Creation of Deferred Tax Asset in Respect of Provision by ijr12069

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									                                                   opinion



        Creation of Deferred Tax Asset in Respect of
        Provision for Final Mine Closure Expenditure

A. Facts of the Case                                                                 steel	 industry,	 which	 may	 result	
    1.	 A	 public	 sector	 under-                                                    in	 alternative	 cheaper	 substitute	
taking	 is	 engaged	 in	 mining	 of 	        Expert Advisory Committee               in	 place	 of 	 manganese,	 and	 (b)	
manganese	 ore	 at	 several	 loca-                                                   identification of ore reserves at
tions.	Due	to	different	chemical	                                                    lower	underground	levels,	which	
                                                 The following is the brief          can	be	extracted	at	an	economi-
compositions	 required	 by	 end-             version of an opinion given
users	 (mainly	 ferro	 manganese	            by the Expert Advisory Com-
                                                                                     cal	cost.
producers),	 ore	 extracted	 from	           mittee of the Institute in                  4.	 As	per	the	querist,	as	the	
a	 single	 mine,	 which	 has	 a	 par-        response to query sent by a             final mine closure is a result of
ticular	 chemical	 composition,	 is	         member. This is being pub-              extraction	of 	ore	during	the	op-
not	 sold	 as	 such;	 instead,	 blend	       lished for the information of           erating	period	of 	lease	of 	a	mine,	
of 	ore	of 	various	mines	is	sold.	          readers.                                it is necessary that profits of a
    2.	 The	 querist	 has	 stated	                                                   financial year should be worked
that	as	per	Rule	23B	of 	Mineral	                                                    out	after	providing	for	estimated	
Conservation	 and	 Development	            reclamation, surface back filling,        liability on account of final mine
Rules,	 1988	 (MCDR)	 amended	             removing	dumps,	plantation	over	          closure	 expenditure.	 In	 view	
in	 April,	 2003,	 it	 is	 obligatory	     waste	 rock	 dumps,	 etc.	 These	         of 	 this	 and	 due	 to	 Accounting	
on	 the	 part	 of 	 the	 user	 (lessee)	   activities	 involve	 substantial	 ex-     Standard	 (AS)	 29,	 ‘Provisions,	
to	 submit	 progressive	 mine	 clo-        penditure which is called ‘final          Contingent	 Liabilities	 and	 Con-
sure	 plan	 at	 the	 time	 of 	 obtain-    mine	closure	expenditure’.			The	         tingent	 Assets’,	 issued	 by	 the	
ing	lease	or	at	the	time	of 	lease	        querist	 has	 also	 submitted	 sepa-      Institute	 of 	 Chartered	 Accoun-
renewal	 or,	 in	 case	 of 	 continu-      rately	 relevant	 extracts	 of 	 the	     tants	of 	India,	becoming	manda-
ing leases, every five years. The          Mine	 Conservation	 and	 Devel-           tory	for	accounting	periods	com-
Indian	 Bureau	 of 	 Mines	 (IBM),	        opment	Rules	for	the	perusal	of 	         mencing	on	or	after	01.04.2004,	
which	is	a	regulatory	body,	is	also	       the	Expert	Advisory	Committee.	           the	 company	 has	 provided	 for	
insisting	 upon	 bank	 guarantees	             3.	 According	to	the	querist,	        the	estimated	liability	on	account	
which	 can	 be	 invoked	 if 	 activi-      as	estimated,	the	ore	reserves	in	        of final mine closure expenses
ties	 stated	 in	 progressive	 mine	       the	 present	 leases	 are	 expected	      in the financial year 2004-05 for
closure	 plan	 are	 not	 carried	 out	     to	 last	 for	 about	 35-40	 years,	      the first time. According to the
to	 their	 satisfaction.	 	 	 Further,	    based	 on	 the	 current	 rate	 of 	       querist,	mine-wise	estimated	ex-
as	 per	 Rule	 23C	 of 	 MCDR,	 it	        extraction	 of 	 ore.	 The	 expect-       penditure on final mine closure,
is also necessary to submit final          ed	 year	 of 	 closing	 down	 a	 par-     proven	 ore	 reserves	 and	 actual	
mine	closure	plan	one	year	prior	          ticular	 mine	 cannot,	 however,	         production	during	the	year	have	
to	proposed	closure.	As	per	Rule	          be	 predicted	 based	 on	 available	      been	considered	for	the	purpose	
23(5)	of 	MCDR,	the	leaseholder	           ore	 reserves	 because	 extraction	       of 	working	out	the	estimated	li-
cannot	 abandon	 a	 mine	 or	 part	        rate	also	depends	on	demand	of 	          ability for final mine closure ex-
thereof unless the final mine clo-         various	grades	of 	ore	and	blend	         penditure.	
