MAY 2010 - Final (New Course) Group 1 - Paper 1

Y Ltd. is a full tax free enterprisefor the first ten years of its existence andis in the second year of its operation. Depreciationtiming difference resultingin a tax liability in year 1 and 2 is Rs. 200 lakhs and Rs. 400 lakhs respectively.. From the t?ird year it is expected that the timing difference would reverseeach year by Rs. 10 lakhs. Assuming tax rate of 40%, find out the deferredtax liability at the end of the second year and any charge to the Profit andLoss account.