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Deferred tax proportionate basis in export sales
11-05-2010, 03:49 PM
Post: #1
Deferred tax proportionate basis in export sales
In case the company is making local and export sales then according to rule 231 of Income tax rules, 2002 the taxable income should be calculated on proportionate basis. Same rule is applied in case if we are calculating deferred tax asset/(liability).

Example is

Lets say accounting base and tax base was same in all cases of a company except fixed assets. Suppose Accounting base is Rs. 1,500 and tax base is Rs. 1,200. Lets say export sales = 4,000 and local sales = 96,000. Deferred tax liability should be Rs. 101 i.e. (300 x 35% x 96%).

But I have seen a case in which the proportion of local sales divided by total sales was calculated on basis of average of 6-years not the current year alone. My question is that do we have to take the proportion of local sales over total sales on basis of current year or average of 6-years?

Its quite confusing that companies are using 6-year average without any reference from the Income Tax Ordinance, 1984.
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