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    Question

    A company claims depreciation of ₹15 lakhs as per tax

    laws but only ₹10 lakhs as per books. How should this temporary difference be treated?
    A Create Deferred Tax Asset Correct Answer Incorrect Answer
    B Create Deferred Tax Liability Correct Answer Incorrect Answer
    C No deferred tax recognition Correct Answer Incorrect Answer
    D Adjust against reserves Correct Answer Incorrect Answer
    E Show in OCI only Correct Answer Incorrect Answer

    Solution

    Higher tax depreciation → taxable income lower now → higher tax in future → results in Deferred Tax Liability (DTL).

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