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Deferred Tax

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This query is : Resolved

CA Jithesh C (Querist)
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03 June 2009 Daer Experts,

Kindly give me some suggestions for the issue mentioned below:

A private limited company is making losses from inception. Suppose in the first year income tax depreciation is Rs Rs 1,00,000/- and Companies Act Depreciation is Rs 80,0000/-. Should we create DTL of Rs 6,798/- (20000*33.99%) or DTA of Rs (6,798)/- (Negative).

Sreedhar Atchutuni ACA,GradCWA

Sreedhar Atchutuni ACA,GradCWA (Expert)
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03 June 2009 Here DTL does not arise only DTA arises.But DTA should also not to be recognized because the company is making losses from its inception.Reason is AS 22 states DTA is to be recognized only when there is virtual certainity supported by convincing evidence that sufficient future taxable income will be available against which such DTA can be realised.

So my opinion is no DTL and DTA.

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