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Help Required in Deferred tax computation

Shri Shri (Professional) (629 Points)

15 November 2010

KINDLY HELP ME OUT IN COMPUTING PROVISION FOR TAX & DEFERED TAX COMPUTATION WITH THE DETAILS BELOW

PROFIT OF THE COMPANY BEFORE TAX (PBT) : 40,88,605

DEPRECIATION AS PER COMPANIES ACT : 12,63,746

DEPRECIATION AS PER IT ACT : 13,46,238

PLS FIND THE IMAGE BELOW & HELP ME TO FILL THE BOX

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ITS URGENT KINDLY RENDER A SOLUTION

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10 Replies

kavitha (SAO) (56 Points)
Replied 15 November 2010

image is not clear. plz attach that excel sheet

Shri Shri (Professional) (629 Points)
Replied 15 November 2010

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 15 November 2010

Dear Shri,

The income tax depreciation is more than depreciation in the books of accounts.This means you are claiming more expenditure and deferring the payment of tax.This gives rise to defrred tax liability.

Deferred tax liability to be shown in the balance sheet= 33.99% (1346238-1263746)=28,039

You already have a deferred tax asset of Rupees 55,635.You will debit Profit & Loss Account by Rs. 83,675.

(i m assuming that depreciation is the only timing difference and there are no timing differences brought forward from the previous year)

Regards,

Fatema

Ameet (L) (1678 Points)
Replied 15 November 2010

DEAR DTA/DTL ALWAYS CREATE ON DIFFERENCE OF WDV OF FIXED ASSETS UNDER COMPANIES ACT AND WDV OF FIXED ASSETS UNDER INCOME TAX ACT. IT IS WRONG TO CALCULATE ON DEPRECIATION.

KINLY GIVE WDV UNDER INCOME TAX ACT AND COMPANIES ACT

Ameet (L) (1678 Points)
Replied 15 November 2010

IN ADDITION, DTA REPRESENTATION IS WRONG UNDER SCHEDULE VI

IT SHOULD BE BELOW INVESTMENTS. iN YOUR CASE IT WILL BE BELOW FIXED ASSETS

AND WHY FIVE YEAR INFORMATION GIVEN ? IT IS FOR ? (JUST FOR MY KNOWLEDGE)

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 15 November 2010

Ameet,

DTA will be the same in both cases.calculate it on wdv or depreciation

Ameet (L) (1678 Points)
Replied 15 November 2010

NOT AT ALL DEAR. NOT ALWAYS.....IT MAY IMPACT GOOD DIFFERENCE IN BOTH THE METHOD. I HAD GREAT EXPERIENCE HENCE I AM TELLING......ALSO CONCEPTUALY AND AS PER ACCOUNTING STANDARD IT IS WRONG WAY OF CALCULATION.....

IF U WANT TO TRY THEN TRY, TAKE DIFFERENT CASES BY WAY OF CALCULATING BOTH THE METHOD,

IF U CALCULATE ON DEPRECIATION, THEN IT WILL BE FOR THE YEAR AND IF U CALCULATE ON WDV THEN IT WILL AS ON.

REST YOURS, IF U WANT TO CALCULATE THEN ITS UP TO U...

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 15 November 2010

You can calculate deferred tax on difference in depreciation under the two laws and reconcile the same with WDV under the two laws and see whether the same tallies or not.