Deferred tax

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

27 September 2012 Sir
A company is having brought forward losses and unabsorbed depreciation. Due to the uncertainty of future profits company has decided not to make provision of deferred tax assets arising on timing difference due to difference between depreciation as per Income Tax and Companies Act.
Company also having opening balances of deferred tax assets. How would treat this opening balances. Whether to write off as prior period item or to show as it is in the balance sheet. Please reply it is very urgent.

shashikumar

shashikumar (Expert)
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27 September 2012 Irrespective of future profits the company has to make a provision for DTA/DTL and if company decided tofor non provision its violation of section 211 of companies act.

Showing the opening balance as it is advisable instead of writing off.

Querist : Anonymous

Querist : Anonymous (Querist)

27 September 2012 Sashi Kumarji,
But As per AS 22, In case of company having brought forward losses and unabsorbed depreciation, DTA should be provided only when there is virtual certainty supported by convincing evidence that the company would generate profits. In this case there is no certainty. Whether the company has to make the provision.