Page 11 - 2. COMPILER QB - INDAS 12

MTP QUESTIONS

Q7 (MTP AUGUST 2018)

QA Ltd. is in the process of computation of the deferred taxes as per applicable Ind AS. QA Ltd. had acquired
40% shares in GK Ltd. for an aggregate amount of Rs. 45 crores. The shareholding gives QA Ltd. significant
influence over GK Ltd. but not control and therefore the said interest in GK Ltd. is accounted for using the

equity method. Under the equity method, the carrying value of investment in GK Ltd. was Rs. 70 crores on

31st March, 2017 and Rs. 75 crores as on 31st March, 2018. As per the applicable tax laws, profits recognised
under the equity method are taxed if and when they are distributed as dividend or the relevant investment is

disposed of.
QA Ltd. wants you to compute the deferred tax liability as on 31st March, 2018 and the charge to the
Statement of Profit for the same. Consider the tax rate at 20%.

SOLUTION

DTL created on accumulation of undistributed profits as on 31.3.2018

Carrying Value as Tax base Taxable Total Deferred Charged to P&L during the
value per tax temporary tax liability @ year
records differences 20%

a B c d E= b-d F = e x 20% g
31st March 2017 70 crores 45 crores 45 crores 25 crores 5 crores 5 crores

31st March 2018 75 crores 45 crores 45 crores 30 crores 6 crores 1 crore (6 crores – 5 crores

Q8 (March 19 – 10 Marks)
QA Ltd. is in the process of computation of the deferred taxes as per applicable Ind AS and wants guidance

on the tax treatment for the following:
(i) QA Ltd. does not have taxable income as per the applicable tax laws, but pays 'Minimum Alternate Tax’

(MAT) based on its book profits. The tax paid under MAT can be carried forward for the next 10 years
and as per the Company's projections submitted to its bankers, it is in a position to get credit for the

same by the end of eighth year. The Company is recognising the MAT credit as a current asset under

IGAAP. The amount of MAT credit as on 31st March, 2016 is Rs. 8.5 crores and as on 31st March, 2017 is
Rs. 9.75 crores;
(ii) The Company measures its head office property using the revaluation model. The property is revalued every

year as on 31st March. On 31st March, 2016, the carrying value of the property (after revaluation) was Rs.

40 crores whereas its tax base was Rs. 22 crores. During the year ended 31st March, 2017, the Company
charged depreciation in its Statement of Profit and Loss of Rs. 2 crores and claimed a tax deduction for

tax depreciation of Rs. 1.25 crores. On 31st March, 2017, the property was revalued to Rs.45 crores. As per
the tax laws, the revaluation of Property, Plant & Equipment does not affect taxable income at the time

of revaluation.

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