My client, till A.Y 2009-10 is under the scheme of Tonnage tax under sec.115VU. Accumilated loss till A.Y 2009-10 is Rs.4Crores. Since it has opted for tonnage tax scheme the company is liable to pay tax on net tonnage irrespective of taxable income or loss. How ever current year i.e., F.Y 2009-10, the company has opted out from tonnage tax scheme & henceforth the books of accounts were prepared under the normal provisions of income tax act, 1961.Current year the loss is Rs.1.27Crores (Tax loss is Rs.1.50Crores) and accumulated loss including current year loos is to the tune of Rs.5.27Crores.
My client now wants to provide for Deferred tax Asset as there is virtual certainity of Income in the F.Y2010-11 to the tune of Rs.3 Crores.
My boss is of the opinion that for calculation of DTA even the accumulated loss (Rs.5.27 Cr) should also be considered and since the loss is more than the income(Rs.3Cr), DTA should not be created.
As per my interpretation of the provisions of Income tax Act,1961, since the company has opted out tonnage tax scheme in the F.Y 2009-10, accumulated loss till that date i.e., Rs.4Crores should not be considered for calculation of DTA as in the earlier years company has not paid any tax though the company got huge profits, as they are liable to pay tax on net tonnage.
Since there is sufficient future income to avail the DTA credit in the F.Y2010-11 (Rs.3Crores against the current year loss), the company may provide for deferred tax asset and also the accumulated loss till F.Y 2008-09 to the tune of Rs.4Crores need not be considered for calculation of DTA.
Plz lemme know whether my boss opinion is correct or my opinion is correct.
Also I would like to know, for creation of DTL in respect of Depreciation, do I have to consider the accumulated depreciation since the beginning of incorporation (Dt of Incorporation: 11.10.2004) or only the current year (2009-10) depreciation??
Thanks & Regards
Radhika
CAclubindia