sure	 plan	 is	 implemented	 to	 the	      of 	 ore	 which	 the	 company	 de-            5.	 The	 querist	 has	 stated	
satisfaction	 of 	 the	 IBM.	 As	 per	     cides	 to	 sell	 from	 time	 to	 time.	   that the provision for final mine
the	 regulations,	 the	 leased	 area	      The	 longevity	 of 	 the	 mine	 also	     closure	expenses	is	not	allowable	
can	be	surrendered	only	after	re-          depends	on	factors	like	(a)	tech-         under	the	Income-tax	Act,	1961	
storing	the	same	by	carrying	out	          nological	 developments	 in	 the	         since	 the	 same	 is	 not	 incurred	


                                                                                 April 2006 The Chartered Accountant   1527
during	 the	 current	 year.	 Thus,	               ing	 policies	 is	 ‘prudence’,	    Standard	 (AS)	 1,	 ‘Disclosure	 of 	
in	 the	 view	 of 	 the	 querist,	 as	            which	stipulates	that	in	view	     Accounting	 Policies’,	 issued	 by	
per	 paragraph	 4	 of 	 Accounting	               of 	 uncertainty	 attached	 to	    the	 Institute	 of 	 Chartered	 Ac-
Standard	 (AS)	 22,	 ‘Accounting	                 future events, profits are not     countants	 of 	 India).	 Therefore,	
for	Taxes	on	Income’,	issued	by	                  anticipated	 but	 recognised	      the	company	has	chosen	to	post-
the	 Institute	 of 	 Chartered	 Ac-               only	when	realised.                pone	the	recognition	of 	the	de-
countants	of 	India,	the	item	falls	       (e)	 It	is	too	early	to	predict	con-      ferred	tax	asset	and	to	create	the	
under	 the	 category	 of 	 ‘timing	               ditions of profitability and       same	 only	 when	 it	 is	 absolutely	
differences’	 for	 the	 purpose	 of 	             taxable	income	which	would	        sure	of 	realising	such	assets.	
working	out	deferred	tax	assets.	                 exist	35-40	years	later.	              10.	 The	 company’s	 view-
    6.	 According	to	the	querist,	              7.	 According	to	the	querist,	       point	 has	 not	 been	 accepted	 by	
as	 a	 matter	 of 	 prudence,	 the	        paragraph	16	of 	AS	22	requires	          the	 government	 auditors	 and,	
company	 has	 not	 recognised	             exercise	of 	prudence	at	the	time	        hence,	 an	 assurance	 has	 been	
the	 deferred	 tax	 assets	 on	 this	      of 	creating	deferred	tax	assets	by	      given	by	the	company	to	seek	the	
account.	 The	 querist	 has	 stated	       taking	 into	 account	 past	 trends	      opinion	of 	the	Expert	Advisory	
that	the	company	has	considered	           only.	However,	factors	like	uncer-        Committee	and	to	review	the	po-
the	 following	 aspects	 while	 tak-       tainty	 attached	 to	 future	 events,	    sition	next	year.			The	querist	has	
ing	this	decision:                         especially	for	fairly	long	periods,	      separately	 provided	 the	 photo-
(a)	 The	possibility	of 	mine	clo-         have	not	been	highlighted	in	the	         copies	of 	the	government	audi-
     sure	 and,	 in	 turn,	 incurring	     Accounting	Standard.	                     tors’	views,	explanations	thereto	
     restoration/reclamation	 ex-               8.	 As	 per	 the	 querist,	 the	     given	 by	 the	 company	 and	 the	
     penditure	will	take	effect	not	       government	auditors	have	point-           final comments of the govern-
     in	the	near	future	but	prob-          ed	out	that	the	factors	enumerat-         ment	auditors	for	the	perusal	of 	
     ably	 after	 a	 period	 of 	 35-      ed	in	paragraph	6	above	have	not	         the	Committee.	
