If the firm files the return of income u/s 139(1) on or before 30.10.2025, its tax liability would
stand reduced to ₹64.65 lakhs, as against ₹104.832 lakhs to be paid if return is furnished after due
date. Further, it would also be eligible for tax credit for alternate minimum tax u/s 115JD to the
extent of 33.45. Therefore, the firm is advised to file its return of income or before 31.10.2025.

Question: 7

M/s PRK LLP, a limited liability partnership, set up a unit in Special Economic Zone (SEZ) on 1st April,
2020 to develop and export computer software. The unit complied with all the conditions of
section 10AA. The net profit of the unit as per Statement of Profit & Loss for the year ended 31st
March, 2025 was ₹65 lakhs after debiting/crediting the following items:
i. Profit on sale of import entitlement ₹9 lakhs
ii. Remuneration to its working partners ₹58 lakhs.
iii. Interest at the rate of 16% per annum on partners' capital ₹20 lakhs.
iv. Donation to a political party ₹3 lakhs.
v. Depreciation ₹17 lakhs

Additional Information:

(i) Payment of remuneration to working partners and interest on capital are authorized by the
partnership deed.
(ii) Brought forward business loss from assessment year 2019-20 was ₹ 4 lakhs.
(iii) Unabsorbed depreciation brought forward from assessment year 2018-19 was ₹ 35 lakhs.
(iv) Total export tumover was ₹ 45 crores and the sale proceeds in convertible foreign exchange
received in India by 30th September, 2025 was ₹ 38 crores. Total export turnover of ₹ 45 crores
include telecommunication charges of ₹ 5 crores attributable to delivery of software. Sale
proceeds realization of ₹ 38 crores also include such telecommunication charges of ₹ 2 crores.
(v) Depreciation allowable as per Income-tax Rules is ₹ 26 lakhs.

You are required to compute:

(i) Income-tax (including AMT u/s 115JC) payable by Mis PRK LLP for the Assessment Year
2025-26.
(ii) Amount of tax credit allowed to be carried forward.
Necessary working notes should form part of your answer.

Answer:

Computation of total income and tax liability of M/s PRK LLP for A.Y.2025-26 (under the regular
provisions of the Income-tax Act, 1961)
Particulars Rs. Rs.
Net profit as per Statement of Profit & Loss 65,00,000
Add: Items debited but to be considered separately or to
be disallowed
- Remuneration to its working partners 58,00,000
- Interest@16% p.a. on partners' capital (Interest on 5,00,000
capital account would be fully allowed to the extent of
12%, since the same is authorized by the partnership
deed. Thus, interest in excess of 12% i.e., 20 lakhs/16%
x 4% would be disallowed)
- Donation to a political party [not allowed as deduction 3,00,000
as per section 37(1) while computing business income,
since it is not incurred wholly and exclusively for the
business]
- Depreciation 17,00,000 83,00,000
1,48,00,000
Less: Permissible expenditure and allowances
- Depreciation allowable as per Income-tax Rules, 1962 26,00,000
- Unabsorbed depreciation u/s 32(2) [allowable as 35,00,000 61,00,000
deduction while computing book profit as per
Explanation 3 to section 40(b)]
Profit on sale of import entitlement [taxable as profits and
gains from business as per section 28, since the same has
already credited in Statement of profit and loss, no further
adjustment is required]
Book Profit
On first 3 lakh of book profit [₹ 3,00,000 × 90%] 2,70,000
On balance 84 lakh of book profit [ ₹ 84,00,000×60%] 50,40,000
53,10,000
Remuneration actually paid of 58,00,000 is allowable to
the extent of
53,10,000
Business Income 33,90,000
Less: Brought forward business loss for A.Y. 2019-20 4,00,000
 Gross Total Income 29,90,000
Less: Deduction u/s 10AA
Profit from SEZ unit x Export Turnover/ Total Turnover x 22,41,000
100%[ 24,90,000 x 36 crores/40 crores x 100% (since it is
the fifth year of operation)]
Profit derived from SEZ unit 33,90,000
Less: Profits from sale of import entitlement [business
income which are in the nature of ancillary profits, do not
constitute profit 'derived from' business for the purpose
of exemption u/s 10AA] 9,00,000
24,90,000
Export Turnover: 36 crores
[38 crores - 2 crores, being telecommunication charges
included therein. Telecommunication charge not
includible in export turnover]

Total Turnover: 40 crores

[45 crores - 5 crores, being telecommunication charges
included therein. Since telecommunication charges has
been excluded from export turnover, the same has to be
excluded from total turnover also]
Less: Deduction u/s 80GGC
[Donation to political party [allowable as deduction u/s 3,00,000
80GGC, assuming the donation made otherwise than by
way of cash]
Total Income 4,49,000
Tax liability
Tax@30% 1,34,700
Add: Health and education cess @ 4% 5,388
Tax Liability 1,40,088
Tax Liability (rounded off) 1,40,090

Computation of adjusted total income of M/s PRK LLP and Alternate Minimum Tax
Particulars Rs.
Total Income (as computed above) 4,49,000
Add Deduction u/s 10AA 22,41,000
Adjusted Total Income 26,90,000
Alternate Minimum Tax@18.5% 4,97,650
Add: Health and Education cess @ 4% 19,906
Tax liability u/s 115IC 5,17,556
Since the regular income-tax payable is less than the alternate minimum
tax payable, the adjusted total income shall be deemed to be the total
income and tax is leviable @18.5% thereof plus cess @4%. Therefore, the
tax liability is ₹ 5,17,560 (rounded off).
AMT Credit to be carried forward u/s 115JEE
Tax liability u/s 115JC (rounded off) 5,17,560
Less: Tax liability under the regular provisions of the Income-tax Act, 1961 1,40,090
Amount of Credit 3,77,470

Note :
In the above solution, while computing deduction u/s 10AA, the brought froward business loss of
₹ 4,00,000 from A.Y. 2019-20 is not deducted from profits derived from SEZ, considering the view
that such profits have to be computed as per Chapter IV-D and hence, effect of carry forward and
set-off of losses is not given.
However, alternate view is also possible based on Circular No. 7/DV/2013 [FILE NO.279/MISC/M-
116/2012-ITJ], dated 16-7-2013 that provisions contained in Chapter VI relating to set-off and carry
forward and set-off of losses shall also apply while determining the income for the purpose of
computing deduction u/s 10AA. If this view is considered, the deduction u/s 10AA has to be
computed after deducting brought forward business losses of ₹ 4,00,000 from the profits of SEZ. In
such case, the deduction u/s 10AA would be ₹18,81,000 [(₹20,90,000 x 36 crores/ 40 crores) x
100%], total income would be ₹8,09,000, tax liability as per normal provisions would be ₹ 2,52,410.
Alternate minimum tax liability would remain same. However, AMT credit to be carried forward
would be ₹2,65,150]