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CA Final · Financial Reporting · Ind AS 12 Income Taxes

Kaveri Estates Ltd carries freehold land at ₹50 lakh under the Ind AS 16 revaluation model. On 31 March 2025 it revalues the land to ₹80 lakh. The tax base remains ₹50 lakh. If the land were sold, the gain would be taxed at 20%, and the company expects to recover the carrying amount through sale. How should the company account for the tax effect of the revaluation?

The company recognises a deferred tax liability of ₹6 lakh, being 20% of the ₹30 lakh temporary difference, and charges it to other comprehensive income. The revaluation surplus was itself recognised in OCI, so the related tax follows the same place of recognition.

  1. ARecognise a DTL of ₹6 lakh and charge it to other comprehensive incomeCorrect
  2. BRecognise a DTL of ₹6 lakh and charge it to profit or loss
  3. CRecognise a DTL of ₹15 lakh against revaluation surplus at the 50% tax slab
  4. DRecognise no deferred tax because land is not depreciable

Explanation

The taxable temporary difference is 80 − 50 = 30 lakh. At 20% the DTL is ₹6 lakh. The revaluation surplus is recognised in OCI, so the related deferred tax is also recognised in OCI. Non-depreciability does not remove the temporary difference, and charging profit or loss ignores where the underlying item was recognised.

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