     40	 years.	 	 The	 mines	 under	      been specified in the Accounting              11.	 The	 querist	 has	 empha-
     reference	are	being	operated	         Standard	and	hence,	the	deferred	         sised	 that	 the	 provision	 should	
     for	more	than	50	years	and	           tax	 asset	 should	 have	 been	 cre-      not	 be	 considered	 for	 working	
     there	is	no	event	during	the	         ated	in	view	of 	the	timing	differ-       out	 deferred	 tax	 assets	 till	 it	 is	
     current	 year	 which	 necessi-        ences	as	contemplated	in	AS	22.	          absolutely	 sure	 that	 the	 assets	
     tates	 closure	 of 	 any	 of 	 the	   The	 government	 auditors	 have	          would be realised and/or final
     mines	in	the	near	future.	            also	 taken	 a	 stand	 that	 there	 is	   mine	 closure	 is	 foreseen	 in	 the	
(b)	 Although	 the	 company	 has	          a	provision	for	reassessment	of 	         near	future.	
     been	 consistently	 reporting	        deferred	 tax	 assets	 at	 each	 bal-
     very good profits, it cannot          ance	 sheet	 date	 in	 AS	 22,	 and	      B. Query
     be	 predicted	 whether	 there	        if 	it	is	felt	later	that	there	would	        12.	 The	 querist	 has	 sought	
     will be sufficient taxable in-        not be sufficient taxable income          the	 opinion	 of 	 the	 Expert	 Ad-
     come	 after	 35-40	 years	 (es-       to	realise	the	deferred	tax	assets,	      visory	Committee	as	to	whether	
     pecially	 when	 large	 mines/         the	 company	 can	 reassess	 the	         any	deferred	tax	asset	needs	to	be	
     all	 mines	 of 	 the	 company	        same.	                                    created	 as	 per	 AS	 22	 (especially	
     will	 be	 closed	 down)	 to	 re-           9.	 According	to	the	querist,	       bearing	in	mind	the	concept	of 	
     alise	the	deferred	tax	assets,	       in	support	of 	the	treatment	giv-         prudence)	 in	 respect	 of 	 provi-
     if 	created.	                         en	 by	 the	 company,	 it	 has	 been	     sion made on account of final
(c)	 Possibility	 of 	 the	 company	       pointed	out	to	the	auditors	that	         mine	closure	expenditure,	which	
     making any profit in the year         one	of 	the	major	considerations	         is	a	remote	event	and	the	expen-
     of 	 incurrance	 of 	 mine	 clo-      governing	 selection	 and	 appli-         diture	is	likely	to	be	incurred	af-
     sure	 expenses	 to	 claim	 tax	       cation	 of 	 accounting	 policies	        ter	a	period	of 	35-40	years.	
     benefits on these expenses            is	 ‘prudence’,	 which	 stipulates	
     is	an	assumption,	which	may	          that	 “in	 view	 of 	 the	 uncer-         C. Points considered by the
     or	may	not	prove	to	be	cor-           tainty	 attached	 to	 future	 events,	    Committee
     rect.	                                profits are not anticipated but               13.	 The	 Committee,	 while	
(d)	 One	of 	the	major	consider-           recognised	 only	 when	 realised	         expressing	 its	 opinion,	 has	 re-
     ations	 governing	 selection	         though	 not	 necessarily	 in	 cash”	      stricted	itself 	to	the	issues	raised	
     and	application	of 	account-          (paragraph	17(a)	of 	Accounting	          in	 paragraph	 12	 above	 and	 has	


1528 The Chartered Accountant April 2006
not	 considered	 any	 other	 issue	              subsequent	 abandonment.	          when	the	oil	is	extracted.”	(Em-
that	may	arise	from	the	Facts	of 	               Charge	 for	 abandonment	          phasis	supplied	by	the	Commit-
the	Case	such	as,	allowability	of 	              costs	 should	 not	 be	 dis-       tee).”
