[aaykarbhavan] Re: Query reltated to Income tax (deffered tax liab)

Dear CA Ram Agrawal,

       Income Tax under section 115JB, on Book Profits is payable when the "income tax payable on the total income as computed under the Income Tax Act, is less than 18.5% of the Book Profits as defined in the Explanation to section 115JB(2) of the Act." Therefore the assessee has to determine the tax on (a) the Total Income under the regular provisions of the Act by claiming depreciation as provided under the Income Tax Rules and (b) compute the tax at 18.5% on the Book Profits as defined in the aforesaid Explanation to section 115JB of the Act by providing depreciation as per Schedule XIV of the Companies Act and pay whichever is the lesser of the two taxes. Therefore it is obvious that both the depreciation viz., depreciation under the Income Tax Act for computing tax on the Total Income under the regular provisions and the depreciation as per Schedule XIV to compute tax at 18.5% of the Book Profits are relevant. It may not be correct to say that since the assessee is paying tax under section 115JB of the Act, depreciation as per the Income tax is not relevant. The assessee has to claim depreciation under the Income Tax Act for computing Total Income under the regular provisions of the Act. Therefore the assessee has to compute and provide for Deferred Tax liability on the difference between the WDV of depreciable Fixed assets as per Income Tax records and Book Value of the depreciable Fixed assets as mandated by AS 22.

Regards

CA M.K.Krishnan

Vellore

Tamilnadu

--- In aaykarbhavan@yahoogroups.com, ram agrawal wrote:
>
>
> Dear colleagues,
>  Our company is paying income tax Under MAT since last two three years.In case of MAT tax is paid on book profit. In this book profit depreciation as per books is claimed and depreciation as per income tax does not have any relevance. Now my query is that in such scenario  whether we should show deferred tax liability  on account of difference in depreciation claim as per income tax(higher) and as per book profit since we are not considering income tax deprecation for paying MAT.Hoping for an early reply as we have
> to finalize accounts by 30th May.
>
> Regards
>
> Ram agrawal
> ---
>

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