CBDT arrives with its latest recommendation known as Tax Accounting Standards (TAS) in confrontation with the existing ICAI formulated Accounting Standards which urges the tax payers to prepare books of accounts to be used in filing their income tax returns in accordance with the standards laid down by Income Tax Department.

The TAS has recommended that unlike as in accounting standard norms which allows recognition of expected losses (not the anticipated gains) hypothetical losses wouldn’t be deducted from the income for tax purposes. Therefore to circumvent the differential treatment in recognizing incomes and losses as in accounting standards, the tax accounting norms wouldn’t anticipated or mark-to-market losses. The said rule would also prevail in case of forward exchanges and other speculative trading. However, the recommendation would not call for maintaining separate books of accounts for ICAI and TAS and would be made applicable only to the computation of taxable income, thus negating the compliance burden on tax-payers.

The sectors majorly affected by the standard are real estate and construction in addition to treatment of contracts, government grants, foreign exchange, securities, leases, intangible assets and borrowing costs. TAS would also deal with securities held as stock-in-trade for tax purposes in confliction with AS-13. There is a levy of 30% on securities held as stock-in-trade, against 15% long term capital gains tax on listed securities held as investment. After examining the 31 standards issued by ICAI and recommending 14 issues under the Income Tax Act, litigations with IT Department is highly expected by CBDT. In this regard, it has recommended TAS be made applicable to all taxpayers for bringing about certainty on the issues.