provision for final mine closure                 counted	to	its	present	value.	         16.	 The	 Committee	 also	
expenses	 under	 the	 Income-tax	                The	provision	for	estimated	       notes	 paragraphs	 17	 and	 19	 of 	
Act,	1961.                                       abandonment	 costs	 should	        the	 Exposure	 Draft	 of 	 the	 Re-
   14.	 The	 Committee	 notes	                   be	 made	 at	 current	 prices	     vised	Accounting	Standard	(AS)	
that the nature of final mine clo-               considering	 the	 environ-         10,	 ‘Tangible	 Fixed	 Assets’,	 is-
sure	 expenditure	 in	 the	 present	             ment	and	social	obligations,	      sued	 by	 the	 Institute	 of 	 Char-
case	 is	 similar	 to	 that	 of 	 aban-          terms	of 	mining	lease	agree-      tered	 Accountants	 of 	 India,	
donment	costs	in	case	of 	oil	and	               ment,	industry	practice,	etc.”	    which	propose	the	following	ac-
gas	producing	companies.		In	this	               (Emphasis	 supplied	 by	 the	      counting	treatment:
                                                 Committee).                             “17.	 The	 cost	 of 	 a	 tangible	
context,	 the	 Committee	 notes	
                                               AS 29                                     fixed asset comprises:
paragraph	 53	 of 	 the	 Guidance	
                                               “Example 3: Offshore Oil-            (a)	 its	purchase	price,	including	
Note	on	Accounting	for	Oil	and	
                                           field                                         duties	and	taxes	(other	than	
Gas	Producing	Activities,	issued	
                                               An	enterprise	operates	an	off-            those	 subsequently	recover-
by	the	Institute	of 	Chartered	Ac-
                                           shore oilfield where its licensing            able	 by	 the	 enterprise	 from	
countants	of 	India,	which	states	
                                           agreement	requires	it	to	remove	              the	taxing	authorities),	after	
as	follows:
     “53.	 Abandonment	 costs	             the	 oil	 rig	 at	 the	 end	 of 	 pro-        deducting	 trade	 discounts	
     are	 the	 costs	 incurred	 on	        duction	 and	 restore	 the	 seabed.	          and	rebates.
     discontinuation	 of 	 all	 op-        Ninety	per	cent	of 	the	eventual	        (b)	 any	 costs	 directly	 attribut-
     erations	 and	 surrendering	          costs	relate	to	the	removal	of 	the	          able	to	bringing	the	asset	to	
     the	 property	 back	 to	 the	         oil	rig	and	restoration	of 	damage	           the	 location	 and	 condition	
     owner.	 These	 costs	 relate	         caused	by	building	it,	and	ten	per	           necessary	 for	 it	 to	 be	 capa-
     to	 plugging	 and	 abandon-           cent	arise	through	the	extraction	            ble	of 	operating	in	the	man-
     ing	 of 	 wells,	 dismantling	        of 	oil.	At	the	balance	sheet	date,	          ner	intended.
     of 	 wellheads,	 production	          the	rig	has	been	constructed	but	        (c)	 the	 initial	 estimate	 of 	 the	
     and	 transport	 facilities	 and	      no	oil	has	been	extracted.                    costs	 of 	 dismantling	 and	
     to	restoration	of 	producing	             Present obligation as a re-               removing	 the	 asset	 and	 re-
     areas	 in	 accordance	 with	 li-      sult of a past obligating event	              storing	 the	 site	 on	 which	 it	
     cense	 requirements	 and	 the	        –	The	construction	of 	the	oil	rig	           is	located,	the	obligation	for	
     relevant	legislation.”                creates	 an	 obligation	 under	 the	          which	 an	 enterprise	 incurs	
   15.	 Regarding	 the	 account-           terms	 of 	 the	 licence	 to	 remove	         either	 when	 the	 asset	 is	 ac-
ing treatment of final mine clo-           the	 rig	 and	 restore	 the	 seabed	          quired	 or	 as	 a	 consequence	
sure	expenditure,	the	Committee	           and	 is	 thus	 an	 obligating	 event.	        of 	 having	 used	 the	 asset	
notes	paragraph	54	of 	the	above-          At	the	balance	sheet	date,	how-               during	 a	 particular	 period	
mentioned	 Guidance	 Note	 and	            ever,	 there	 is	 no	 obligation	 to	         for	 purposes	 other	 than	 to	
Example	3	of 	Appendix	C	to	AS	            rectify	 the	 damage	 that	 will	 be	         produce	 inventories	 during	
29	in	the	context	of 	oil	and	gas	         caused	by	extraction	of 	the	oil.             that	period.”
