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Deferred tax

ravi (senior accountant) (507 Points)

29 May 2011

In the previous year we had a loss of Rs.305655 and DTL created (due to depreciation difference ) was Rs.80311 now my query is my auditor has created DTL only for difference in depreciation per accounting income and taxable income, he has forgotten about creating DTA regarding carry forward and set off of above said loss (this is only my guess) dear members pls suggest me whether should we create DTA for that loss? here as well. If here it is YES -my previous year accounts are already filed and finalised pls suggest me the remedy now to recognize the above effects. Thanks in advance to all the professionals here. Thank you all very much for your support.

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4 Replies

Deepesh Khatri (CA) (167 Points)
Replied 30 May 2011

First of all i will assume that the said loss can be carried forward as per Income Tax Act.

The treatment done by the auditor is absolutely correct. The loss is being carried forward in books as well as the IT Act, as such there is no timing difference in recognition.

Again i will assume, cause you have not given any additional information. As for depreciation, seems like it is the only item causing timing difference in the profit/(loss) of the year as per books and as per IT Act. The creation of DTL/DTA only on the depreciation difference is valid.

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Viren (Chartered Accountant) (137 Points)
Replied 31 May 2011

One more reason for not creating DTA is that

" In auditor's opinion there may not be REASONABLE CERTAINTY of future taxable profit." - AS 22

As per recognition of income criteria, there is a caution on loss making company for creating DTA.

if you create DTA it will affect P/L credit , So accordingly Revenue will increase.

Thanks

All the Best

CA Dipti (Audit Manager) (26 Points)
Replied 31 May 2011

Originally posted by : ravi
	I agree with depesh

CA Rakesh Garg (Asst. MGR Taxation) (510 Points)
Replied 01 June 2011

Originally posted by : Deepesh
	First of all i will assume that the said loss can be carried forward as per Income Tax Act. The treatment done by the auditor is absolutely correct. The loss is being carried forward in books as well as the IT Act, as such there is no timing difference in recognition. Again i will assume, cause you have not given any additional information. As for depreciation, seems like it is the only item causing timing difference in the profit/(loss) of the year as per books and as per IT Act. The creation of DTL/DTA only on the depreciation difference is valid.