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Defeered tax Liability

CA Sanjay Baheti (PROPRIETOR) (1160 Points)

27 January 2010

Whether Deffered tax Liability created as per As-21 in Books is considered to be part of Reserves & Surplus for the purpose of computing Net Tangible Worth.

Regards.

Ca Sanjay Baheti,Ahmedabad

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9 Replies

Amir (Learner) (4016 Points)
Replied 27 January 2010

Dear Sir,

First of all DTA/DTL is created as per AS 22 & not as per AS 21..

Anyways, It will not be treated as part of Reserve & Surplus since ICAI has prescribed it's disclosure "After/Below Loans on Liabilities Side"

PRAVEEN KUMAR (MBA (Finance) B.Com.(P)) (3443 Points)
Replied 27 January 2010

agree with Mr. Amir

CA Sanjay Baheti (PROPRIETOR) (1160 Points)
Replied 28 January 2010

Dear Mr Amir, As you replied that the same is not treated as part of Reserves & Surplus as per ICAI Guidelines.But can you clarify me when the deffered tax liability created at time of transtional period when As-22 was applicable the same was out of either cr balance in Profit & Loss A/c or General reserve which is part of Reserves & Surplus. Please comments. regards Ca Sanjay Baheti,Ahmedabad

Amir (Learner) (4016 Points)
Replied 28 January 2010

Dear Sanjay,

Tell me Deferred Tax liability is an expense or an appropriation ??

It is an expense, it is only for Transitional period it is created from the opening balance of P/L a/c or General Reserve.

Ok if I go by ur logic that Every item which is created from balance of P/L A/c or General reserve is a"Reserve & surplus",

then what u have to say about Dividend, is it also "Reserve & Surplus"... No my friend Dividend is a liability...

Similarly "Deferred Tax Liability is not a part of Reserve & surplus"

Munish Kumar Bhanot (Accounts Manager) (21 Points)
Replied 29 January 2010

Sir, I also wnat to know that can we ni the Balance of Daffered tax whcih we have created at the time of Balance sheet finalising Thanks Munish K.Bhanot

CA SURENDRA KUMAR RAKHECHA (Practising CA at Surat) (26263 Points)
Replied 30 January 2010

The Principle of Accounting of Deferred tax is Accrual Concept.

Hence it is either a libility or an asset.

So it is clear that it is not a part of Reserves and Surplus.

Deferred Tax is the timing difference.

The concept of Deferred Tax is based on the assumption that at one point of time the difference between Book Profits and Profits under IT Act is set off (becomes NIL).

But practically it will not be so. Because when business is run; every year there are so many transactions which will create timing difference every year.

Rohit Khaitan (Learning from Life) (127 Points)
Replied 31 January 2010

Yes I agree with CA Surendra Kumar Rakhecha.. As DTA /DTL is the provision of timing difference of book profits Or Profit as per Companies act and profits under IT Act.. So it should not be considered as the part of Reserves & Surplus and thus requires a separate disclosure in the face of Balance Sheet and Also a comment in the Notes on Accounts...

With Thanks & regards

Rohit..

Nilesh Gajjar (Tax Pract.) (Financial Accountants) (492 Points)
Replied 18 September 2010

KA Mr. Sanjay Baheti

Fresh TIN registration both for Vat/CST under VAT/CST ACT - VAT

You cannot avail the benefit of LUMPSUM under Gujarat VAT Act & it also not permits to purchase from o/s Gujarat hence, you have to go in regular scheme ok

NILESH H GAJJAR

9825114973