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deferred tax??????

JOYAL GEORGE (Partner M/s Balan & CO Cochin) (388 Points)

12 July 2010

I AM IN A GREAT DILEMA REGARDING A PRACTICAL ISSUE.... Pleae help me

A company who prepares its annual accounts on calendar year basis (Jan to Dec). It files it IT return on financial basis (Apr to Mar). In such a case how will you calculate deferred tax for annual accounts AS 22. ? how wll you determine the taxable income on 31 dec.?

Also, how to compute depreciation as per IT rules as on 31 dec( applying principles of 180 days)///

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5 Replies

Archit Goyal (Learning Professional) (344 Points)
Replied 12 July 2010

i think u dont have seen such a case

in this case companies has to prepare seprate finanancials for income tax return purposes

respectively other values must be claculated

(Guest)

In this case the company will have to prepare books of accounts in accordance with Income Tax Act i.e. on financial year basis & then calculate the Deferred Tax.

JOYAL GEORGE (Partner M/s Balan & CO Cochin) (388 Points)
Replied 13 July 2010

It is a very much relevant issue & i am doing such a company for the first time. There are so many multi national companies including Philips who prepare annual accounts on calender year basis and it return has to be filed on financial year basis.

JOYAL GEORGE (Partner M/s Balan & CO Cochin) (388 Points)
Replied 13 July 2010

Hello Archit,

There are so many companies who prepare annual accounts on calender year basis. I hope you have not come acrooss any such cases. Thats why you replied like this. I am doing a company whoich was taken over by a non-resident who prepares annual accounts on calender year basis.... (please go through companies act)

Parth - CA,CS,CMA (Learner) (406 Points)
Replied 13 July 2010

What Archit said is completely right.

But i think he looked the question from IT Return preparation angle and not from Financial Reporting Angle.

Yes you will have to prepare the 31st March ending statements but u can show the deferred tax provision for those three months.

I can understand how difficulty the topic starter would be facing...

For example, difference of depreciation is taken as deferred tax.. Now, while showing position of deferred tax on account of difference in depreciation, one has to take depreciation as per IT on 31st Dec., which will not be available!! (Coz one may even sell of an asset in last three months hence inelgibile for entire depreciation for whole year)

Also, one cant create DTA on 43B disallowances as on 31st Dec, as they may be allowed subsequently..

Really a typical problem. I m eager to see the solution to it. According to me, reasonable estimation is the only soultion.

To Archit,

Mate, he is not confused about the what to show on 31st March. We all knw we have to prepare second accounts. He's asking what to show on 31st Decemeber. (You can prepare data from past but u cant predict future 3 months)

Hope i got the msg correctly.