Prashanth (Chartered Accountant) (2322 Points)
01 October 2011Hi all,
We create deferred Tax asset on Diminution or decrease in the value of investments and impairment loss on fixed aseets,but on what evidence or source these DTA is created (i.e either the company will sell these assets in future at higher price or reversal in future)
and what is the rate should be applied either normal rates or capital gain rates ?
ashish gupta
( student)
(1922 Points)
Replied 01 October 2011
the reason for creating DTA is only that there will be future taxable income against which such DTA can be adjsuted. this income need not be from selling of assets; it can be income from operations.
And the rate will be normal rate of tax only
Prashanth
(Chartered Accountant)
(2322 Points)
Replied 01 October 2011
@ ashish gupta, how the investments and the income from business operations can be related.I dont think so....
ashish gupta
( student)
(1922 Points)
Replied 01 October 2011
sir the reason that DTA is created is not the decrease in the value of investment but the reason that this decrease will not be allowed as per tax.
ACCOUNTANT
(Student)
(559 Points)
Replied 02 October 2011
Timing difference(in payment of tax): which originates in one period and is capable of reversal in subsequent period(s):
--> difference in net block of fixed assets as per accounts and as per tax due to difference in the rate
and method of depreciation;
-->provision for doubtful debts and advances, provision for warranties, provision for VRS, provision
for asset write-off, disallowed payments under 43B of Income Tax Act, provision for excise
liabilities, provision for diminution in value of investments, scientific research expenditure (not
weighted deduction which is a permanent difference), section 350 deduction, amortization of
deferred revenue expenditure, lease income.
Such provisions are mere provisions and its the amount of allowed expenditure for tax calc purpose..
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