A Company incurs accounting loss in the very first year and the same loss is carried forwarded for tax puposes to next years. Whether Deferred Tax Liability shall be created or not? if yes, please specify the reasons.
Shaely (ACS and CA final student ) (24 Points)
12 October 2010A Company incurs accounting loss in the very first year and the same loss is carried forwarded for tax puposes to next years. Whether Deferred Tax Liability shall be created or not? if yes, please specify the reasons.
Vedant Agarwal
(Chartered Accountant)
(46 Points)
Replied 18 October 2010
As per AS 22, in case of Unabsorbed depreciation and b/f losses, DTA is to be created only if there exists VIRTUAL CERTAINITY WITH CONVINCING EVIDENCE of future income to set off such losses.
In the above case, if the accountant can have virtual certainity (For Eg. Sale Order etc) that future income will be available, he can create DTA else he cannot.
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