« Top Headlines » Open DEMAT Account in 24 hrs  Tax planning for 2025: How to maximise your savings before March 31 deadline  New income tax bill reaches Parliament: Finance Minister Nirmala Sitharaman tables I-T Bill 2025 in Lok Sabha  5 major changes in the last 6 months every taxpayer should know!  Good news for taxpayers: ITR forms updated to allow 87A tax rebate claims, but there's a catch  Top 10 income tax changes from 2024 to look out for while filing ITR in 2025 «  Direct tax mop-up set to rise 40% for 2nd year in a row... 71% tax trauma for India Inc: Study... » SC upholds ICAIs norm on deferred tax liability November, 23rd 2007 The Supreme Court has upheld the validity of Accounting Standard 22 prescribed by the Institute of Chartered Accountants of India (ICAI) on deferred tax liability of listed companies. The apex court dismissed a bunch of petitions filed by various companies which had challenged mandatory adoption of the accounting system, saying that it is necessary in the era of mergers and acquisitions where fair valuation principles have an important role to play. Under AS 22 system it is necessary for the companies to give effect to the concept of true and fair accrual of accounts contemplated under section 211(1) of the Companies Act. A bench comprising Justice SH Kapadia and Justice BS Reddy said that it is different from the concept of true and correct principle as the fair valuation principle brings out the real income of the company. We are of the view that the AS 22 is neither ultra vires nor inconsistent with the provisions of the Companies Act including Schedule VI, the court said.The objective behind the accounting standard is to evolve methods for more transparency and leave less room for subjective selection of methods. It is also aimed at providing for more attention to quality of estimates used in arriving at accounting income, the court said. Such a system is necessary in an era of globalisation as the new system is in sync with the international accounting standards. The Indian Accounting Standards (IAS) have to harmonise and integrate with the International Accounting Standards by which harmonisation of various accounting policies, practices and principles could take place, court said. Today we are living in the world of globalisation in which apart from merger, acquisition play an important role. The buyer wants to know the income and liabilities of a company. He wants to know the real income of the company which he proposes to buy. Because of the difference in the rates of depreciation statutorily prescribed under the income Tax Act and the Companies Act, the concept of deferred taxation has been introduced in order to obliterate the difference between accounting depreciation and tax depreciation said Justice Kapadia.