Tax Credit -- Minimum tax liability

smraza · 01-17-2005, 05:34 PM

I have a question in my mind, i would like have opinions from the members.
Suppose company's normal tax liability comes to Rs.400,000/- and Turnover tax is Rs.700,000/-, so it should provide the Minimum tax liability in its accounts.
Now as per ITO 2001 the company can avail the excess of amount over the normal taxation paid up to five years against the normal tax liaiblity. i.e. Rs.300,000/-
My question is whether we can adjust this amount against the deferred tax liability or not?

SMR

syedhassan · 01-18-2005, 04:35 AM

<BLOCKQUOTE id=quote>quote<hr height=1 noshade id=quote>
I have a question in my mind, i would like have opinions from the members.
Suppose company's normal tax liability comes to Rs.400,000/- and Turnover tax is Rs.700,000/-, so it should provide the Minimum tax liability in its accounts.
Now as per ITO 2001 the company can avail the excess of amount over the normal taxation paid up to five years against the normal tax liaiblity. i.e. Rs.300,000/-
My question is whether we can adjust this amount against the deferred tax liability or not?

SMR
<hr height=1 noshade id=quote></BLOCKQUOTE id=quote>
HI BACK SMRAZA...
I THINK WE CAN ADJUST THIS AMOUNT AGAINST THE DEFFERED TAX LIABILITY..
BUT WHY DONT YOU TAKE THE LATEST ORDINANCE...
REGARDS..
SYEDHASSAN..

ACCA

maani · 01-18-2005, 06:15 PM

Hi,
The excess amount of tax (if turnover tax is more than normal tax) can be carried forward for adjustment against the normal tax liability of "suceeding tax years"....
Deferred tax is also a part of that normal tax liability...so the excess amount of turnover tax can be adjusted against deferred tax of future years...
Another thing, I have never read the word "deferred tax" in ITO 2001...Have u?

Ace

syedhassan · 01-19-2005, 04:32 AM

<BLOCKQUOTE id=quote>quote<hr height=1 noshade id=quote>
Hi,
The excess amount of tax (if turnover tax is more than normal tax) can be carried forward for adjustment against the normal tax liability of "suceeding tax years"....
Deferred tax is also a part of that normal tax liability...so the excess amount of turnover tax can be adjusted against deferred tax of future years...
Another thing, I have never read the word "deferred tax" in ITO 2001...Have u?

Ace
<hr height=1 noshade id=quote></BLOCKQUOTE id=quote>
neither did i ...!! in my whole bachlors..
regards,.,,

ACCA

maani · 01-19-2005, 06:03 PM

So, Its confirmed that excess tax can be adusted against deferred tax of future tax years...because "deferred tax" is an accounting term...and the amount of deferred tax is also a part of normal tax liability that we have to pay in future years...

Ace

smraza · 01-24-2005, 04:27 PM

the excess of amount over the normal tax liability can be adjusted if and only when the company has strong evidences that in foreseeable future company will have sufficient profit which will make the company a normal tax payer instead of minimum tax payer.

take care.

SMR

maani · 01-25-2005, 01:38 AM

Hi,
But I haven't seen such provision in the tax laws...
and still if it exists then what type of evidence can satisfy the govt?....

Ace

smraza · 01-25-2005, 04:16 PM

Dear Maani,
This treatment has nothing to do with the government, as the matter relates to the financial reporting, this will not have any impact on amount to be paid to the tax authorities.

SMR

maani · 01-26-2005, 07:25 PM

Hi,
So ur original post meant that...can the current tax liability be adusted against deferred tax(debit balance)...?

Ace

smraza · 01-27-2005, 04:48 PM

Aray Chanda,
It is not like the way u r thinking,
I just asked that can we adjust the excess of amount, of minimum tax over the normal tax, against our current deferred tax or not.... what is the confusion in that????
Deferred tax is purely an accounting treatment, and whatever i have said purely relates to the accounting treatment not with the amounts to be paid to the tax authorities.

SMR

maani · 01-27-2005, 11:39 PM

sorry chanddu,
Actually I am preparing for taxation now a dayz thatz y I pulled ur original post towards taxation...
But your original post was confusing...because u have talked about minimum and normal tax liability...and minimum and normal tax liability are the terms which relates to Tax Laws...Because You ll never see the word normal tax or minimum tax in the financial statments..."provision for taxation"...or "taxation" are used...and provision for taxtion is never adjusted against deferred taxation....
so in financial statements "normal tax or minimum tax" cannot be adusted against deferred tax...

Take carez

Ace

Edited by - maani on Jan 27 2005 64418 PM

Edited by - maani on Jan 27 2005 64700 PM

smraza · 01-28-2005, 04:25 PM

<BLOCKQUOTE id=quote>quote<hr height=1 noshade id=quote>
sorry chanddu,
Actually I am preparing for taxation now a dayz thatz y I pulled ur original post towards taxation...
But your original post was confusing...because u have talked about minimum and normal tax liability...and minimum and normal tax liability are the terms which relates to Tax Laws...Because You ll never see the word normal tax or minimum tax in the financial statments..."provision for taxation"...or "taxation" are used...and provision for taxtion is never adjusted against deferred taxation....
so in financial statements "normal tax or minimum tax" cannot be adusted against deferred tax...

Take carez

Ace<hr height=1 noshade id=quote></BLOCKQUOTE id=quote>
I am talking about the practical approach, dear.
Who says that the minimum tax or tax payable under normal rules cannot be seen in the financial statements, just pick up financial statements of any listed company, go to the taxation note and have a look at the 'Relationship / reconciliaiton b/w accounting income and tax expense' you will find the same, that reconciliation is the requirement of IAS 12.
Btw, have u finalized any listed company?? I mean are u doing articles????

SMR

maani · 01-31-2005, 06:40 AM

My Dear big bro...I was only trying to explain you that y I pulled ur question towards taxation rather then taking it as an accounting issue...
Definitely ur knowledege about practical issues is much more than me...
and get ready coz some problems about cashflows are making problems for me...help me plz...

Ace