14 July 2024
To adjust the provision for tax based on the information provided, we need to consider the following:
1. **Provision for Tax for 2008-09**: Rs. 10 lakhs (this is the amount originally provisioned for tax liabilities for the financial year 2008-09).
2. **TDS Receivable**: Rs. 20 lakhs (this represents Tax Deducted at Source which has been deducted from income but not yet paid to the tax authorities).
3. **Income Tax Full and Final Refund**: Rs. 2.8 lakhs (this is the amount expected to be refunded to the company after assessment).
### Adjustment Calculation:
To adjust the provision for tax, follow these steps:
1. **Calculate Adjusted Provision for Tax**:
Start with the original provision for tax: - Provision for Tax for 2008-09: Rs. 10 lakhs
Deduct the TDS receivable because this amount has already been accounted for in the provision but has not yet been paid to the tax authorities: - Adjusted Provision = Provision for Tax - TDS Receivable - Adjusted Provision = Rs. 10 lakhs - Rs. 20 lakhs - Adjusted Provision = (-Rs. 10 lakhs) (Note: This negative figure indicates that there is an excess of TDS receivable over the provision made, suggesting a net receivable position.)
2. **Consider the Income Tax Full and Final Refund**:
Since the company expects to receive a refund of Rs. 2.8 lakhs from the tax authorities, this amount should be added back to the adjusted provision for tax. This adjustment reflects the reduction in the provision due to the expected refund.
- Adjusted Provision after considering refund = Adjusted Provision + Income Tax Full and Final Refund - Adjusted Provision after considering refund = (-Rs. 10 lakhs) + Rs. 2.8 lakhs - Adjusted Provision after considering refund = Rs. (-7.2 lakhs)
### Summary of Adjustment:
Based on the adjustments: - The provision for tax initially made for 2008-09 was Rs. 10 lakhs. - Considering the TDS receivable of Rs. 20 lakhs and expected refund of Rs. 2.8 lakhs, the adjusted provision for tax would be Rs. (-7.2 lakhs), indicating a net receivable position.
This adjustment ensures that the provision for tax reflects the expected cash flow impact on taxes, considering both TDS receivable and expected refunds. Adjustments like these are crucial for accurately representing the financial position and expected liabilities of the company in its financial statements.
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