10 June 2009
Actually its not a tax question. Its accounts (AS). Concept is very simple. Take an example of Bonus. If u r making any provision, U can allow as expenditure in accounts. But Income-tax act wont allow. So it results as Deferred Tax Asset. How? . It will save your future tax. According to Sec.43B, you can allow on the basis of payment basis. So if u pay next year, u can allow. So it will reduce your tax burden. " Pay tax now; Save tax later" - DTA. Eventhough u made a provision for bonus, In IT, we have to disallow and u have to pay tax. Thats all. It follows matching concept in accounts.
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