13 April 2016
Hi, MAT credit is recognised in Balance Sheet along with DTA. Both are separate requirements. However, we need to check the recoverability of both on reporting date. For your information, under IGAAP MAT credit and DTA are shown as separate line items while in IFRS both are treated as DTA.
13 April 2016
Shall DTA be computed in reference to normal provision of Income tax if MAT is applicable.
MAT liability computed as per books profit where you have already debited depreciation as per Company act.... Now for computation of DTA again you creating recoverability on such depreciation...... How we can recognised the same thing twice in Balance sheet
13 April 2016
Yes even if MAT is applicable, DTA / DTL is based on normal provisions of Income tax and AS 22.
For DTA / DTL computation you consider the temporary differences e.g. in case of Depreciation you take the diff. of Book dep and IT dep or book wdv and tax wdv.
MAT and Deferred tax are two different concepts dont mix them. You will take the MAT credit if in future (10 years limit) your normal tax is higher that MAT. For computation of normal tax you will consider all the temproary / permanent differences.
13 April 2016
Thanks, Reason of confusion is matching concept which is not applied here if we recognise simultaneously. if DTA/DTL recognised only to the extent of RATE of TAX applied i.e @ 30% and 18%
13 April 2016
What is the basic concept behind recognising the DTA in bance sheet, if we have paid excess tax in current year and the same is expected to be adjusted in coming year as per book profits. Mean there is few items in profit and loss account that is not allowable in Income tax in current period but in subsequent period so we have recognised the same..... But why MAT credit??????? Because we have paid tax in excess of actual liability computed under normal provision of Income Tax and now why this situation is created because there are difference under IT normal provision and 115JB and one of the component of this difference may be depreciation........ and so in this condition we are recognising assets two times in balance sheet for same item
13 April 2016
You must be aware of concept behind introduction of MAT...Companies having higher book profits but not paying tax / or very nominal tax because of some allowances/disallowances as per normat provisions of tax (mainly Dep)....So MAT was introduced and diff. of MAT and Normal tax is allowed as MAT credit for 10 years. This is the specific provision and MAT credit can be availed as soon as company is covered under normal provisions.
Concept of Deferred Tax is relevant for tax as per normal provisions of tax. Deferred tax is nothing to do with MAT.
13 April 2016
It appears to be double asset recognition in form of MAT as well as DTA but generally a company is covered under MAT because of higher dep in IT and in this case DTL is recognised on Dep not DTA.
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