Accounting Standard-22

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This query is : Resolved

Manoj Kumar (Querist)

04 May 2010 Dear All,
One of the company has never provided the Deferred Tax assets/liability in the books becaue of losses. In the current F.Y. DTA/DTL has to be provided in the books. In the c.y. there is a profit and As per Income Tax Act all brought forwards losses and depreciation will be allowed. please advice whether DTA/DTL would be made on brought forward losses and depreciation also.

Aditya Maheshwari

Aditya Maheshwari (Expert)

04 May 2010 Where an enterprise has unabsorbed depreciation or carry forward of losses under tax laws, deferred tax assets should be recognised only to the extent that there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised.

So till last year if DTA has not been made then no problem.

Now u want to make DTA/DTL in the current year. If u make DTA on unabsorbed depreciation or carry forward of losses under tax laws till last year then you will have to reverse the DTA on account of set off of unabsorbed depreciation or carry forward of losses under tax laws. So the net effect would be that DTA will be created and will be written off as all the losses are being set off. So the net impact on the P & L A/c will be NIL. So you can make a DTA and then write it off in the current year itself or do not make any DTA to that effect as the impact on the P & L is the same.

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