industry,	which	state	as	follows:              An outflow of resources                   “19.	The	obligations	for	the	
   Guidance Note on Accounting for         embodying economic benefits                   costs	 of 	 dismantling	 and	
Oil and Gas Producing Activities           in settlement -	Probable.                     removing	 the	 asset	 and	 re-
     “54.	 The	 full eventual liabil-          Conclusion	-	A	provision	is	              storing	 the	 site	 on	 which	
     ity for abandonment cost net	         recognised	for	the	best	estimate	             it	 is	 located	 are	 recognised	
     of 	salvage	values	should	be	         of 	ninety	per	cent	of 	the	eventu-           and	 measured	 in	 accor-
     recognised	 at	 the	 outset	 on	      al	costs	that	relate	to	the	removal	          dance	 with	 AS	 29,	 Provi-
     the	ground	that	a	liability	to	       of 	the	oil	rig	and	restoration	of 	          sions,	 Contingent	 Liabilities	
     remove	an	installation	exists	        damage	caused	by	building	it	(see	            and	Contingent	Assets.		The	
     the	 moment	 it	 is	 installed.	      paragraph	 14).	 These	 costs	 are	           underlying	nature	and	asso-
     Thus,	 an	 enterprise	 should	        included	 as part of the cost of the          ciation	 of 	 an	 obligation	 for	
     capitalise as part of the cost cen-   oil rig.	The	ten	per	cent	of 	costs	          dismantling,	 removing	 and	
     tre	the	amount	of 	provision	                                                       restoring	the	site	on	which	a	
     required	 to	 be	 created	 for	       that	arise	through	the	extraction	
                                           of 	oil	are	recognised	as	a	liability	        tangible fixed asset is locat-

                                                                                April 2006 The Chartered Accountant   1529
      ed	with	the	asset	remains	the	        ment,	instead	of 	the	amount	of 	                of profits for the future.”
      same	irrespective	of 	wheth-          provision	 being	 debited	 to	 the	            20.	 The	 Committee	 notes	
      er	the	obligation	is	incurred	        profit and loss account.                   from	 the	 above	 that	 AS	 22	 en-
      upon	 acquisition	 of 	 the	 as-          18.	 With	 regard	 to	 creation	       visages	 creation	 of 	 a	 deferred	
      set	or	while	it	is	being	used.	   	   of 	deferred	tax	asset,	the	Com-           tax	asset	if 	there	is	‘reasonable’	
      Therefore,	 the	 cost	 of 	 an	       mittee	is	of 	the	view	that	if 	the	       certainty that sufficient future
      asset	also	includes	the	costs	        provision for final mine closure           taxable	income	will	be	available	
      of 	 dismantlement,	 removal	         expenses	gives	rise	to	timing	dif-         against	which	such	deferred	tax	
      or	 restoration,	 the	 obliga-        ferences	 under	 AS	 22,	 leading	         asset	can	be	realised	rather	than	
      tion	 for	 which	 is	 incurred	       to	 creation	 of 	 deferred	 tax	 as-      ‘absolute’	certainty	as	argued	by	
      as	a	consequence	of 	having	          set,	 consideration	 of 	 prudence	        the	querist	in	paragraphs	9	and	
      used	the	asset	during	a	par-          should	be	kept	in	mind	as	recog-           11	above.		The	Committee	also	
      ticular	 period	 other	 than	 to	
      produce	 inventories	 during	         nised	in	paragraph	13	of 	AS	22,	          notes	that	this	‘reasonable’	lev-
      that	 period.	 	 An	 enterprise	      which	states	as	follows:                   el	 of 	 certainty	 would	 normally	
      applies	 AS	 2,	 Valuation	 of 	           “13. Deferred tax should              be	 achieved	 by	 examining	 the	
      Inventories,	 to	 the	 costs	 of 	         be recognised for all the             past	 records	 of 	 the	 enterprise	
      obligations	that	are	incurred	             timing differences, sub-              and	 by	 making	 ‘realistic	 esti-
      as	a	consequence	of 	having	               ject to the consideration of          mate’ of profits for the future.
