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Deferred tax

Angel (Associate) (31 Points)

04 July 2018

The assessee is a private limited Company.It should one of the asset and Got Profit on sale of asset of Rs 324023 in Books of Accounts. There is no profit in IT books due to Block of asset rule. And now depreciation as per book is 764259 and as per Income Tax is 620502 . What will be the amount of Deferred Tax ??

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4 Replies

Sanjai B (78 Points)
Replied 05 July 2018

if you reduce income tax depreciation with companies act depreciation.. you will get deferred Tax..

A.Kishore Kesav (810 Points)
Replied 05 July 2018

Generally...depreciation as per tax records will be high comparing to depreciation provided under accounting records....as in ur case...the depreciation under tax records is less comparing to depreciation provided in accounting records...
Thus it can be assumed as a reversal of Deferred Tax Liability...as in the earlier stages deprecation in the tax records will be high comparing to accounting...thus it will results in origination of Deferred Tax Liability...

Solution is treat such diff between tax records depreciation and accounting records depreciation reversal of DTL..

Angel (Associate) (31 Points)
Replied 05 July 2018

What will be the effect for Profit on sale of asset??

A.Kishore Kesav (810 Points)
Replied 05 July 2018

As such profit is blocked in the Tax records...there exists the permanent difference of accounting income and taxable income...i.e. it is a permanent difference...as it should be ignored for determining Deferred Tax as only timing difference which could be reversed in the subsequent years are been recognised as DTA/DTL...

Solution is ignore DT of such profit earned...as it is a permanent difference.

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