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For an ordinary company, not under insolvency resolution or a Tribunal-nominated board, what amount is deducted in computing book profit under section 206 of the Income-tax Act, 2025 for…

Question and options

For an ordinary company, not under insolvency resolution or a Tribunal-nominated board, what amount is deducted in computing book profit under section 206 of the Income-tax Act, 2025 for brought-forward loss (excluding depreciation) and unabsorbed depreciation as per the books?

  1. The total of the two amounts taken together

  2. The higher of the two amounts, even if the other is nil

  3. The lower of the two amounts, but nothing if either is nil

  4. The brought-forward loss, ignoring unabsorbed depreciation

Answer and explanation

Correct answer: C - The lower of the two amounts, but nothing if either is nil

Section 206(1)(c)(xvi) of the Income-tax Act, 2025 reduces book profit by the brought-forward loss (excluding depreciation) or the unabsorbed depreciation as per the books, whichever is less, and by nothing where either amount is nil. The aggregate of both amounts is deducted only for companies under corporate insolvency resolution or whose board has been replaced by Tribunal-nominated directors, under section 206(1)(d)(vi) and (vii).

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