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Shaping the future of software driven business
Unconsolidated Financials •
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Deferred tax liabilities are recognized for all taxable temporary differences, except deferred tax liability arising from
initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, affects
neither accounting nor taxable profit/ loss at the time of transaction. Deferred tax assets are recognized for all deductible
temporary differences, the carry forward of unused tax credits and any unused tax losses, except deferred tax assets
arising from initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and,
affects neither accounting nor taxable profit/ loss at the time of transaction. Deferred tax assets are recognized only to
the extent that sufficient future taxable income will be available against which such deferred tax assets can be realized.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in India or tax laws
prevailing in the respective tax jurisdictions where it operates, no deferred tax (asset or liability) is recognized in respect
of temporary differences which reverse during the tax holiday period, to the extent the Company’s gross total income is
subject to the deduction during the tax holiday period. Deferred tax in respect of temporary differences which reverse
after the tax holiday period is recognized in the period in which the temporary differences originate.
The carrying amount of deferred tax asset is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available against which such deferred tax assets can be realized.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the same taxable entity and
the same taxation authority.
Deferred tax relating to items recognized outside the statement of profit and loss is recognized in co-relation to the
underlying transaction either in other comprehensive income or directly in equity.
Minimum alternate tax (MAT) paid in a period is charged to the statement of profit and loss as current tax. MAT credit
available is recognized as an asset only to the extent that there is convincing evidence that the Company will pay normal
income tax during the period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which
the Company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available
in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the
statement of profit and loss and shown as “MAT Credit Entitlement.” The Company reviews the “MAT credit entitlement”
asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that
it will pay normal tax during the specified period.
Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments:
On March 30, 2019, Ministry of Corporate Affairs
has notified Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments which is to be applied while performing the
determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is
uncertainty over income tax treatments under Ind AS 12. According to the appendix, companies need to determine the
probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies
have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the
expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates.
The standard permits two possible methods of transition - i) Full retrospective approach – Under this approach, Appendix C
will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 – Accounting Policies,
Changes in Accounting Estimates and Errors, without using hindsight and ii) Retrospectively with cumulative effect of
initially applying Appendix C recognized by adjusting equity on initial application, without adjusting comparatives.
The effective date for adoption of Ind AS 12 Appendix C is annual periods beginning on or after April 1, 2019.
The Company will adopt the standard on April 1, 2019 and has decided to adjust the cumulative effect in equity on the date
of initial application i.e. April 1, 2019 without adjusting comparatives.
The effect on adoption of Ind AS 12 Appendix C would be insignificant in the standalone financial statements.
Amendment to Ind AS 12 – Income taxes:
On March 30, 2019, Ministry of Corporate Affairs issued amendments to the
guidance in Ind AS 12, ‘Income Taxes’, in connection with accounting for dividend distribution taxes.
The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other
comprehensive income or equity according to where the entity originally recognised those past transactions or events.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company is
currently evaluating the effect of this amendment on the standalone financial statements.
Notes forming part of financial statements (Contd.)