24th August 2011

Dear Forum Members

During the year ended 31st March 2010 a company has arrived at MAT liability. The following entries were passed in the books in respect of MAT liability and for payment of taxes

Debit P&L 12.00 lacs

Credit Provision for Taxation 12.00 lacs

(Being entry passed for provision for taxation for year ended 31.03.2010)

Debit Income Tax Paid (advance tax / self asst tax) 12.00 lacs

Credit Bank A/c 12.00 lacs

(Being balance income tax paid for year ended 31.03.2010)

(Note : The above liability and taxes paid has not been adjusted in the books as on date. The same continues to be shown in the books and would be adjusted upon receipt of assessment order from the department. It is a method followed by the company of adjusting the provision for taxation entries against taxes paid, only after receipt of assessment orders)

During the year ended 31st March 2011 the company has arrived at regular tax of about Rs.16.00 lacs. The MAT tax comes to about Rs.14.00 lacs. Hence the company can now adjust tax about Rs.2.00 lacs from previous year (31.03.2010) MAT paid.

The following entries are proposed to be passed in the books during 31.03.2011

Debit P&L 16.00 lacs

Credit Provision for Taxation 16.00 lacs

(Being entry passed for provision for taxation for year ended 31.03.2011)

Debit MAT Entitlement 12.00 lacs

Credit P&L 12.00 lacs

(Being entry passed for creating the MAT entitlement of Rs.12.00 lacs available to the company in respect of MAT paid during the year ended 31st March 2010)

Debit Provision for Taxation 2.00 lacs

Credit MAT Entitlement 2.00 lacs

(Being MAT credit of Rs.2.00 lacs availed during the year ended 31.03.2011 from the MAT paid during the year ended 31.03.2010 – Balance Rs.10.00 lacs being carry forward for future years adjustment)

Debit Income Tax Paid (advance tax / self asst tax) 14.00 lacs

Credit Bank A/c 14.00 lacs

(Being balance income tax paid for year ended 31.03.2011 after adjusting MAT credit of Rs.2.00 lacs available from year ended 31.03.2010)

Kindly advise whether the entries proposed to be passed during the year ended 31st March 2011 are correct.

with regards

R. Muralidharan