deferred tax

This query is : Resolved

rajesh (Querist)
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01 July 2011 Dear All,

We have created deferred tax asset in previous year i.e. 2009-10 as there is virtual certainty that future taxable income will be available. However in the year 2010-11 , there is a loss and as per calculation deferred tax assets comes. So please provide us the guidance regarding,
1) Whether deferred tax asset should be created as there is a loss and in the near future i.e one year , profit will be available only to the extent of covering up losses of previous year?
2) If yes/no what note in the audit report of a ltd. company should be put?

Thanks

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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01 July 2011 The deferred tax assets or liability is created due to the benefits of tax if any arising to the company either by way of exemptions or by way of allowing depreciation as per income tax act. This is nothing but the book entries and not effecting your tax-ability.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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01 July 2011 The company is not virtually certain that sufficient profit will emerge in financial year 2011-12 to cover up the loss of financial year 2010-11. Hence DTA for the loss of 2010-11 need not be provided in the books.
In the 'note on accounts' pl repeat the 1st sentence of the above para and for the words'need not' in the second sentence substitute the words'is not'.

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