Amber Limited purchases a building at a cost of 20,00,000 on 1 st April 2021 its useful life is four years and an expected scrap value is zero.…

As per AS 22 "Accounting for Taxes on Income", computation of Current Tax, Deferred Tax Liability (DTL), and Total Tax Expense of Amber Limited is as under: 2021-2022 (₹) 2022-2023 (₹) 2023-2024 (₹) 2024-2025 (₹) Profit before depreciation and taxes 18,00,000 22,00,000 25,00,000 30,00,000 Less: Depreciation for accounting purposes 5,00,000 5,00,000 5,00,000 5,00,000 Profit before Taxes (i) 13,00,000 17,00,000 20,00,000 25,00,000 Less: Tax Expenses (a) Current tax for the year 2,40,000 3,60,000 7,50,000 9,00,000 (b) Deferred Tax Liability/ Asset(b) 1,50,000 1,50,000 (1,50,000) (1,50,000) Tax expense (a+b) (ii) 3,90,000 5,10,000 6,00,000 7,50,000 Profit after tax (i) – (ii) 9,10,000 11,90,000 14,00,000 17,50,000 Working notes: 1. Calculation of current tax at 30% Year Taxable Income Current Tax (₹) 2021-22 8,00,000(18,00,000-10,00,000) 2,40,000 2022-23 12,00,000(22,00,000-10,00,000) 3,60,000 2023-24 25,00,000 7,50,000 2024-25 30,00,000 9,00,000 2. Calculation of Timing Difference and Deferred Tax Assets/Liability Year Timing Difference (Tax Depreciation-Accounting Depreciation) DTL/(DTA) Deferred Tax = Timing Difference × 30% 2021-22 10,00,000-5,00,000= 5,00,000 1,50,000 2022-23 10,00,000-5,00,00=5,00,000 1,50,000 2023-24 0 - 5,00,000= (5,00,000) (1,50,000) 2024-25 0-5,00,000 = (5,00,000) (1,50,000)