Hello Club Members,
How Deffered Tax liability wil be treated in case of selling of the entire assets (may be on windup). Whether the defered tax liability will be taken to account to calculate the actual WDV of the assets as per IT act, so that the Capital Gain or loss will be arrived.
Experts can clear my doubt.
Praveeri
| Originally posted by :Praveeri | ||
| " | Hello Club Members, How Deffered Tax liability wil be treated in case of selling of the entire assets (may be on windup). Whether the defered tax liability will be taken to account to calculate the actual WDV of the assets as per IT act, so that the Capital Gain or loss will be arrived. Experts can clear my doubt. Praveeri |
" |
Hi,
Deferred tax is provided in the books as per AS-22 and the same is recorded on account of timing differences. The provision has nothing to do with Income-Tax provisions, computation of depreciation as per IT Act.
Then incase of company windup what will be happen to the provision of deffered tax liability since it is a part of balance sheet, whether after liquidation, will be be peacemealed to shareholders?
| Originally posted by :Praveeri | ||
| " | Then incase of company windup what will be happen to the provision of deffered tax liability since it is a part of balance sheet, whether after liquidation, will be be peacemealed to shareholders? | " |
Right. I believe the balance will be adjusted to Reserves which it turn will reduce/increase the shareholders fund. The logic is we would have debited/credited P & L account with provision for deferred tax and the same will be nullified on reversal at the time of winding up.
dear sir,
Pls. explain what is the meaning or purpose of Deffered Tax
The income of a entity may not match with the Total income that is arrived at as per Income Tax Act, 1961. Probable reasons for the difference are, depreciation method followed in the books, certain expenses not allowable under IT Act U/s.40(a), 43B etc., However, certain expenses which are disallowed in one year can be availed in the subsequent year on complying with law (like payments on which TDS subsequently remitted, statutory dues subsequently paid and even the depreciation which in the due course vary). These differences which are capable of reversal in the subsequent years are called 'timing differences'.
Provision for Income-tax that is provided in the books is as per IT Act. However, the tax benefit/reversal that is known to the entity as on the date of Balance Sheet and which is capable of accruing in the subsequent years is to be reflected in the books so as to give a true and fair view.
Hence, rate equal to tax on the timing differences is provided in the books as per AS-22.
CAclubindia
