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Discussion > Income Tax > Tax queries >

Deferred Tax on Revalued Assets

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[ Scorecard : 42]
Posted On 08 April 2010 at 21:59 Report Abuse

The query is :

- The assets have been revalued this year.

- The revaluation effect is not considered as per IT Act.

- That implies that the tax effect on revalued portion is a permanent difference.

- How is the Deferred tax amount to be calculated as per AS - 22.???

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Chartered Accountant

[ Scorecard : 245]
Posted On 09 April 2010 at 10:55

Pretty intresting query....

a) You need to visit AS-6 before applying AS 22 i.e. as per AS 6 you cannot charge to revenue the depreciation on revalued portion, it needs to be adjusted against revaluation reserve

b) Now AS 22 to be applicable there needs to be tax difference on account of timing, Depreciation on revaluation is not allowed as per Income Tax Act and Similarly even in the Companies Act the same is not allowed, so in short there is no difference.

Hope this solves your query..


[ Scorecard : 3956]
Posted On 09 April 2010 at 11:36

Dear Nicky Sir,

With due respect I would say that I couldnt find anything in AS-6 that talks about the charging of additional depreciation on account of revaluation to "Revaluation reserve"

Although Schedule VI of companies act talks about it but again only with reference to a disclosure & not in respect of treatment.

One more thing Guidance Note on "Accounting for Depreciation" as isuued by ICAI encourages charging of additional depreciation to the P& L A/c - reason being - Depreciation is looked up as an allowance which helps in replacing ur assets in future so in order to replace ur assets u got to make way for additional depreciation also by charging it to P&L A/c.


As far as query goes - Deferred Tax is calculated on timing difference where as additional depreciation on account of revaluation of assets is a permanent difference. So no need to recognize Deferred Tax in this case.

Chartered Accountant

[ Scorecard : 245]
Posted On 09 April 2010 at 15:30

Amir you are right and I misread.. Thanks for correcting

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[ Scorecard : 241]
Posted On 09 April 2010 at 20:53

in India DTA/DTL is created only for timing differences. only those transactions are considered for this purpose which are routed through P & L a/c. the revaluation of assets affects only balance sheet i.e. increase in assets and creation of revaluation reserve. such balance sheet adjustments are called  temporary differences in IFRS/IAS approach and find no place in AS-22. Thus, though Deferred Tax is calculated for this in some other countries, India still ignores such differences and provides no treatment for that.

further, the depr. charged on additional value by us in P&L a/c is disallowed in IT act and would never be so allowed in future also. So, such differences could not be called timing difference as even if it arises, it wont be reversed in subsequent periods. Thus NO treatment for deferred tax.

So in nutshell, following AS-22 consider only timing differences and not Temporary diferences, as given in IFRS(or IAS). Maybe in future ICAI will consider impact of such balance sheet revaluations.

friends, please correct me, if i went wrong somewhere.


Kazi Md. Sazzad Ali
Senior Articled Student

[ Scorecard : 30]
Posted On 25 September 2012 at 10:50

Depreciation on revalued assets is Tk.  15,76,28,030/-

Carrying amount of revalued assets is Tk. 1,56,34,51,595/-

Opening Revaluation Surplus is Tk. 110,82,54,614/-

Opening Deferred Tax Liability Provision is Tk. 61,28,25,011/-

which amonut  will be  the deferred tax provision on revalued assets this year and its journal ?

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