      used	the	asset	during	a	par-               prudence in respect of de-            The	 Committee	 is	 of 	 the	 view	
      ticular	period	to	produce	in-              ferred tax assets as set out          that	 while	 the	 realistic	 estimate	
      ventories	during	that	period.	    	        in paragraphs 15-18.”                 would	 take	 account	 of 	 the	 fu-
      This	is	because	the	account-              19.	 The	 Committee	 also	             ture	 uncertainties,	 the	 possibil-
      ing	for	these	costs	in	accor-         notes	 that	 in	 the	 present	 case	       ity	of 	occurrence	or	non-occur-
      dance	 with	 AS	 2	 acknowl-          since	 the	 company	 under	 con-           rence	 of 	 any	 unforeseen	 event	
      edges	their	nature.”                  sideration is making profits,              leading to absence of sufficient
    17.	 It	appears	from	the	Facts	         paragraphs	15	and	16	of 	AS	22	            future	taxable	income,	may	not	
of the Case that the final mine             are	also	relevant	for	considering	         be sufficient ground for not
closure	 is	 a	 result	 of 	 extraction	    whether	 the	 deferred	 tax	 asset	        creating	 the	 deferred	 tax	 asset.	  	
of 	 ore	 during	 the	operating	 pe-        should	 be	 created	 or	 not.	 	 The	      This	 is	 because	 such	 unfore-
riod	 of 	 lease	 of 	 a	 mine,	 rather	    said	 paragraphs	 are	 reproduced	         seen	events	are	a	part	of 	every	
than	the	result	of 	dismantlement	          below:                                     business.		Further,	it	is	appreci-
of 	plant	and	equipment	which	is	                “15. …deferred tax assets             ated	 that	 the	 longer	 the	 period	
used	for	the	purpose	of 	extract-                should be recognised and              for	 which	 an	 estimate	 is	 to	 be	
ing	 the	 ore	 from	 the	 mine.	 	 In	           carried forward only to the           made,	 the	 lesser	 is	 the	 degree	
view	 of 	 this,	 creation	 of 	 provi-          extent that there is a rea-           of 	 accuracy	 of 	 making	 the	 es-
                                                 sonable certainty that suffi-
sion	every	year	to	the	extent	of 	               cient future taxable income           timate.	 	 However,	 in	 such	 situ-
the	ore	extracted	during	the	year,	              will be available against             ations	also,	keeping	in	view	the	
representing	 the	 estimated	 li-                which such deferred tax               past	experience	of 	not	only	the	
ability on account of final mine                 assets can be realised.               company	concerned	but	also	of 	
closure	expenses,	is	appropriate.	     	         16.	While	recognising	the	tax	        the	industry	as	a	whole,	making	
However,	 in	 case	 a	 part	 or	 the	            effect	of 	timing	differences,	       of 	 a	 realistic	 estimate	 may	 still	
whole of the final mine closure                  consideration	 of 	 prudence	         be	 possible.	 	 The	 Committee	
expenses	relate	to	the	dismantle-                cannot	 be	 ignored.	 There-          also notes that sufficient future
ment	 of 	 plant	 and	 equipment	                fore,	deferred	tax	assets	are	        taxable	 income	 may	 also	 arise	
used	 for	 the	 extraction	 of 	 ore,	           recognised	 and	 carried	 for-        from	 the	 reversal	 of 	 deferred	
the	 provision	 for	 the	 relevant	              ward	only	to	the	extent	that	         tax	 liabilities	 created,	 for	 ex-
amount	 should	 be	 made	 in	 the	               there	is	a	reasonable	certain-        ample,	 on	 account	 of 	 the	 tim-
year	in	which	the	cost	of 	acqui-                ty	 of 	 their	 realisation.	 This	   ing	differences	between	the	tax	
sition/construction	of 	plant	and	               reasonable	level	of 	certainty	       depreciation	and	the	accounting	
equipment	is	capitalised.		In	this	              would	normally	be	achieved	           depreciation.	 In	 view	 of 	 this,	
case,	the	amount	of 	the	provision	              by	 examining	 the	 past	 re-         the	company	should	make	a	‘re-
should	be	capitalised	as	a	part	of 	             cord	 of 	 the	 enterprise	 and	      alistic estimate’ of profits for
the	cost	of 	the	plant	and	equip-                by	making	realistic	estimates	        the	 future	 and,	 if 	 such	 an	 es-


1530 The Chartered Accountant April 2006
timate	 can	 be	 made,	 create	 the	     a	 part	 of 	 the	 cost	 of 	 the	 plant	   ation,	 the	 considerations	 dis-
deferred	tax	asset.	However,	in	         and	equipment,	there	would	be	              cussed	 in	 paragraph	 20	 above	
case	the	‘realistic	estimate’	indi-      no	 timing	 differences	 on	 ac-            would	 apply	 in	 the	 creation	 of 	
cates	that	there	will	not	be	any	        count	of 	the	provision	since	the	          the	deferred	tax	asset.
