AS-22 Urgent Sir!!!

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Rajesh (Querist)

04 September 2010 Dear Experts,
Require ur immediate reply...Very urgent Sir!!!
For a first year incorporated company we are finalizing the audit.
For AS - 22 calculations i have done the following workings. Please tell me whether i am correct or not. Because of this i have not yet said to my senior that the audit has been finalized.

Closing wdv balance of Fixed Assets as per Companies Act - 60,00,000
Less: Closing wdv balance of Fixed Assets as per Income Tax Act - 50,00,000
Difference in balances = 10,00,000
Note:
(1)This is due to difference in depreciation amount. In Income Tax act we are claiming more depreciation amount than companies act. Therefore Tax Profit is less than Book Profit, consequently we are paying less tax now which we have to pay at a latter point of time, thats why we have to create DEFERRED TAX LIABILITY.
(2)It is assumed that there is no amount disallowed u/s 43B.

Deferred Tax Liability to be created - 10 lakhs * 30% (no surcharge or cess since less than one crore income) = 3 lakhs.

First Entry - Booking the expense and creating liability:

DTL* (P&L) A/c Dr. 3 lakhs
To DTL (B/s) A/c 3 lakhs
(Being the amount of Deferred Tax liability which we have to pay in later years for which currently booked as expense and corressponding credit (i.e. liability) is being created)

* Instead of DTL (P&L) we may also term it as Tax Expense

Second Entry - For transferring the expense into P&L a/c:

P&L A/c Dr. 3 lakhs
To DTL (P&L) A/c 3lakhs
(being the amount of Deferred Tax transferred to P&L account for the year ended 31.3.2010)

Please inform me whether i am correct or not in this regard.

With regards,
Rajesh.