Deferred Tax (AS 22)

This query is : Resolved

JaiPrakash Agarwal (Querist)
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23 May 2008 As per AS-22, Deferred Tax (Asset or Liability) should be recognised only when there is a temporary difference between taxable income and accounting income.

Now as per AS-31, The Financial Instruments need to be marked to market and recognise the anticipated losses in books. Since these losses are not recognised by income tax. This will give rise to a difference between taxable income & accounting income.

But I am uncertain about the type of difference it should be referred to - permanent or temporary.
The reason being if the actual sale of instrument results in profit, the anticipated loss becomes a permanent difference, as no loss occurs at any time and was never reversed.

CA. Yayati Tyagi

CA. Yayati Tyagi (Expert)
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23 May 2008 i think in this case we should consider these losses as temporary difference, because later we may be able to sell them at profit as u mentioned, unless there is permanent devaluation.

if later these are sold at profit, u should write back the deferred tax asset created earlier with proportionate amount.

if later sold at loss, u write back the deferred tax asset created earlier with proportionate amount and treat extra loss as permanent difference.

in both cases, the DTA created earlier has to go.

CA. Yayati Tyagi

CA. Yayati Tyagi (Expert)
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03 June 2008 replied

JaiPrakash Agarwal

JaiPrakash Agarwal (Querist)
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18 June 2008 yes but is there any notification to substaintiate this

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