sufficient future taxable income         same is not debited to the profit
to	realise	the	deferred	tax	asset,	      and	 loss	 account.	 	 The	 timing	         D. Opinion
the	 company	 should	 not	 create	       difference,	 if 	 any,	 will	 arise	 on	       22.	 On	 the	 basis	 of 	 the	
the	deferred	tax	asset.                  account	of 	the	depreciation	for	           above,	 the	 Committee	 is	 of 	 the	
    21.	 In	a	situation	where	the	       tax	 purposes	 and	 that	 for	 ac-          opinion	 that	 deferred	 tax	 asset	
final mine closure expenses re-          counting	 purposes	 which	 may	             may	have	to	be	created	as	per	AS	
late	 to	 dismantlement	 of 	 plant	     result	into	creation	of 	deferred	          22	in	view	of 	the	considerations	
and	 equipment	 and	 the	 provi-         tax	asset/liability.		In	case	it	re-        stated	 in	 paragraphs	 17	 to	 21	
sion	 therefor	 is	 capitalised	 as	     sults	in	a	deferred	tax	asset	situ-         above.	r


       Notes:
    1. The Opinion is only that of the Expert Advisory Committee and does not necessarily represent the Opinion
        of the Council of the Institute.
    2. The Compendium of Opinions containing the Opinions of Expert Advisory Committee has been published
        in twenty four volumes which are available for sale at the Institute’s office at New Delhi and its regional
        council offices at Mumbai, Chennai, Kolkata and Kanpur.




                                   CLASSIFIEDS

    No.	4437:	 Required	 Char-           sudeva.com;careers@scvasude-             No.	4440:	 Hyderabad	based	
tered	Accountants	having	2	to	5	         va.com                                Practicing	 FCA	 seeks	 profes-
years of experience in the field                                               sional	 work	 on	 Partnership/As-
of 	 Statutory	 Audit	 and	 Inter-           No.	4438:	 Australian	 based	 signment/Sub-contract/Retain-
nal Audit for our office in New          CA	 seeks	 long	 term	 relation- ership/Merger/Network	 basis.	          	
Delhi.	 	 The	 candidates	 should	       ship	with	Indian	CA’s	for	tax	and	 Contact:	09848216916,	vgbang_
have	 excellent	 communication	          bookkeeping	assignments.		Aus- ca@rediffmail.com
and	 computer	 skills	 and	 should	      tralian	 experience	 and/or	 quali-
have	 a	 desire	 to	 deliver	 quality	   fications preferred. Expressions
work.		We	offer	an	independent	          of 	 interest	 asource@optusnet.         No.	 4441:	 Delhi	 based	 CA	
work	environment	and	attractive	         com.au                                Firm	requires	articled	trainee	with	
remuneration	 package.	 	 Should	                                              requisite qualification, Chartered
you	be	interested	please	send	us	            No.	4439:	 Delhi	 based	 CA	 Accountant, semi-qualified. Suri
your	resume	by	post	or	e-mail	at	        firm requires Chartered Accoun- Malhotra	&	Associates,	15A/44,	
S.C.	Vasudeva	&	Co.,	Chartered	          tants, Semi qualified, Articled Pratap	Chambers-II,	202,	W.E.A.	
Accountants,	 B-41,	 Panchsheel	                                             	
                                         Clerks	 &	 Graduate	 assistants.	 Karol	 Bagh,	 New	 Delhi.	 Con-
Enclave,	 New	 Delhi	 –	 110017,	        Contact:	 41588008,	 41588009,	 tact:	 9818555642,	 25496826.	 E-
Tel:	 26499111,	 26499222,	 Fax:	        9313889918.	 	 E-mail:	 jaideep- mail:	 malhotravirender@yahoo.
41749444;	 E-mail:	 info@scva-           agg@rediffmail.com                    co.in.


                                                                                 April 2006 The Chartered Accountant   1531

								
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