Deferred Tax Liability on Special Reserve created
under Section 36(1) (viii) of the Income Tax Act, 1961-UCBs
RBI/2013-14/619 UBD.
CO. BPD. PCB. Cir. No. 67/09.50.001/2013-14 dated 30th May, 2014
It
has been observed that some banks are not creating Deferred Tax Liability (DTL)
on Special Reserve as per Accounting Standard 22: 'Accounting for taxes on
Income' (AS 22) on the ground that they do not intend to withdraw from such
Reserve in the future. In many cases banks have formalised such intent by
having resolutions passed by their Boards or Committees to this effect.
2. The matter regarding creation of
DTL on Special Reserve has been examined and banks are advised that, as a
matter of prudence, DTL should be created on Special Reserve.
3. For this purpose, banks may take
the following course of action:
a) If the expenditure due to the
creation of DTL on Special Reserve as at March 31, 2013 has not been fully
charged to the Profit and Loss account, banks may adjust the same directly from
Reserves. The amount so adjusted may be appropriately disclosed in the Notes to
Accounts of the financial statements for the financial year 2013-14.
b) DTL for amounts transferred to Special
Reserve from the year ended March 31, 2014 onwards should be charged to the
Profit and Loss Account of that year.
4. In view of the
requirement to create DTL on Special Reserve, banks may reckon the entire
Special Reserve for the purpose of computing Tier-I Capital.
.
.
.
.
.
0 comments:
Post a Comment