Sir/Madam,
My question is as follows:-
In past few tears company incurred huge losses. But this year it has a profits, as a result of which current tax is "0" but it has a liability of MAT and there will be defferred tax because previous year losses are being adjusting in this year. Our company is a company incorporated u/s 8 of the companies act. One of our group company has been raided by CBI and our company's name is also in FIR hence we will not be allowed any income tax or FCRA facility.
Kindly advise should we show provision for MAT or Defferred Tax in the financial statements.
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Provision for MAT or Defferred Tax in the financial statements.
Replies (3)
If your company is under scrutiny by tax authorities, then is your business still a going concern? If it is halted, then realise profit or loss. If your still operating, one cannot create a provision IAS 37 and IndAS 37 for income taxes as this has a different treatment for provisioning. Taxes are recognised as a liability and creating new provisions will overstate the balance sheet. So, give it a normal treatment in the future.
If you are following non IndAS, that is AS 22 & 29, provisioning is allowed. The main problem is, all illustrations which I have is about capital projects and not enough examples related to deferred tax treatments from differences arising from different transactions. However, I have an illustration here which is easy to understand:
https://www.caclubindia.com/articles/meaning-of-deferred-tax-liability-asset-in-simple-words-13385.asp
I have one more resource which will give you the difference between 22 and IndAS 12.
Computation of deferred taxes is appearing to be same when I glanced at this resource. I don’t understand why all companies won’t adopt IndAS. When all listed companies and 250 Cr above companies can follow it, so can small companies. Do you know one secret FRS 102 and related IFRS principles are developed for small companies in UK. Now, why is it not like this in India? Do IFRS companies in India want to show off that AS companies are lesser prominent or do the authorities think that AS company owners are uneducated to implement IFRS? Funny waste. Yet, this happens only in India.
https://cleartax.in/s/as-22-accounting-on-income-taxes
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