Losses of subsidiary company
This query is : Resolved
01 September 2011
Dear Experts,
We have a 100% sub company in Dubai.
In F.Y.10-11 subsidiary company incurred loss of rs.10 lakhs.
Can holding company bring this loss in its books of a/c & balance profit after adj of 10 lakh can be offered to tax for the yr ended 31.03.11.
Waiting for ur reply...
Thanks in advance..
Regards,
Sushil.
We have a 100% sub company in Dubai.
In F.Y.10-11 subsidiary company incurred loss of rs.10 lakhs.
Can holding company bring this loss in its books of a/c & balance profit after adj of 10 lakh can be offered to tax for the yr ended 31.03.11.
Waiting for ur reply...
Thanks in advance..
Regards,
Sushil.
01 September 2011
Dear Sushil,
As per AS-13, in case of permanent investment, the value of investments is to be decreased only when there is a permanent diminution in value of investment. Hence, if the loss is not of temporary in nature i.e. incurred in current year and the net worth of the Company is substantially reduced, then the value of investment in subsidiary is to be reduced to reflect fair value of investment and balance is to be provision for diminution in value of investments. The above accounting treatment is to be given in accounts prepared as per Companies act.
But while preparing the computation as per IT Act, no provision made is allowed as deduction. Hence, such a diminution is value of investment in subsidiary will not be allowed as deduction and will be added to net income.
As per AS-13, in case of permanent investment, the value of investments is to be decreased only when there is a permanent diminution in value of investment. Hence, if the loss is not of temporary in nature i.e. incurred in current year and the net worth of the Company is substantially reduced, then the value of investment in subsidiary is to be reduced to reflect fair value of investment and balance is to be provision for diminution in value of investments. The above accounting treatment is to be given in accounts prepared as per Companies act.
But while preparing the computation as per IT Act, no provision made is allowed as deduction. Hence, such a diminution is value of investment in subsidiary will not be allowed as deduction and will be added to net income.
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03 September 2011
Sachin is correct. I agree with him
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